Notice 2009-29

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Notice 2009-29 Powered By Docstoc
					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
Description: 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.
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