Tax-Exempt Bond Voluntary Closing Agreement Program Announced


On Monday, the IRS announced a program to provide certain issuers that purchase and hold their own tax-exempt bonds relief from debt extinguishment ( Announcement 2011-19 ).

 

In 2008, during the financial crisis, the IRS issued two notices providing relief from liquidity constraints in the tax-exempt bond market. The notices allowed state and local governments to purchase and hold their own tax-exempt bonds for temporary holding periods without resulting in a retirement of the purchased tax-exempt bonds. The permitted holding period ended Dec. 31, 2010.

 

Some issuers who purchased their own tax-exempt bonds were unable to resell those bonds before the Dec. 31, 2010, deadline. Therefore, the IRS is initiating a voluntary closing agreement program (VCAP) under which it will consider requests for voluntary closing agreements from issuers of extinguished bonds.

 

Under a closing agreement, extinguished bonds would be treated as remaining outstanding until the earliest of (1) 180 days after the closing agreement is executed by the IRS and issuer; (2) the date the bonds are sold to a third party, (3) the date the bonds are currently refunded, or (4) the date the bonds are canceled on the issuer’s books.

 

To qualify for a closing agreement, the issuer must adopt a resolution of its intent to resell or currently refund the extinguished bonds as tax-exempt bonds within the relevant closing agreement period, meet other conditions, and pay a fee.

 

The VCAP will accept requests through Dec. 31, 2012.

 

More from the JofA:

 

 Find us on Facebook      Follow us on Twitter

 

SPONSORED REPORT

How the election may affect taxation of business income

This report summarizes recent proposals to reform the U.S. business income tax system and considers the path to enactment of any such legislation.

VIDEO

How to Excel pivot a general ledger

The general ledger is a vast historical data archive of your company's financial activities, including revenue, expenses, adjustments, and account balances. J. Carlton Collins, CPA, shows how to prepare data for, and mine data with, PivotTables.

QUIZ

Did you follow 2016’s biggest accounting news?

CPAs will remember 2016 as a year of new standards and new faces. How well did you follow the biggest accounting events? The 7 questions in this quiz will help you find out