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On April 11, 2018, the Internal Revenue Service published Revenue Procedure 2018-26 (Rev. Proc. 2018-26) expanding the number of remedial actions available to issuers of state and local tax-exempt bonds and other tax-advantaged bonds when a change in the use of the bond proceeds occurs and results in excessive private business use (nonqualified use). Rev. Proc. 2018-26 applies to such nonqualified uses that occur on or after April 11, 2018.
Prior to Rev. Proc. 2018-26, existing remedial actions did not provide a cure for nonqualified uses resulting from longer-term leases of financed property to private businesses other than redeeming or defeasing the affected bonds. Rev. Proc. 2018-26 allows an issuer to apply the alternative use of disposition proceeds currently provided under Regs. § 1.141-12(e), subject to a number of modifications. As with the proceeds an issuer receives from the sale of tax-exempt financed property, the lease amount, which is calculated as the present value of all the lease payments required to be paid under the lease, may be applied to an alternative governmental or otherwise qualified use.
With regard to direct pay bonds, prior to Rev. Proc. 2018-26 there had been no remedial action providing for the adjustment of the refundable federal tax credit for nonqualified uses. Rev. Proc. 2018-26 allows an issuer to cure a nonqualified use by reducing the amount of refundable federal tax credit to eliminate the amount allocable to the nonqualified bonds. Beginning with the first Form 8038-CP filed for any interest payment date after the nonqualified use occurs, the issuer must reduce the amount of the interest payable by the portion allocable to the affected bonds.
With regard to certain types of tax credit bonds and direct pay bonds, prior to Rev. Proc. 2018-26 there had been no remedial actions available to issuers. Rev. Proc. 2018-26 extends the availability of the existing remedial actions of redemption or defeasance of nonqualified bonds or alternative use of disposition proceeds to these types of bonds.Day Pitney Alert
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Day Pitney Press Release
On November 22, Connecticut Governor Dannel P. Malloy announced that he is appointing Jay Nolan to serve as his appointee on the state's recently created Municipal Accountability Review Board.
Doug Gillette was quoted in an article, "Assured Says It's Open to a Hartford Debt Restructuring," published in The Bond Buyer.
Day Pitney LLP has once again been recognized as Connecticut's number one bond counsel firm by volume, serving as bond counsel on issues in Connecticut totaling approximately $1.7 billion in 2016, according to The Bond Buyer, a daily newspaper serving the municipal bond industry.
Day Pitney Press Release
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