Proposal limits developers’ use of tax-exempt bonds
A regulatory proposal by the Internal Revenue Service would limit the ability of real estate developers to use tax-exempt bond financing to finance infrastructure work.
Developers in 20 states can use tax-exempt bond issues to fund construction of sidewalks, streets and sewers by forming special-purpose taxing district comprised of political subdivisions.
The regulatory proposal would define a political subdivision qualified to belong to a special-purpose taxing district as an entity that has sovereign powers, serves a governmental purpose and has governmental control.
The IRS proposal states that “control by a small faction of private individuals, business corporations, trusts, partnerships, or other persons is fundamentally not governmental control.”
Tallahassee attorney Jonathan Johnson with Hopping Green & Sams told BuilderOnline.com that the IRS proposal would be detrimental to real estate development: “With these proposed regulations, you would basically be neutering and rendering much less effective an important tool for how infrastructure has been financed.”
The IRS is accepting public comments on its regulatory proposal until May 23 and a public hearing on the proposal is scheduled for June 6. [BuilderOnline.com] — Mike Seemuth