IRS “Issue Price” Final Regulations to be Addressed this Fall
The IRS priority guidelines released this month include two regulations important to many members of GFOA: Issue Price regulations and proposed rules on the definition of political subdivisions. The priority guidelines specify regulations that will be worked on by the Department of the Treasury through June 30, 2017.
According to the guidelines, the final regulations on the definition of issue price for tax-exempt bonds will be released this year. GFOA expressed core concerns, including those about safe harbors for competitive sales, in testimony before United States Treasury and IRS officials in 2015. The priority guidelines also include the proposed regulations defining political subdivisions for purposes of the tax exemption, but these are not likely to progress given the extensive response from the issuer community on the topic. GFOA also spoke in opposition to these proposed rules in 2016, specifically emphasizing that the proposed rules question the legitimacy and authority of the bodies that enacted the enabling legislation that created the political subdivisions in the first place.
GFOA’s Federal Liaison Center will continue to monitor and report the progress of these projects and communicate our concerns to IRS/Treasury officials throughout the process.
Rep. Goodlatte Issues Remote Sales Tax Legislation Proposal
Early this week, the Chairman of the House Judiciary Committee, Representative Goodlatte (R-VA-6), released proposed legislation designed to address the remote collection of taxes on online purchases. Goodlatte’s proposal is an alternative to the legislation introduced by Rep. Chaffetz (R-UT-3), the Remote Transactions Parity Act (HR 2775), which is presently waiting to be heard by the House Judiciary Committee. GFOA continues to support the Remote Transactions Parity Act (HR 2775) because it would compel retailers to collect taxes on remote sales based on the location of the consumer.
While we are pleased to see Chairman Goodlatte’s attention to the issue, unfortunately his proposal contains principles that would complicate and strip taxing authority from state and local governments. As we wait for legislation to be introduced, we are working closely with our colleagues at the National League of Cities, U.S. Conference of Mayors, National Association of Counties and National Governors Association, along with our partners in the retail community, to urge Chairman Goodlatte to consider moving forward with the better solution, the Remote Transactions Parity Act (HR 2775). The GFOA will continue to keep you informed on the status of these discussions as they take place and will continue to encourage you to engage your members of Congress directly to urge their support for the Remote Transactions Parity Act (HR 2775) using the resources in our Marketplace Fairness Act Resource Center.
Continuing Disclosure Alert—Recent SEC Enforcement Actions
On August 24, 2016, the SEC Office of Municipal Securities announced enforcement actions against 71 municipal issuers for violations in municipal bond offerings from 2011 to 2014, as part of the Municipalities Continuing Disclosure Cooperation (MCDC) Initiative. Close review of the Cease and Desist Orders reveals that nearly all of the enforcement actions relate to late filings of financial information on EMMA. Some issuers failed to note the late filing in the official statements of subsequent bond issues. The named issuers missed filing deadlines by as little as 36 days to as much as several years. There were few examples of failures to report other material events. This GFOA Continuing Disclosure Alert reminds issuers of the importance of making timely filings of financial information in accordance with each issuer’s continuing disclosure agreement.
The Alert highlights essential practices emphasized throughout GFOA’s best practices on continuing disclosure:
- Understand and discuss your organization’s policies and procedures on disclosure.
- Know who is filing what, when and where.
- Be aware of what is posted on EMMA.
- Be aware of what your organization has promised to do in the continuing disclosure agreement.
- Recognize that each official statement must include a statement about whether the issuer failed to materially comply with previous commitments within the past five years
Click here to access GFOA’s Continuing Disclosure Alert.
GFOA, NABL Issue Guidance on Post-Issuance Tax-Compliance
GFOA and the National Association of Bond Lawyers have issued guidance to issuers and their counsel on developing policies to maximize continuing compliance with the tax-exempt bond rules after the issuance of tax-advantaged bonds. The two organizations cooperated on the issuance of separate but complementary guidance to their respective members. Read GFOA’s Alert on Developing and Implementing Procedures for Post-Issuance Tax Compliance for Issuers of Governmental Bonds here.
Post-issuance tax compliance procedures describe the course of action to be taken by an organization to maximize the likelihood that tax rules applicable to tax-advantaged bonds – tax-exempt bonds, tax credit bonds and direct pay bonds—are followed after the bonds are issued and while the bonds remain outstanding. Post-issuance tax compliance procedures have two fundamental purposes: to enhance the likelihood of compliance with rules and to facilitate and streamline the organization’s administrative functions. Broadly speaking, the tax rules applicable to tax-advantaged bonds address four principal categories of issues: (1) expenditure of proceeds, (2) use of financed assets, (3) investment of proceeds, and (4) recordkeeping. These four categories define the focus of well-drafted post-issuance tax compliance procedures.
House Municipal Finance Caucus Launches Website
The Municipal Finance Caucus has recently launched a website which can be found here. The site, which is an extension of Rep. Randy Hultgren’s (R-IL) Congressional website, highlights the purpose, background and membership of the caucus. It also highlights the caucus’s purpose: “to protect a century’s old tax-exemption that has driven our economy, spurred job growth, funded critical infrastructure projects and enhanced the quality of life.” Please feel free to visit the site, thank your congressional representatives who are already members of the caucus and ask for your congressional representatives not listed to join using GFOA’s Federal Tax Exemption on Municipal Bonds resource center.