The Treasury Department and the Internal Revenue Service during the next year should produce final guidance on qualified hedges and a final definition of "solid-waste disposal facilities," among other municipal bond-related projects, the National Association of Bond Lawyers urged in a recent letter to the agencies.

The letter, which was not publicly released until late Friday, included a list of recommended projects the government should include on its 2008-2009 guidance priority list. The Treasury last April had released a tentative list of the projects it considered to be priorities for the period from July 1, 2008, to June 30, 2009, and then asked market participants to comment on its list.

Perry Israel, who helped draft the NABL list and has his own law firm in Sacramento, said the government's rulemaking activities during the last year allowed NABL to include several new items to this year's list.

"In the past, the IRS and Treasury have done a really good job of moving things along, and so we were able to modify our requests from last year quite a bit and list some things that we think are very important," he said yesterday.

The list of 14 items cuts broadly across a number of municipal bond issues, but Israel said the request for additional guidance on issue price would help the most bond counsel.

"I think that that's one that's important for everybody," he said.

NABL has been asking the IRS since 2006 for a "reasonable expectation" provision be included in arbitrage regulations that would stipulate, "if certain standard marketing procedures are followed, the initial offering price at which the bonds are offered to investors by the underwriter shall be deemed to be the issue price of a bond, regardless of the prices at which they are actually sold, and regardless of prices at which other trades may occur."

The NABL letter lists 13 other rulemaking projects the group would like taken up or completed, but declined to provide an order of priority or importance.

The attorneys recommend the IRS provide final guidance on the section of the tax code related to qualified hedges and how they are restricted under arbitrage rules. Specifically, the group would like the IRS to address the treatment of variable-rate advance refunding issues hedged by swaps with the London Interbank Offering Rate and how those hedges should be treated for arbitrage purposes.

In addition, NABL would like the Treasury to follow up on its stated intention to turn two notices on reissuance into proposed regulations. When the Treasury released its two notices stating that issuers could convert auction-rate securities to other interest modes or issue new bonds without retaining bond insurance - so long as those actions were permitted by the bond documents - without causing a reissuance of the bonds, officials stated that they would like ultimately to turn them into proposed IRS regulations.

The organization also would like to see a final definition of "solid-waste disposal facilities" so that it is clear which kinds of facilities would qualify for tax-exempt bond financing, an item that was on last year's IRS priority list. NABL previously commented on the original definition offered by the IRS in a set of proposed regulations released four years ago.

Other issues NABL would like to see addressed include final guidance regarding how payments in lieu of taxes are treated under the private payment test, and additional guidance for tax rules pertaining to clean renewable energy bonds. The organization is also seeking guidance on how arbitrage regulations apply to qualified zone academy bonds.

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