Arbitrage Investment Restrictions on Tax-Exempt Bonds, 14006-14007 [2019-06937]
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Federal Register / Vol. 84, No. 68 / Tuesday, April 9, 2019 / Rules and Regulations
not have a significant economic impact
on a substantial number of small entities
under the criteria of the Regulatory
Flexibility Act.
List of Subjects in 14 CFR Part 97
Air Traffic Control, Airports,
Incorporation by reference, Navigation
(Air).
Issued in Washington, DC, on March 22,
2019.
Rick Domingo,
Executive Director, Flight Standards Service.
Adoption of the Amendment
Accordingly, pursuant to the
authority delegated to me, Title 14,
AIRAC date
State
PART 97—STANDARD INSTRUMENT
APPROACH PROCEDURES
1. The authority citation for part 97
continues to read as follows:
■
By amending: § 97.23 VOR, VOR/
DME, VOR or TACAN, and VOR/DME
or TACAN; § 97.25 LOC, LOC/DME,
LDA, LDA/DME, SDF, SDF/DME;
§ 97.27 NDB, NDB/DME; § 97.29 ILS,
ILS/DME, MLS, MLS/DME, MLS/RNAV;
§ 97.31 RADAR SIAPs; § 97.33 RNAV
SIAPs; and § 97.35 COPTER SIAPs,
Identified as follows:
Effective Upon Publication
Authority: 49 U.S.C. 106(f), 106(g), 40103,
40106, 40113, 40114, 40120, 44502, 44514,
44701, 44719, 44721–44722.
2. Part 97 is amended to read as
follows:
■
City
Airport
FDC No.
FDC date
25–Apr–19 .........
FL
Tampa .....................
Tampa Executive ....
8/2054
3/1/19
25–Apr–19 .........
FL
Tampa .....................
Tampa Executive ....
8/2102
3/1/19
25–Apr–19 .........
25–Apr–19 .........
UT
UT
Duchesne ................
Duchesne ................
Duchesne Muni .......
Duchesne Muni .......
9/4478
9/4479
3/11/19
3/11/19
25–Apr–19 .........
25–Apr–19 .........
25–Apr–19 .........
OR
FL
FL
Mc Minnville ............
Tampa .....................
Tampa .....................
Mc Minnville Muni ...
Tampa Executive ....
Tampa Executive ....
9/4615
9/6087
9/6088
3/11/19
3/13/19
3/13/19
Effective Date: These final
regulations are effective April 9, 2019.
Applicability Date: For the date of
applicability, see § 1.148–11(n).
FOR FURTHER INFORMATION CONTACT:
Lewis Bell at (202) 317–6980 (not a tollfree number).
SUPPLEMENTARY INFORMATION:
DATES:
[FR Doc. 2019–06756 Filed 4–8–19; 8:45 am]
BILLING CODE 4910–13–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9854]
RIN 1545–BO77
Arbitrage Investment Restrictions on
Tax-Exempt Bonds
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.
AGENCY:
This document contains final
regulations regarding the arbitrage
investment restrictions under section
148 of the Internal Revenue Code (Code)
applicable to tax-exempt bonds and
other tax-advantaged bonds issued by
State and local governments. The final
regulations clarify existing regulations
regarding the definition of ‘‘investmenttype property’’ by expressly providing
an exception for investment in capital
projects that are used in furtherance of
the public purposes of the bonds. The
final regulations affect State and local
governmental issuers of these bonds and
potential investors in capital projects
financed with these bonds.
SUMMARY:
amozie on DSK9F9SC42PROD with RULES
Code of Federal regulations, Part 97, (14
CFR part 97), is amended by amending
Standard Instrument Approach
Procedures and Takeoff Minimums and
ODPs, effective at 0901 UTC on the
dates specified, as follows:
VerDate Sep<11>2014
16:07 Apr 08, 2019
Jkt 247001
Background
This document contains amendments
to 26 CFR part 1 under section 148 of
the Code. For interest on State or local
bonds to be excluded from the gross
income of the bondholder under section
103, the bonds must satisfy various
eligibility requirements, including a
requirement that the bonds not be
arbitrage bonds as defined in section
148. Section 148(a) generally defines an
‘‘arbitrage bond’’ as any bond issued as
part of an issue any portion of the
proceeds of which are reasonably
expected to be used or are intentionally
used to acquire ‘‘higher yielding
investments’’ or to replace funds so
used. Section 148(b)(1) defines the term
‘‘higher yielding investments’’ as any
‘‘investment property’’ that produces a
yield over the term of the issue that is
materially higher than the yield on the
issue. Section 148(b)(2) defines the term
‘‘investment property’’ to include any
security (within the meaning of section
165(g)(2)(A) or (B)), any obligation, any
annuity contract, certain residential
rental property, and any ‘‘investment-
PO 00000
Frm 00008
Fmt 4700
Sfmt 4700
Subject
This NOTAM, published in TL 19–09, is
hereby rescinded in its entirety.
This NOTAM, published in TL 19–09, is
hereby rescinded in its entirety.
VOR/DME–A, Orig.
Takeoff Minimums and Obstacle DP,
Orig–A.
RNAV (GPS) RWY 4, Orig–C.
RNAV (GPS) RWY 5, Orig–C.
ILS OR LOC RWY 23, Amdt 1C.
type property.’’ Section 1.148–1(e)(1) of
the Income Tax Regulations defines
‘‘investment-type property’’ to include
any property (other than securities,
obligations, annuity contracts, and
covered residential rental property for
family units under section 148(b)(2)(A),
(B), (C), and (E)) ‘‘that is held
principally as a passive vehicle for the
production of income.’’ Section 1.148–
1(e)(1) provides that, for this purpose,
the production of income includes any
benefit based on the time value of
money.
Institutional investors have suggested
clarification of the scope of the
regulatory definition of investment-type
property under § 1.148–1(e)(1) to ensure
that the definition does not impede
greater investment in public
infrastructure.
The legislative history to the Tax
Reform Act of 1986, Public Law 99–514,
100 Stat. 2085, indicates that Congress
intended to limit the scope of the
arbitrage restriction on investment-type
property so that it did not extend to
investments in capital projects in
furtherance of the public purposes of
the bonds. In this regard, the House
Report to the Tax Reform Act of 1986
included the following statement about
the intended scope of the definition of
investment-type property: ‘‘The
restriction would not apply, however, to
real or tangible personal property
acquired with bond proceeds for reasons
E:\FR\FM\09APR1.SGM
09APR1
Federal Register / Vol. 84, No. 68 / Tuesday, April 9, 2019 / Rules and Regulations
other than investment (e.g., courthouse
facilities financed with bond
proceeds).’’ H.R. Rep. No. 99–426, at
552 (1985), 1986–3 (vol. 2) C.B. 457; see
also S. Rep. No. 99–313, at 844 (1986),
1986–3 (vol. 3) C.B. 682 (containing a
statement substantially identical to that
in the House report); H.R. Rep. No. 99–
841, at II–747 (1986) (Conf. Rep.), 1986–
3 (vol. 4) C.B. 608 (stating that the
conference agreement follows the House
bill and the Senate amendment on this
restriction).
To clarify the scope of the investmenttype property definition consistent with
Congressional intent reflected in the
legislative history, in a notice of
proposed rulemaking published in the
Federal Register (83 FR 27302; REG–
106977–18) on June 12, 2018 (the
Proposed Regulations), the Department
of the Treasury (Treasury Department)
and the IRS proposed an exception to
the definition of investment-type
property for certain capital projects that
further the public purposes for which
the tax-exempt bonds were issued.
The Treasury Department and the IRS
solicited requests for a public hearing
and written comments on the Proposed
Regulations. No public hearing was held
because no request for a hearing was
received. The Treasury Department and
the IRS received four public comments
favoring finalization of the Proposed
Regulations to allow greater capital
investment in public infrastructure and
did not receive any unfavorable public
comments. Accordingly, the Treasury
Department and the IRS adopt the
Proposed Regulations, without
substantive change, as final regulations
by this Treasury Decision.
Explanation of Provisions
Special Analyses
This regulation is not subject to
review under section 6(b) of Executive
Order 12866 pursuant to the
Memorandum of Agreement (April 11,
2018) between the Treasury Department
and the Office of Management and
Budget regarding review of tax
regulations. Because this regulation
does not impose a collection of
information on small entities, the
Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. Pursuant to
section 7805(f) of the Code, the notice
of proposed rulemaking preceding this
regulation was submitted to the Chief
Counsel for Advocacy of the Small
Business Administration for comment
on its impact on small business, and no
comments were received.
Drafting Information
The principal authors of these
regulations are Lewis Bell and Spence
Hanemann of the Office of Associate
Chief Counsel (Financial Institutions
and Products). However, other
personnel from the Treasury
Department and the IRS participated in
their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is
amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read in part as
follows:
■
1. Section 1.148–1(e)(4): Exception to
Investment-Type Property Definition for
Certain Capital Projects
amozie on DSK9F9SC42PROD with RULES
provisions of the final regulations to
bonds that are sold before July 8, 2019.
Authority: 26 U.S.C. 7805 * * *
Section 1.148–1(e)(4) of the Final
Regulations provides that investmenttype property does not include real
property or tangible personal property
(for example, land, buildings, and
equipment) that is used in furtherance
of the public purposes for which the
tax-exempt bonds are issued. For
example, investment-type property does
not include a courthouse financed with
governmental bonds or an eligible
exempt facility under section 142, such
as a public road, financed with private
activity bonds.
■
2. Applicability Dates and Reliance
§ 1.148–11
The amendments to the definition of
investment-type property in the final
regulations apply to bonds sold on or
after July 8, 2019. Issuers may apply the
*
VerDate Sep<11>2014
16:07 Apr 08, 2019
Jkt 247001
Par. 2. Section 1.148–0(c) is amended
by adding entries for §§ 1.148–1(e)(4)
and 1.148–11(n) to read as follows:
§ 1.148–0
*
Scope and table of contents.
*
*
(c) * * *
§ 1.148–1
*
*
Definitions and elections.
*
*
*
*
*
(e)* * *
(4) Exception for certain capital
projects.
*
*
*
*
*
1. Revising the first sentence of
paragraph (e)(1).
■ 2. Adding paragraph (e)(4).
The revision and addition read as
follows:
■
§ 1.148–1
Definitions and elections.
*
*
*
*
*
(e) Investment-type property—(1) In
general. Except as otherwise provided
in this paragraph (e), investment-type
property includes any property, other
than property described in section
148(b)(2)(A), (B), (C), or (E), that is held
principally as a passive vehicle for the
production of income.* * *
*
*
*
*
*
(4) Exception for certain capital
projects. Investment-type property does
not include real property or tangible
personal property (for example, land,
buildings, and equipment) that is used
in furtherance of the public purposes for
which the tax-exempt bonds are issued.
For example, investment-type property
does not include a courthouse financed
with governmental bonds or an eligible
exempt facility under section 142, such
as a public road, financed with private
activity bonds.
*
*
*
*
*
Par. 4. Section 1.148–11 is amended
by adding paragraph (n) to read as
follows:
■
§ 1.148–11
Effective/applicability dates.
*
*
*
*
*
(n) Investment-type property. Section
1.148–1(e)(1) and (4) apply to bonds
sold on or after July 8, 2019. An issuer
may apply the provisions of § 1.148–
1(e)(1) and (4) to bonds sold before July
8, 2019.
Kirsten Wielobob,
Deputy Commissioner for Services and
Enforcement.
Approved: November 16, 2018.
David J. Kautter,
Assistant Secretary of the Treasury (Tax
Policy).
Editorial Note: This document was
received for publication by the Office of the
Federal Register on April 3, 2019.
[FR Doc. 2019–06937 Filed 4–8–19; 8:45 am]
BILLING CODE 4830–01–P
Effective/applicability dates.
*
*
*
*
(n) Investment-type property.
■ Par. 3. Section 1.148–1 is amended
by:
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14007
E:\FR\FM\09APR1.SGM
09APR1
]]>Agencies
[Federal Register Volume 84, Number 68 (Tuesday, April 9, 2019)]
[Rules and Regulations]
[Pages 14006-14007]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-06937]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9854]
RIN 1545-BO77
Arbitrage Investment Restrictions on Tax-Exempt Bonds
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations regarding the
arbitrage investment restrictions under section 148 of the Internal
Revenue Code (Code) applicable to tax-exempt bonds and other tax-
advantaged bonds issued by State and local governments. The final
regulations clarify existing regulations regarding the definition of
``investment-type property'' by expressly providing an exception for
investment in capital projects that are used in furtherance of the
public purposes of the bonds. The final regulations affect State and
local governmental issuers of these bonds and potential investors in
capital projects financed with these bonds.
DATES: Effective Date: These final regulations are effective April 9,
2019.
Applicability Date: For the date of applicability, see Sec. 1.148-
11(n).
FOR FURTHER INFORMATION CONTACT: Lewis Bell at (202) 317-6980 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to 26 CFR part 1 under section
148 of the Code. For interest on State or local bonds to be excluded
from the gross income of the bondholder under section 103, the bonds
must satisfy various eligibility requirements, including a requirement
that the bonds not be arbitrage bonds as defined in section 148.
Section 148(a) generally defines an ``arbitrage bond'' as any bond
issued as part of an issue any portion of the proceeds of which are
reasonably expected to be used or are intentionally used to acquire
``higher yielding investments'' or to replace funds so used. Section
148(b)(1) defines the term ``higher yielding investments'' as any
``investment property'' that produces a yield over the term of the
issue that is materially higher than the yield on the issue. Section
148(b)(2) defines the term ``investment property'' to include any
security (within the meaning of section 165(g)(2)(A) or (B)), any
obligation, any annuity contract, certain residential rental property,
and any ``investment-type property.'' Section 1.148-1(e)(1) of the
Income Tax Regulations defines ``investment-type property'' to include
any property (other than securities, obligations, annuity contracts,
and covered residential rental property for family units under section
148(b)(2)(A), (B), (C), and (E)) ``that is held principally as a
passive vehicle for the production of income.'' Section 1.148-1(e)(1)
provides that, for this purpose, the production of income includes any
benefit based on the time value of money.
Institutional investors have suggested clarification of the scope
of the regulatory definition of investment-type property under Sec.
1.148-1(e)(1) to ensure that the definition does not impede greater
investment in public infrastructure.
The legislative history to the Tax Reform Act of 1986, Public Law
99-514, 100 Stat. 2085, indicates that Congress intended to limit the
scope of the arbitrage restriction on investment-type property so that
it did not extend to investments in capital projects in furtherance of
the public purposes of the bonds. In this regard, the House Report to
the Tax Reform Act of 1986 included the following statement about the
intended scope of the definition of investment-type property: ``The
restriction would not apply, however, to real or tangible personal
property acquired with bond proceeds for reasons
[[Page 14007]]
other than investment (e.g., courthouse facilities financed with bond
proceeds).'' H.R. Rep. No. 99-426, at 552 (1985), 1986-3 (vol. 2) C.B.
457; see also S. Rep. No. 99-313, at 844 (1986), 1986-3 (vol. 3) C.B.
682 (containing a statement substantially identical to that in the
House report); H.R. Rep. No. 99-841, at II-747 (1986) (Conf. Rep.),
1986-3 (vol. 4) C.B. 608 (stating that the conference agreement follows
the House bill and the Senate amendment on this restriction).
To clarify the scope of the investment-type property definition
consistent with Congressional intent reflected in the legislative
history, in a notice of proposed rulemaking published in the Federal
Register (83 FR 27302; REG-106977-18) on June 12, 2018 (the Proposed
Regulations), the Department of the Treasury (Treasury Department) and
the IRS proposed an exception to the definition of investment-type
property for certain capital projects that further the public purposes
for which the tax-exempt bonds were issued.
The Treasury Department and the IRS solicited requests for a public
hearing and written comments on the Proposed Regulations. No public
hearing was held because no request for a hearing was received. The
Treasury Department and the IRS received four public comments favoring
finalization of the Proposed Regulations to allow greater capital
investment in public infrastructure and did not receive any unfavorable
public comments. Accordingly, the Treasury Department and the IRS adopt
the Proposed Regulations, without substantive change, as final
regulations by this Treasury Decision.
Explanation of Provisions
1. Section 1.148-1(e)(4): Exception to Investment-Type Property
Definition for Certain Capital Projects
Section 1.148-1(e)(4) of the Final Regulations provides that
investment-type property does not include real property or tangible
personal property (for example, land, buildings, and equipment) that is
used in furtherance of the public purposes for which the tax-exempt
bonds are issued. For example, investment-type property does not
include a courthouse financed with governmental bonds or an eligible
exempt facility under section 142, such as a public road, financed with
private activity bonds.
2. Applicability Dates and Reliance
The amendments to the definition of investment-type property in the
final regulations apply to bonds sold on or after July 8, 2019. Issuers
may apply the provisions of the final regulations to bonds that are
sold before July 8, 2019.
Special Analyses
This regulation is not subject to review under section 6(b) of
Executive Order 12866 pursuant to the Memorandum of Agreement (April
11, 2018) between the Treasury Department and the Office of Management
and Budget regarding review of tax regulations. Because this regulation
does not impose a collection of information on small entities, the
Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply.
Pursuant to section 7805(f) of the Code, the notice of proposed
rulemaking preceding this regulation was submitted to the Chief Counsel
for Advocacy of the Small Business Administration for comment on its
impact on small business, and no comments were received.
Drafting Information
The principal authors of these regulations are Lewis Bell and
Spence Hanemann of the Office of Associate Chief Counsel (Financial
Institutions and Products). However, other personnel from the Treasury
Department and the IRS participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR part 1 is amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. Section 1.148-0(c) is amended by adding entries for Sec. Sec.
1.148-1(e)(4) and 1.148-11(n) to read as follows:
Sec. 1.148-0 Scope and table of contents.
* * * * *
(c) * * *
Sec. 1.148-1 Definitions and elections.
* * * * *
(e)* * *
(4) Exception for certain capital projects.
* * * * *
Sec. 1.148-11 Effective/applicability dates.
* * * * *
(n) Investment-type property.
0
Par. 3. Section 1.148-1 is amended by:
0
1. Revising the first sentence of paragraph (e)(1).
0
2. Adding paragraph (e)(4).
The revision and addition read as follows:
Sec. 1.148-1 Definitions and elections.
* * * * *
(e) Investment-type property--(1) In general. Except as otherwise
provided in this paragraph (e), investment-type property includes any
property, other than property described in section 148(b)(2)(A), (B),
(C), or (E), that is held principally as a passive vehicle for the
production of income.* * *
* * * * *
(4) Exception for certain capital projects. Investment-type
property does not include real property or tangible personal property
(for example, land, buildings, and equipment) that is used in
furtherance of the public purposes for which the tax-exempt bonds are
issued. For example, investment-type property does not include a
courthouse financed with governmental bonds or an eligible exempt
facility under section 142, such as a public road, financed with
private activity bonds.
* * * * *
0
Par. 4. Section 1.148-11 is amended by adding paragraph (n) to read as
follows:
Sec. 1.148-11 Effective/applicability dates.
* * * * *
(n) Investment-type property. Section 1.148-1(e)(1) and (4) apply
to bonds sold on or after July 8, 2019. An issuer may apply the
provisions of Sec. 1.148-1(e)(1) and (4) to bonds sold before July 8,
2019.
Kirsten Wielobob,
Deputy Commissioner for Services and Enforcement.
Approved: November 16, 2018.
David J. Kautter,
Assistant Secretary of the Treasury (Tax Policy).
Editorial Note: This document was received for publication by
the Office of the Federal Register on April 3, 2019.
[FR Doc. 2019-06937 Filed 4-8-19; 8:45 am]
BILLING CODE 4830-01-P
