The Treasury Department and IRS today released for publication in the Federal Register a notice of proposed rulemaking (REG-129067-15) concerning the definition of a “political subdivision” for purposes of tax-exempt bonds issued by state and local governments.
The proposed regulations [PDF 228 KB] are being issued to specify the elements of a "political subdivision." State and local governments that issue tax-exempt bonds and users of property financed with tax-exempt bonds will be affected by this guidance. However, under certain transition rules, the proposed definition of political subdivision will not apply for purposes of determining whether outstanding bonds are obligations of a political subdivision and will not apply to existing entities for a transition period.
The proposed regulations clarify and further develop the eligibility requirements for a political subdivision. To qualify as a political subdivision under the proposed regulations, an entity must meet three requirements (taking into account all of the facts and circumstances):
The regulations are proposed to be effective 90 days after final regulations are published. As briefly noted above, there are numerous transition rules listed in the proposed regulations.
For more information, contact the Managing Director-in-Charge of KPMG's Washington National Tax Exempt Organizations Tax group
D. Greg Goller | +1 (703) 286- 8391 | firstname.lastname@example.org
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