VIEWS: 2 PAGES: 5 CATEGORY: Business & Economics POSTED ON: 6/11/2010
Notice 2009-29 sets forth the maximum face amount of qualified energy conservation bonds that may be issued by each state and large local government under Section 54D(e)(1). The notice also provides limited regulatory guidance for QECBs.
provides for six months of continuation bonds (“QECBs”) that may be issued by Section 54D(b) provides that the annual coverage (instead of 18 months) would each State and large local government un- credit determined under § 54A(b) with re- not result in the State program failing to der § 54D(e)(1) of the Internal Revenue spect to any qualified energy conservation be comparable. Similarly, State programs Code. For this purpose, § 54A(e)(3) pro- bond shall be 70 percent of the amount so providing for different qualifying events, vides that the term “State” includes the determined without regard to § 54D(b). different qualified beneficiaries, or differ- District of Columbia and any possession Section 54D(c) provides that the max- ent maximum premiums generally do not of the United States. This notice also pro- imum face amount of bonds which may fail to be comparable solely for those rea- vides certain interim guidance for QECBs. be designated under § 54D(a) by any is- sons. suer shall not exceed the portion of the Q–58. In the case of an insured plan SECTION 2. BACKGROUND volume cap allocated to such issuer under subject solely to State law requiring the § 54D(e). insurer to provide continuation coverage, .01 INTRODUCTION Section 54D(e)(1) provides that the if the employer collects the reduced pre- Section 301(a) of Tax Extenders and $3.2 billion in total national bond volume miums from assistance eligible individuals Alternative Minimum Tax Relief Act of cap shall be allocated by the Department of and pays the full premium to the insurer, 2008, Division C of Pub. L. 110–343. the Treasury among the States in propor- is the employer eligible to take the payroll 122 Stat. 1365 (2008) (“Act”) added new tion to the population of the States. Section credit directly? § 54D to provide program provisions for 54D(e)(2)(A) provides that in the case A–58. No. Under section 6432(b)(3), QECBs. The Act amended § 54A(d)(1) of any State where there is a “large local in the case of an insured plan subject solely to provide that the term “qualified tax government,” as defined § 54D(e)(2)(C), to State law with respect to the require- credit bond” means, in part, a qualified each large local government shall be al- ment to provide continuation coverage, the energy conservation bond that is part of located a portion of the State’s allocation only person entitled to be reimbursed for an issue that meets the requirements of that bears the same ratio to the State’s the premium reduction through the payroll § 54A(d)(2), (3), (4), (5), and (6) re- allocation (determined without regard to credit (unless and until provided otherwise garding expenditures of bond proceeds, this subparagraph) as the population of the in future guidance) is the insurer providing information reporting, arbitrage, matu- large local government bears to the popu- the coverage under the group health plan. rity limitations, and prohibitions against lation of the State. Section 54D(e)(2)(B) financial conflicts of interest. The Act provides that the amount allocated under ADDITIONAL ISSUES this subsection to a large local govern- also amended § 54A(d)(2) to provide that, for purposes of § 54A(d)(2)(C), the term ment may be reallocated by the large The IRS and Treasury are aware of var- “qualified purpose” for a QECB means a local government to the State where the ious issues relating to the premium reduc- purpose specified in § 54D(a)(1) described large local government is located. Section tion provision that are not addressed in this below. 54D(e)(2)(C) provides that for purposes of notice, including issues affecting partic- The Act added § 54D(d) to provide a § 54D, the term “large local government” ular arrangements. Although this notice national bond limitation (“national bond means any municipality or county that has does not address these issues, the IRS and volume cap”) authorization for QECBs of a population of 100,000 or more. Treasury continue to consider these and $800 million. Section 1112 of Title 1 of Under § 54D(e)(3), any allocation to a other issues and possible guidance with re- Division B of the American Recovery and State or large local government shall be spect to them. Reinvestment Act of 2009, Pub. L. No. allocated in turn by the State or large lo- DRAFTING INFORMATION 111–5, 123 Stat. 115 (2009) (“2009 Act”) cal government to issuers within the State amended §54D(d) to increase the national in a manner that results in the use of not The principal author of this notice is bond volume cap authorization for QECBs less than 70 percent of the allocation to Leslie R. Paul of the Office of Division from $800 million to $3.2 billion. such State or large local government to Counsel/Associate Chief Counsel (Tax Ex- designate bonds that are not private activ- empt and Government Entities). For fur- .02 QUALIFIED ENERGY ity bonds. ther information regarding this notice, con- CONSERVATION BONDS UNDER Section 54D(f) defines the term “quali- tact Ms. Paul at (202) 622–6080 (not a § 54D fied conservation purpose” to mean any of toll-free
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