Ruling on Pooled Debt May Curb Refinancings, Lawyers Say

Ferris, Craig T.
June 2003
Bond Buyer;6/25/2003, Vol. 344 Issue 31664, p29
Trade Publication
A revenue ruling issued by the Internal Revenue Service is expected to make it more difficult for the proceeds of pooled bond issues to be loaned to issuers to refinance debt because the bonds could violate the restrictions on advance refundings and could be declared taxable, bond attorneys said. Revenue Ruling 2003-78, which had been expected because it was one of the items on the IRS' priority guidance plan, says issuers must look at the issue date of pooled bonds and holds that any proceeds used more than 90 days after the issue date of that issue to pay off old debt by any of the borrowers is an advance refunding. One bond counsel said that the ruling, which is the first official guidance issued by the IRS on pooled refundings, was not surprising because pooled bond issues are a routine target for IRS audits and because advance refundings are seen by the agency as a burden on the market.


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