NEW ORLEANS - The Treasury's priorities this fiscal year for municipal bond rules on financing of solid-waste disposal facilities and reissuance may have to be temporarily shelved because the department will have to focus on the forthcoming economic stimulus package and bringing new administration officials up to speed, an official said late Friday.
"Regulatory process will take a backseat to whatever goes on with the stimulus plan and changes going on with the transition of the government," said John J. Cross 3d, tax legislative counsel for the Treasury office of tax policy, told a meeting of bond lawyers here. "There will be new people in charge of senior tax positions in the government, and it should be very interesting."
Cross spoke on a panel at a meeting of the American Bar Association's tax-exempt financing committee.
The Treasury had hoped to finalize recently proposed rule changes that would ease public approval requirements for private-activity bond-financed projects, but may be delayed because several labor groups have complained the proposals will limit public input on them, he added.
Many members of the municipal bond community praised the proposed changes that were introduced in September, and had hoped they would be adopted quickly so issuers could begin using them. But several community and labor groups submitted comment letters to the department criticizing the changes, saying they made it more difficult for the public to weigh in on proposed projects.
"I think the publicity about the public comments ... may make it somewhat harder to get this finalized as quickly as I'd like to," Cross said, but noted that finalizing the regulations was "an important project, something I have an interest in seeing move forward."
The vast majority of the critical letters focused on provisions other than those that market participants found most helpful, he noted.
The critics objected to giving issuers the ability to cancel hearings for lack of interest and reducing the notification time for a hearing to seven days from 14.
However, they were silent on a provision applauded by other market participants that would create a new two-step approval process for pooled loan financing projects that would allow for initial approval of projects earlier in the process.
The groups also did not criticize the proposed establishment of two "safe harbors" that would make it easier for issuers to determine if "substantial" deviations in a project had occurred since public approval was gained, such that new approval would be needed.
"To me, that's the gravy, and I think we've heard nothing but positive comments on that," Cross said.
A public hearing on the proposed rule changes is scheduled for Jan. 26, and Cross said three groups have requested to testify.
"We're ... glad that people requested to speak at this public hearing because it would have been a really unfortunate irony to have to cancel the public hearing on the public hearing regulations," he quipped.
Meanwhile, Clifford Gannett, director of the Internal Revenue Service's tax-exempt bond branch, told the group his shop is going to be focusing on ensuring it processes audits quickly and ethically this year.
The bond branch now is up to 40 agents, after 10 more were hired in the last six months, and TEB hopes to close 475 examinations this year, bumping up its goal of 460 in fiscal 2008. The team actually closed 529 audits last year.
Gannett said his group is working to ensure that when an audit does occur, it is "not overly burdensome. It's timely, it's targeted, and actually the work that's being done is at least work you all can respect."
TEB hopes to be flexible on how much time roughly 200 governmental issuers will have to respond to post-issuance compliance surveys being sent out at the end of the month, Gannett said. The IRS will give issuers 60 days to respond and will be "very flexible" on 30-day extensions, and will look at further extensions on a case-by-case basis, he said.