Public Finance

The IRS recently issued a private letter ruling, PLR 201310043 (released on March 8, 2013), of interest to Section 529 plans and their program managers. The ruling relates to the tax treatment of incentive contributions to 529 accounts and was issued in response to a ruling request by a financial services complex described as including a bank and broker.

A recent ruling in the American Airlines bankruptcy case enforcing an automatic acceleration upon bankruptcy provision serves as a reminder that the enforceability of so-called ipso facto provisions in debt instruments remains an unsettled, forum-dependent question. 

On February 14, 2013, SEC Chairman Elisse Walter at long last indicated, in testimony for the Senate Banking Committee, that the SEC’s final regulations regarding “municipal advisors”

Municipal securities regulators this week provided previews of upcoming regulatory action that suggest that one issue of concern to Section 529 college savings programs will fade away while another one may appear on the horizon.  

MSRB Rule G-17 has been interpreted by the MSRB as requiring a broker or dealer (“broker”) to  disclose to its customer, at or prior to the time of trade of a municipal security, all material information about the transaction known by the broker, as well as material information about the security that is reasonably accessible to the market. 

Market commenters have suggested that billions of dollars in municipal bonds may be subject to par redemptions if the much-discussed “28% cap” on the value of certain federal income tax deductions or exclusions is enacted and if the capped items include municipal bond interest.

This is a follow up to our recent blog post discussing then pending Michigan legislation known as the “Local Financial Stability and Choice Act” or Public Act 436 (the “Financial Stability Act”), which will replace Public Act 72 and overhaul Michigan’s emergency manager law.

Detroit’s increasingly distressed financial condition has created a dynamic and rapidly evolving situation where the potential of a Chapter 9 filing appears to be the subject of renewed discussion and legislative attention. 

Since August 2, 2012, investment banking firms retained to act as underwriters on municipal finance transactions have been required to provide written disclosure to issuers concerning the relationship between issuers and underwriters.

Please find today’s special revenue decision in the Jefferson County bankruptcy case.

In our May 24 entry on this topic, the Northern Mariana Islands Retirement Fund (the “Fund”) was battling numerous challenges to its Chapter 11 eligibility.

The IRS is planning on sending out letters (“Letters”) over the next few months to several hundred issuers who have experienced covenant or payment defaults from 2007 to the present.

On April 17, 2012, the Northern Mariana Islands Retirement Fund (the “Fund”) became the first United States public pension fund to seek formal bankruptcy protection.

While the Investor Bulletin is fairly basic and addressed primarily to investors generally, the list of some of the risks of investing in municipal bonds included in the Bulletin may be helpful to issuers and underwriters when preparing or reviewing disclosure documents. 

The IRS has announced the procedures, and settlement cost methodology, for issuers seeking to preserve the tax-exemption of those student loan bonds that are at risk of being declared taxable due to the issuer's attempted compliance with arbitrage restrictions using a loan-swapping technique that the IRS has determined is ineffective.

On March 19, the SEC’s Office of Compliance Inspections and Examinations released a National Examination Risk Alert http://www.sec.gov/about/offices/ocie/riskalert-muniduediligence.pdf reporting on its examinations of broker-dealers for compliance with municipal bond underwriter due diligence obligations under the SEC’s prior interpretive releases and under SEC Rule 15c2-12.

The MSRB has put out for comment a proposed interpretive notice http://www.msrb.org/Rules-and-Interpretations/Regulatory-Notices/2012/2012-04.aspx designed to eliminate or reduce instances in which underwriters of new bonds issued under a parity indenture or bond resolution consent to amendments to such instrument on the issuance date of the new bonds.

The Massachusetts Attorney General recently promulgated regulations authorizing remote participation in meetings subject to the Open Meeting Law under certain prescribed circumstances.

The bankruptcy court ruled today that the City of Harrisburg’s Chapter 9 petition filed by the Harrisburg City Council was not specifically authorized under Pennsylvania law.

As expected the Harrisburg City Council has filed a reply to the numerous objections to the Chapter 9 filing of Harrisburg initiated by the City Council.  The City Council’s brief (Harrisburg response.pdf) appears to be the only timely filed reply to the objections to the Chapter 9 filing.