On September 13, 2013 the IRS issued proposed regulations that amend and are intended to provide additional guidance regarding the IRC Section 148 arbitrage investment restrictions applicable to tax-exempt bonds and other tax-advantaged bonds. REG-148659-07. The newly proposed regulations are intended to address current market developments, simplify certain provisions, explain technical issues, and improve the administration of the regulations.
Despite the IRS’ intent to provide guidance and simplification, bond practitioners appear to be unsatisfied with the proposed regulations especially with regard to the proposed amended definition of issue price for tax-exempt bonds, which would require the issue price to be based on the actual sale price as opposed to reasonable expectations. Treas Reg § 1.148-1. Practitioners regard the proposed changes as a significant departure from existing regulations, and complain that the certainty for issuers provided by the reasonable expectation standard would be lost. [See "Proposed Issue Price Definition Eliminates Reasonable Expectation Standard for Exempt Bonds," taxanalysts® Tax Notes Today, September 16, 2013.]
At a recent ABA meeting, practitioners again voiced their concern regarding the significant departure of the proposed regulations from the current understanding of the market. Concerns expressed included the proposed removal of the definition of "substantial amount" of bonds sold to the public as 10 percent and its replacement by a safe harbor. [See "ABA Meeting: IRS Official Listens as Proposed Bond Arbitrage Regs Are Panned," taxanalysts® Tax Notes Today, September 24, 2013.]
IRS officials have declined to make any statement or clarifications regarding the newly proposed regulations. Practitioners who are dissatisfied with the newly proposed regulations are encouraged to submit comments to the IRS. Written or electronic comments must be received by December 16, 2013. Requests to speak and outlines of topics to be discussed at the public hearing scheduled for February 5, 2014, must be received by December 16, 2013.
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