Peter Schroeder

Build America Bond issuers could potentially go years without subsidy payments under the examination process the Internal Revenue Service is currently considering for them, bond attorneys meeting here warned last week.

The Internal Revenue Service is kicking off the first round of audits of Build America Bonds and is asking issuers if any potentially related entities, such as pension plans, are buying their BABs, according to issuers and IRS officials.

Municipal market participants should not expect the Treasury Department to simply rubber-stamp the existing tax-exempt bond rules for issue price when it comes to Build America Bonds, a Treasury official told bond lawyers at a recent meeting.

A number of Build America Bond issuers are seeking voluntary closing agreements with the Internal Revenue Service to settle accidental violations of a de minimis premium rule, an IRS official told industry officials in Manhattan yesterday.

Senate Finance Committee Chairman Max Baucus on Thursday proposed to extend the Build America Bonds program for only one year in legislation he unveiled that would extend several expiring or expired bond and tax provisions.

A National Bureau of Economic Research study has concluded that while Build America Bonds have succeeded in their mission to lower financing costs for state and local governments, traditional tax-exempt bonds still offer more enticing after-tax yields to individual investors.

The vast majority of early Build America Bond subsidy payments were processed in a timely and accurate manner during the first five months of the program, with no evidence of fraud or errors, according to a new report.

An overwhelming majority of Build America Bond subsidy payments have been paid in full to BAB issuers, suggesting that concerns about offsets are dramatically overblown, according to new data on state issuers compiled by the IRS.

Four major municipal market groups are urging the Treasury Department to issue guidance confirming that the existing regulatory framework on issue price for tax-exempt bonds also applies to Build America Bonds and stating that if issuers follow certain long-standing practices, they can be confident they are complying with the rules in this area.

House Ways and Means Committee chairman Sander Levin Wednesday introduced a new bill that enables Congress to make another attempt at extending several bond provisions slated to expire at the end of the year, including Build America Bonds.

House Ways and Means Committee chairman Sander Levin plans next week to unveil new jobs legislation that would extend Build America Bonds and other muni bond initiatives that are set to expire at the end of the year.

Proposed extensions to major bond provisions have survived several revisions of pending tax legislation, but municipal market participants are wondering if more controversial, non-bond provisions could scuttle the entire package.

A two-year extension to the Build America Bonds program, as well as extensions to a handful of other bond provisions set to expire at the end of the year, remain in legislative limbo as Senate Democratic leaders this week continue attempts to produce a tax bill that they can pass.

Senate Republicans have proposed an alternative bill to extend expiring tax-law provisions that would not include Build America Bonds, a major difference from pending legislation, which would extend the BAB program by two years while gradually reducing its subsidy rate to 30% from 35%.

Municipal issuers are overreacting to recent developments surrounding the compliance program for Build America Bonds, a Treasury official said yesterday in an effort to tamp down ongoing concerns.

A Treasury Department official Monday said that federal regulators already have attempted to assuage muni market participants’ worries about how to determine issue price for Build America Bonds in guidance issued in April, even though issuers continue to air concerns about the lack of guidance.

The recovery zone bond program would double in size to $50 billion and Build America Bonds could be used to do current refundings of existing BABs under a new tax and jobs bill released late Thursday evening by leaders of the House and Senate tax-writing committees.