Tax News

CCH (cch.taxgroup.com) reports:

  The IRS has issued guidance amending and supplementing
Notice 2008-41, I.R.B. 2008-15, 742 (TAXDAY, 2008/03/26, I.1), regarding reissuance standards for tax-exempt bonds. The guidance expands the circumstances and time periods during which a state or local government may repurchase bonds it issued without resulting in a reissuance or retirement of such bonds for purposes of the provisions of the tax code pertaining to the tax-exempt status of municipal bonds. The new, relaxed rules are intended to provide flexibility in order to facilitate liquidity and stability in the short-term sector of the tax-exempt bond market.

 
Notice 2008-41 provided a special, temporary rule allowing issuers to repurchase auction rate bonds without triggering a reissuance or retirement of the repurchased bonds. The special exemption applied only to bonds purchased before October 1, 2008, and held for not more than 180 days after purchase. Otherwise, the repurchase of a tax-exempt bond by its governmental issuer will generally cause a retirement of the bond and the resale of that bond will generally be considered a reissuance for purposes of the tax-exempt bond rules.

  The new guidance expands this exception in several ways. First, the exception is expanded so that it applies to qualified tender bonds and tax-exempt commercial paper, as well as auction rate bonds. Second, the exception's time frame has been expanded to apply to qualifying bonds purchased on or before December 31, 2009, and held no later than that date. Finally, the final date for purchase of bonds pursuant to qualified tender rights is extended from October 1, 2008, to December 31, 2009.

Notice 2008-88, 2008FED ¶46,599

Other References:

 
Code Sec. 103

  CCH Reference - 2008FED ¶6602.453

 
Code Sec. 148

  CCH Reference - 2008FED ¶7889.13

 
Code Sec. 150

  CCH Reference - 2008FED ¶7933.023

  CCH Reference - 2008FED ¶7933.40

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