Tax News

CCH (cch.taxgroup.com) reports:

  The IRS has proposed a revenue procedure that would contain additional eligibility requirements for tax-exempt-bond partnerships that wish to elect to close their books on a monthly basis, so that partners may take into account their distributive shares of partnership items on a monthly basis. The proposed revenue procedure aims to provide greater administrative certainty to investors in tax-exempt-bond partnerships. The proposed procedure, which would modify and supersede Rev. Proc. 2003-84, 2003-2 C.B. 1159, would provide more specific eligibility criteria for the monthly closing election. The IRS is seeking public comments on the proposed revenue procedure.

  Under the proposed procedure a tender or put option issued to partners, who were holders of partnership interests resembling variable-rate interest debt instruments ("variable-rate interest holders,") would be required terminate without notice upon the occurrence of one of four events with respect to a tax-exempt bond held by the partnership. These events include: (i) a bankruptcy filing by or against a tax-exempt bond issuer; (ii) a downgrade in the credit rating of a tax-exempt bond and a downgrade in the credit rating of any guarantor of the tax-exempt bond, if applicable, to a rating or ratings, as applicable, below investment grade; (iii) a payment default on a tax-exempt bond; or (iv) a final judicial determination or a final IRS administrative determination of taxability of a tax-exempt bond for federal income tax purposes under Code Sec. 103.

  The partnership would also be required to give the variable-rate interest holders a reasonable opportunity to share in appreciation in the value of the bonds. The membership interests of the variable-rate interest holders would be required to give them a right to share in at least five percent of the gain from the sale or other disposition of the partnership's bonds In addition, the partnership would be required to provide to the variable-rate interest holders a right to require a sale, redemption, or other disposition of its bonds, by a date that is no later than the date that represents 80 percent of the remaining weighted average maturity of the tax-exempt bonds held by the partnership (as measured from the date of the partnership's acquisition of the bonds), the so-called "80 percent WAM test."

Notice 2008-80, 2008FED ¶46,573

Other References:

 
Code Sec. 103

  CCH Reference - 2008FED ¶6602.025

 
Code Sec. 702

  CCH Reference - 2008FED ¶25,083.2954

 
Code Sec. 706

  CCH Reference - 2008FED ¶25,165.066

  CCH Reference - 2008FED ¶25,165.281

  CCH Reference - 2008FED ¶25,165.42

 
Code Sec. 707

  CCH Reference - 2008FED ¶25,183.408

 
Code Sec. 761

  CCH Reference - 2008FED ¶26,602.03

 
Code Sec. 851

  CCH Reference - 2008FED ¶26,408.565

 
Code Sec. 852

  CCH Reference - 2008FED ¶ 26,433.26

  CCH Reference - 2008FED ¶ 26,433.29

 
Code Sec. 6031

  CCH Reference - 2008FED ¶35,389.021

  Tax Research Consultant

  CCH Reference - TRC PART: 18,160