Slideshow Tax regulation and enforcement outlook for 2018

  • December 28 2017, 6:00am EST
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Carol Lew

Carol Lew, past president of NABL and a shareholder at Stradling Yocca Carlson & Rauth in Newport Beach, Calif., thinks the new muni audit process, which encourages communication between issuers, their lawyers and auditors as soon as possible after the IRS notifies the issuer of an audit, is “making headway.”
The net effect the new approach, Lew said, is that if a municipal issuer is audited “it doesn’t necessarily mean there’s a problem with their deal.” Instead, the transaction might come under an area the IRS has targeted for examinations.

Perry Israel

“I suspect that we’re going to need clarifications on what is needed or not needed to cause a reissuance,” said Perry Israel, a bond attorney based in Sacramento, Calif. who is on the board of the National Association of Bond Lawyers. He foresees “a number of “Cinderella bond” structures in which taxable bonds are changed into tax-exempt bonds as a method of replacing advance refundings.
“Also, there will be a lot of intentional reissuances as banks try to keep their customers. Many direct placements with banks have been written with ‘gross up’ language that would increase the rate on the bonds if the after tax value is reduced to the bank,” Israel said

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Ed Oswald

From an enforcement standpoint, terminating advance refundings and tax credit bonds means “there will be less for the IRS to look at” in 2018, said Ed Oswald, a tax partner at Orrick Herrington & Sutcliffe in Washington.

Rich Moore

It isn’t clear whether the IRS will break new ground on reissuance rules, according to Rich Moore, a partner at Orrick Herrington & Sutcliffe in San Francisco who is also a NABL board member.
“I don’t know whether this new guidance would go in a regulation or be in a notice that would supercede the others,” Moore said. “At a minimum, what it is going to do is just take the existing guidance on reissuance rules for tax exempt bonds and put them in one place.”

Emily Brock

“If you look at advance refundings all they have to do is strike through the code. It’s done," said Emily Brock, director of the Federal Liaison Center of the Government Finance Officers Association. "Unfortunately I think there are a lot of technical points that weren’t addressed in the final tax legislation that may need greater focus."