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The Final Regulations provided welcome response to comments on the Proposed Regulations. The Proposed Regulations would have required electronic postings to be accompanied by another alternative method for those without Internet access, which would have severely undercut the benefits of administrative ease that come with the move to electronic posting. No such re- quirement for an alternative method is included in the Final Regulations. Further, the Final Regulations clarify that notice may be posted on the issuers’ website, acknowledging the fact that some issuers do not have the authority to post content on the website of the approving governmental entity (e.g. a housing issuer seeking approval of the city in which the project will be located). While allowing electronic posting is a step into the 21st century, the IRS was not yet ready to accept public comment suggesting that public hearings be held via teleconference or webinar due to the lack of reliability and public availability. Maybe by mid-century…


• Time for Posting Public Notice Reduced to Seven Days


Under the Final Regulations, public notice is presumed reasonable if it is published no fewer than seven days in advance of a public hearing. Both current law and the Proposed Regulations included a 14-day period. In making this change, the IRS agreed with public comment that the speed at which information spreads through the public and technological advance warrant a shorter notice period.


• Integrated Operations on Non-Proximate Sites Can Constitute a Single Project


The Final Regulations require that the published public notice include a description of each “project” to be financed by the bonds. A “project” includes projects and facilities that are located on the same, adjacent or proximate sites used for similar purposes, but may also include projects and facilities on non-proximate sites if they are used in an integrated operation, as might be the case with a large university or a health care system.


The Proposed Regulations had sought to clarify that a single project might extend beyond a single, or adjoining tracts of land and had abandoned the “integrated operation” standard in current law as being difficult to apply. However, based on public comment, the Final Regulations both kept the clarifying “proximate site” language and retained the existing “integrated opera- tion” standard for non-proximate sites. What qualifies as an “integrated operation” continues to be a question of interpretation.


• Maximum Principal Amount of Bonds Must be Specified Separately for Each Project


The Final Regulations retain a new requirement introduced in the Proposed Regulations that the public notice and approval must specify separately the maximum stated principal amount of bonds to be issued to finance each separate project. As a result, issuers and conduit borrowers may find themselves locked into projected allocations between projects financed by the issue earlier in the process than to which they have become accustomed to under current law.


The good news is that the reintroduction of the “integrated operations” provision described above may lead to the conclusion that separate facilities constitute a single “project” – meaning that only a single maximum principal amount need be included in the notice. The Final Regulations also provide for a 10% cushion to allow for “insubstantial deviations” in the noticed amount and the amount actually issued for a project. Additionally, the Final Regulations provide that the maximum stated principal amount of bonds to be issued to finance a project may be determined on any reasonable basis and may take into account con- tingencies, without regard to whether the occurrence of any such contingency is reasonably expected at the time of the notice. As a result, issuers and conduit borrowers have flexibility to account for uncertainties in determining the maximum principal amount of the bonds to be issued to finance a project.


If you have any questions regarding the foregoing or any other provision of the Final Regulations, or would like information as to their effect on a particular issue, please contact Todd Greenwalt, Victoria Ozimek or Brian Teaff.


Winter 2018 / 2019


TALHFA


Page 17


Talk


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