Circular 230, allocation and accounting provisions, and qualified zone academy bond rules are among the long-awaited tax-exempt bond regulations that the Treasury Department has listed on its 2005-2006 Priority Guidance Plan.
This year's plan, which was released Monday by Treasury and the Internal Revenue Service, details nine tax issues that will be the subject of formal legal guidance during the next 12 months -- an increase of two from the 2004-2005 plan.
According to the list, Treasury officials expect to issue several sets of final regulations on topics such as refundings, QZABs, and solid-waste disposal facilities, as well as proposed regulations for allocation and accounting rules for private-activity bonds.
Treasury also will make revisions to proposed Circular 230 regulations regarding state and local bond opinions as it prepares to finalize those regulations.
The department said in June that any opinion delivered in connection with traditional bond practice, including written advice concerning a state or local bonds tax exemption or other federal tax issues, falls under the proposed regulations. All other opinions fall under final Circular 230 regulations for "covered" opinions.
The proposed regulations were first published in December and have not yet been finalized. David A. Caprera, tax partner with Kutak Rock LLP in Denver, said any Circular 230 revisions would probably affect bond lawyers most, compared to other items on the guidance plan.
Allocation and accounting provisions, which govern the use of private-activity bond proceeds, have not been addressed since Treasury finalized most of its private-activity bond rules in 1997. Treasury and IRS officials ranked the topic as a top priority at the beginning of 2005.
The rules will likely determine how "mixed-use" facilities with both governmental and private business use can be financed with tax-exempt bonds. Treasury is expected to resolve how it will measure that mixed use in facilities such as parking lots, offices, and stadiums.
QZABs will also receive Treasury attention this year, according to the guidance plan.
Senate Finance Committee chairman Charles E. Grassley, R-Iowa, told Treasury officials in March that the QZAB program needed more oversight to ensure that the taxable tax credit bonds are used for their designated purpose -- to finance school renovations, repairs, and improvements.
Treasury officials were unavailable for comment yesterday.
Linda Schakel, tax partner with Ballard Spahr Andrews & Ingersoll here, said there were more items on the list than she expected. "I am hopeful that this means they are close to [issuing] the allocation and accounting [rules]," she said.
Caprera called those provisions Treasury's "greatest embarrassment" on the plan.
"These have been promised to us for years," he said. "This has been a gaping hole in the existing regulation structure."
And he said several important items were absent from the list.
A lack of guidance on London Interbank Offered Rate swaps continues to create integration problems for the tax-exempt bond community, according to Caprera. A member of the National Association of Bond Lawyers said recently that the association is putting together a task force to address derivatives and swaps issues.
Additionally, "exempt small issues, [Tax Equity and Fiscal Responsibility Act] approval, information reporting, and volume cap all have regulations that are outdated" and should be rewritten, Caprera said. (c) 2005 The Bond Buyer and SourceMedia, Inc. All rights reserved. http://www.bondbuyer.com http://www.sourcemedia.com
