Bill or Regulation Background and Current Status
Urban Aid Legislation (HR 11) In the wake of unrest in Los
Angeles and other cities,
Congress has been trying to
craft legislation to provide
financial aid and tax relief to
urban areas. The House version,
passed on July 2, is HR 11,
which would create urban
enterprise zones. The plan
would allow tax-exempt
qualified redevelopment bonds
to be issued in the zones for a
number of uses, including loans
to small businesses. The bill
would also permanently extend
the tax exemptions for mortgage
revenue bonds and small-issue
industrial development bonds,
and the low-income housing tax
credit, which expired on June
30. In addition, the bill
contains several tax
simplification provisions that
would ease the arbitrage rebate
requirement and other tax law
bond curbs. But the bill also
includes a provision that would
require mark-to-market
accounting of municipal bonds
and other securities, which has
been widely criticized by the
securities industry.
The Senate Finance Committee,
meanwhile, approved enterprise
zone legislation on July 30
that also contains a bond
component. The bill would
create a new category of
exempt-facility bond that could
be used to purchase land,
buildings, and equipment used
by enterprise zone businesses.
It also would renew the
mortgage bond and IDB
exemptions and the low-income
housing tax credit and extend
them through Dec. 31,1993. The
bill also includes a different
set of simplification items
than the one found in the House
bill. The full Senate, which
started debating the bill just
before Congress left for its
August recess, is expected to
resume consideration of the
committee bill in September.
Energy Bill (HR 776) A comprehensive energy bill
passed by the House on May 27
contains two provisions added
by the House Ways and Means
Committee that would affect the
tax-exempt bond market. One
would remove investment
restriction on nuclear
decomissioning trust funds,
which under current law may
invest only in U.S. Treasury
securities and tax-exempt
municipal bonds. That provision
would also lower the funds '34%
tax rate to 20%. Another
provision, sponsored by Rep.
Beryl Anthony, D-Ark., would
increase the supply of
bank-qualified bonds and was
designed to offset any negative
impact on demand for municipals
that the nuclear trust fund
measure might cause. Under
current law, banks may deduct
80% of the cost of carrying
municipal bonds if they are
bought from issuers who expect
to sell no more than $10
million annually. Rep.
Anthony's provision would raise
that amount to $20 million.
On July 30, the Senate
approved its version of energy
legislation, which proposed
removing investment
restrictions on nuclear
decommissioning funds, but did
not propose lowering the tax
rate. The bill also does not
include the provision on
bank-qualified bonds. It does,
however, contain an amendment
offered by Sen. Steve Symms,
R-Idaho. that would remove
volume cap limitations on
high-speed rail bonds. A
conference committee to work
out differences between the two
bills is expected to most in
September.
Waxman Bill (HR 4848) Introduced on April 10 by Rep.
Henry Waxman, D-Calif., this
legislation would hurt the
municipal bond market by
imposing a 2.5% tax on unearned
income, including interest from
tax-exempt bonds, to fund a new
long-term health-care program
for the chronically ill and
disabled. Congress is not
expected to pass any
health-care legislation this
year, but hearings may be hold
on health-care reform later
this year and Rep. Waxman's
bill is expected to be at the
center of the discussion.
Mortgage Board Extension (HR Rep. Barbara B. Kennelly,
1067 and S 167) D-Conn., and Sen. Donald W.
Riegle, D-Mich., introduced
legislation last year to
permanently extend the tax
exemption for mortgage revenue
bonds, which expired June 30.
Congress is considered likely
to pass legislation later this
year that would grant a
short-term extension for the
mortgage bond exemption.
Small-Issue Industrial Rep. William Coyne, D-Pa., and
Development Bond Extension Sen. John B. Breaux, D-La.,
(HR 1186 and S 1357) introduced legislation last
year to extend the tax
exemption for small-issue IDBs,
which expired June 30. Rep.
Coyne's bill would extend IDB
use through 1996, and Sen.
Breaux's bill would make it
permanent. Congress is
considered likely to pass
legislation later this year
that would grant a short-term
extension for the IDB bond
exemption.
Bond Simplification (HR 2775, Rep. Dan Rostenkowski, D-III.,
HR 2777 and S 1394) and Sen. Lloyd Bentsen, D-Tex.,
teamed up last year to offer
broad tax simplification
legislation - HR 2777 and S
1394 - that includes a number
of minor provisions to make
bond rules more workable. In
addition, Rep. Rostenkowski
introduced HR 2775, which
included a few major bond
simplification provisions, such
as increasing the small-issuer
arbitrage exemption to $10
million. Some of the provisions
in all three bills were
included in the urban aid
measures passed by the House
and the Senate Finance
Committee.
Easing of Bond Curbs (HR 710 Along with easing the arbitrage
and S 913) rebate requirement and limits
on bank deductibility, the
legislation introduced last
year by Rep. Beryl Anthony,
D-Ark., and Sen. Max Baucus,
D-Mont., would modify several
other tax law bond curbs, such
as repealing the 5% unrelated
and disproportionate use test.
Some of the provisions in this
legislation found their way
into Rep. Rostenkowski's
simplification bill, HR 2775,
and into urban aid bills passed
by the House and the Senate
Finance Committee.
Expanding Demand for Rep. Tom McMillen, D-Md.,
Municipals (HR 5154) introduced legislation on May
14 designed to increase
purchases of municipal bonds in
two areas: pension funds and
individual retirement accounts.
Under Rep. McMillen's plan,
pension funds and IRAs would
receive 43 cents in federal
subsidies for every dollar
earned in interest income from
investments in tax-exempt
bonds. Rep. McMillen is not a
member of the House Ways and
Means Committee, and Congress
has taken no action yet on his
measure. Capitol Hill watchers
have said chances for passage
of his bill are slim, because
it would be difficult for
Congress to find the money
needed to pay the subsidies.
Environmental Finance (S 90 Sen. Pets Domenici, R-N.M., is
and HR 2172) the author of S 90, which would
reduce restrictions on
tax-exempt bonds used to help
clean up the environment that
benefit private firms by
classifying them as
"governmental," exempting them
from the private-activity
volume cap, and permitting
accelerated depreciation for
all privately owned
infrastructure facilities
financed with tax-exempt bonds.
Rep. Frank Guarini, D-N.J., is
the author of HR 2172, which
also reduces curbs on
private-activity bonds used for
environmental facilities but
does not permit expanded
depreciation. Neither measure
is expected to be considered
seriously this year, especially
in light of the current
stalemate over enacting a tax
bill. Sen. Domenici, however,
may attempt to offer his
proposal as an amendment
to the urban aid bill pending
in the Senate.
HHS Regulations on Medicaid Regulations are due out Oct. 1
Financing implementing changes to the
Medicaid program that sparked
an uproar among state and local
governments last year.
Originally, the Department of
Health and Human Services
proposed rules Sept. 12,1991,
that were slated to go into
effect Jan. 1, 1992, but they
caused so much controversy that
Congress passed legislation
delaying the rules until
October. The rules are designed
to prevent a state from
counting certain tax revenues
or donations from hospitals
toward the contributions it
makes to the Medicaid program
that are eligible for federal
matching funds. Department
officials have been meeting
with state and local lobbyists
to craft the upcoming rules.
HOME Program Legislation The National Affordable Housing
(HR5334 and S3031) and Act of 1990 known as the HOME
Regulations program, is up for
reauthorization this year.
Under the program, the federal
government matches
contributions that state and
local governments make to
rental housing and home
ownership programs for
low-income people. One of the
key issues during the
reauthorization debate will be
whether all forms of tax-exempt
debt should count toward the
match. The 1990 law is vague in
this area, and HUD has taken
the position that only general
obligation bonds should be
eligible for matching funds.
Housing industry officials,
meanwhile, say private-activity
bonds should count as well. In
August the House approved its
version of the reauthorization,
which would allow 100% of the
value of private-activity bond
issuances to be counted toward
the match and would fund HOME
at a level of $2.1 billion for
fiscal 1993. The Senate Banking
Committee approved a bill on
June 22 that would allow only
25% of the value of
private-activity bond issuances
to be eligible for federal
matching funds. HUD, meanwhile,
is still drafting the
regulations for the
two-year-old program and is
expected to publish them later
this year.
Student Loan Bonds (HR 3553 Congress gave final approval in
and S 1150) early July to a comprehensive
bill that would reauthorize the
Higher Education Act of 1965.
The bill contains a provision
that would set up a pilot
program to test the idea of
having colleges be directly
responsible for making and
servicing student loans. Under
present law, the federal
government guarantees loans
made to students by commercial
banks, which in turn sell the
loans to state higher education
authorities who often finance
their purchases with tax-exempt
bonds. Education officials have
warned that a direct-loan
program would obviate the need
for those authorities and, in
turn, for tax-exempt student
loan bonds.
Government Securities Act The Senate passed two
Reauthorization (S 1699, complementary and relatively
S 1247, and HR 3927) simple bills last year that
were introduced by Sen.
Christopher Dodd, D-Conn. S
1247, passed on July 31, 1991,
reauthorized the Government
Securities Act of
Bill or Regulation Background and Current Status
Government Securities Act (continued from previous page)
Reauthorization (S 1699, 1986 and indefinitely extended
S 1247, and HR 3927 the Treasury's rule-making
authority. S 1699, passed Sept.
25, 1991, in the wake of the
Salomon Brothers bidding
scandal, extended the
Treasury's rule-making
authority for one year, made it
illegal to provide false
information in connection with
bidding for government
securities, and extended the
SEC's antifraud authority to
the government securities
market. In the House, the
Energy and Commerce Committee
on June 2 approved HR 3927, a
more complex measure containing
several provisions that trouble
the securities industry.
Included is a provision giving
the Treasury authority to
identify large trading
positions in the government
securities market and backup
authority for the Securities
and Exchange Commission to
monitor prices and audit sales
transactions. The Treasury, the
Federal Reserve, and market
participants oppose the bill.
The Banking Committee Aug. 6
approved a rival bill that
would bar the SEC from writing
rules involving record keeping,
fraud, internal controls, or
record keeping for bank
dealers. instead, the rules
would have to come from the
appropriate bank regulatory
agencies. Such an approach is
opposed by the Commerce
Committee, which argues that it
could be confusing to the
market.
In addition, congressional
sources say the Ways and Means
Committee believes the Banking
Committee overstepped its
jurisdiction by including a
provision that would allow
Treasury to bar or suspend
dealers who violate auction
rules. Ways and Means claims
authority for legislation
involving Treasury debt
operations.
It is unclear when a bill
will come to the House floor
for a vote. Aides said the
three committees have to work
out their differences when
Congress returns from its
August recess.
Fiscal 1993 Budget Resolution The House and Senate gave final
(H Con.Res.287) approval to the fiscal 1993
budget plan on May 21, but the
vote in each chamber was much
closer than expected. The House
vote was 209 to 207, while the
Senate approved it 52 to 41
after a conference committee
approved the compromise measure
on May 20. The new budget sets
an overall cap on domestic
spending of $225.3 billion, the
level called for in the 1990
budget agreement. To comply
with the cap, the House and
Senate Appropriations
committees will have to cut
domestic programs by $6.4
billion. In addition, the
budget calls for cuts of $7
billion in defense spending
cuts.
Balanced Budget Amendment The amendment would require
to the U.S. Constitution (H J. U.S. receipts to equal outlays,
Res.290) unless waived by a three-fifths
majority of both houses of
Congress. The House defeated
the amendment by a vote of 280
to 153 on June 11, falling 9
votes short of the two-thirds
majority needed to pass. The
Senate also buried the
amendment on July 1 when it
failed to break off a
filibuster being waged by
opponents. President George
Bush and congressional sponsors
have vowed to force another
round of votes early next year,
when the new Congress arrives,
if the President is reelected.
Budget Fire Walls Bill Both bills would have
(S 2399, HR 3732) eliminated one year ahead of
schedule the fire walls between
defense, domestic, and
international spending
established by the 1990 budget
agreement. But the bills are in
limbo after the Senate version
failed in a March 26 test vote
and the House defeated its
measure March 31. Senate
leaders have no plans for
further action on their bill,
but House leaders say they may
bring the measure up again
later this year if the
political climate improves.
Superconducting Super Collider The House on June 17 voted to
Energy and Water kill the Super Collider science
Appropriations Bill project in Texas by stripping
(H.R. 5373) nearly all the $483 Energy and
Water million in federal
funding provided in a fiscal
1993 appropriations bill. The
Senate Appropriations Committee
countered on July 23 by
approving a $550 million
appropriation for the Collider
in a bill that the full Senate
passed after a heated debate
over the Collider on Aug. 3.
The House and Senate will try
to resolve their differences
over whether to continue the
project in a conference
committee scheduled to convene
after Congress returns from its
Labor Day recess.
MSRB Municipal Securities The primary market disclosure
Information Library Primary system of the Municipal
Market Disclosure System Securities Rulemaking Board's
Municipal Securities
Information Library went into
operation in late April, just
over 10 months after the SEC
approved it. Under the system,
official statements filed with
the board by underwriters are
put on high-capacity digital
audio tapes that can be sold
to information vendors who may
repackage the information and
resell it. The system allows
market participants to obtain
picture-perfect images of most
of the official statements
produced in the country.
Bloomberg Financial Markets
became the first vendor to
receive digital tapes in early
July.
MSRB Continuing Disclosure The Municipal Securities
Pilot Program Rulemaking Board's 18-month
experimental Continuing
Disclosure Information Pilot
system, which is the second
major element of the MSRB's
Municipal Securities
information Library, was
approved by the Securities and
Exchange Commission April 6.
When the voluntary pilot
program is launched in November
bond trustees will be able to
file three-page notices of
important events - such as
calls and draws on escrow
funds - affecting bonds they
oversee in the secondary
market. The notices can be
filed by fax machine or mail.
Six months after the pilot
system is started, issuers may
voluntarily start filing
similar notices. When the pilot
program ends about May 1994,
the SEC and MSRB will decide if
they want to make the program
permanent and whether and how
to expand it. The board's MSIL
facility, including its public
access facility, is being moved
from the board's Washington,
D.C., headquarters to nearby
Alexandria, Va., at 1640 King
St.
SEC Rule 2a-7 The unveiling of a new
Securities and Exchange
Commission rule governing
tax-exempt money market funds
continues to be delayed by
President Bush's 1992
moratorium on rule-making and
by election year politics. The
SEC in January issued now
standards for both taxable and
tax-exempt money market funds,
but most of the rigorous now
requirements governing the
kinds and variety of securities
that funds can hold do not
apply to tax-exempts. Interest
in the new rule was heightened
last winter when SEC
Commissioner Richard Roberts
recommended that the agency
restrict tax-exempt money
market funds from investing in
short-term paper of issuers
that do not pledge to make
secondary-market disclosure.
The investment Company
Institute, the industry
association representing mutual
funds, wrote Mr. Roberts Dec. 6
opposing the proposal. The group
began work this spring on
disclosure guidelines for
tax-exempt money market and
mutual funds in hopes of
heading off the commissioner's
plan.
SEC Rule for Assessment of The SEC adopted temporary rules
Risks Posed by Derivative in late July that require for
Products (Rules 17h-1T and 2T) the first time that holding
companies, affiliates and
subsidiaries of brokerage firms
report their holdings of
derivative products in
quarterly financial reports
they file with the SEC. The
rule takes effect Sept. 30 and
expires at the end of 1994 when
the SEC is to decide whether to
make it permanent. It is
designed to help the agency
estimate the risks involved in
the burgeoning derivatives
market, including tax-exempt
products. SEC Commissioner
Richard Roberts said in a
speech Aug. 24 that the SEC
should consider setting
reasonable limits on the
ability of tax-exempt money
market funds to invest in some
synthetic variable-rate demand
notes. But he added that many
of the issues surrounding
interest rate swaps should be
left up to the market and
issuers rather than federal
regulators.
MSRB Proposed Official The MSRB last month adopted its
Statement Collection Rule controversial plan to require
underwriters to send official
statements for short-term and
variable-rate demand note deals
to the board's Municipal
Securities information Library.
But the board backed away from
a proposal that would have
required dealers to send
documents for private
placements to MSIL. The move
means that official statements
for nearly all municipal
securities issued in the U.S.
will be available from MSIL's
primary market disclosure
section. The rule still must be
approved by the Securities and
Exchange Commission, which will
open it up for another round of
comment later this year. it
would not take effect until
January, at the earliest.
Financial Accounting Standards The Financial Accounting
Board Project on Market Value Standards Board agreed on July
Accounting 15 to move ahead with a
controversial proposal to Board
Project on Market Value require
banks to value their investment
securities, including some
municipal bonds, at their
current market value rather
than their original market
price. Banks could continue to
report those bonds at their
original purchase price that
they intend to hold to
maturity. For bonds that banks
do not plan to hold to
maturity, unrealized gains and
losses would not be included in
earnings, which according to a
FASB official, means that they
are shown as a separate
component of shareholders'
equity on balance sheets.
Municipal industry leaders warn
that the standard will have
grave effects on the market, by
weakening the demand by
financial institutions for
long-term debt securities. The
board is expected to vote on a
formal proposal for public
comment shortly.
Proposals for Streamlining Public comment is due Sept. 21
Clearance and Settlement on a report by a securities
industry task force that
recommended on May 26 that
Clearance and Settlement stock
and bond trades be settled in
three days instead of the
current five. The report,
however, signaled that such a
tight time frame may not be
possible for settlement of
municipal transactions.
Securities and Exchange
Commission Chairman Richard C.
Breeden, who originally
recommended the creation of
the task force, sought to allay
fears that the so-called "T
plus 3" concept will disrupt
the securities industry and
said it will probably take two
to three years to shift over to
the faster settlement system
rather than the original target
of 1993. The task force, headed
by John Bachmann, chairman of
St. Louis-based Edward D. Jones
& Co., was set up in November
1991 as an outgrowth of the
Group of 30, an international
panel examining how to
streamline clearance and
settlement of securities
worldwide.
Bill or Regulation Background and Current Status
Registration of Rating The SEC received numerous
Agencies comments in August from the
municipal industry on the
question whether nationally
recognized rating agencies
should be required to meet
minimum operating standards. A
number of law firms and dealers
opposed the idea, which has
been raised by SEC member
Richard Roberts in a series of
speeches this year. SEC
commissioners, meanwhile, are
split over the issue, according
to letters they sent recently
to Rep. John Dingell, D-Mich.,
who plans to introduce
legislation next year calling
for registration of rating
firms.
Registration of Conduit Bonds The Municipal Securities
Rulemaking Board, growing
increasingly concerned that
some brokers may be selling
unsuitable bonds to small
investors, voted in August to
launch a major study of whether
new rules are needed Securities
and Exchange Commissioner
Richard Roberts proposed in a
speech Feb. 29 that municipal
bond brokers be required to put
in writing why they think their
recommendations to retail
investors to buy unrated
conduit bonds are suitable.
Broker-Dealers currently are
required by law to make
suitability determinations, but
they do not have to put the
determination in writing. The
SEC's market regulation chief
William Heyman wrote the MSRS
early last month urging it to
take up the proposal or
consider other solutions.
Investment Advisers The House Energy and Commerce
Legislation (H.R. 5726, Committee approved broad
S 2266) legislation on Aug. 4 to
increase federal regulation of
financial advisers after easing
some requirements included in a
bill approved by its
subcommittee a week earlier.
The bill would raise the fees
advisers pay to register with
the SEC, direct the SEC to pay
particular attention in
inspections to new or
financially troubled advisers
and require the SEC to search
for unregistered advisers. The
bill also includes a provision
requiring advisers to supply
investors with brochures
describing their
background and practices as well
as their commissions or fees
for various transactions. The
panel watered
down a provision that would
have required advisers to
provide periodic summaries of
all charges to customers
and authorized the SEC to
designate an outside
organization to handle much of
the increased inspection activity
called for in the legislation.
The bill is much broader than a
bill approved earlier this year
by the Senate Banking
Committee, which would do
little more than require an
increase in fees to pay for
increased inspections by
regulators. Action by the full
House and Senate has not been
scheduled.
IRS Arbitrage Rebate The Internal Revenue Service on
Regulations May 12 finalized arbitrage
(Fl-91-86/1.148-0 to -9 and rebate rules that had been
1.149(d)(-1) and 1.150-0-1 and published in temporary
1.103.13T form in May 1989. The IRS set a
June 30,1993, expiration date
for the final rules, however,
and announced it
would rewrite and simplify them
before that date. The IRS said
it would integrate yield
restriction and rebate
requirements in the rewritten rules.
Meanwhile, the final rules
have the same effective dates
as the 1989 rules, which means
they are generally
effective for governmental
bonds issued after Aug. 31,
1986, and for some
nongovernmental bonds issued
after
Aug. 15,1986.
The IRS also extended the
effective date of the 1989
rules until June 17 so that
market participants with bond
deals in the works could elect
to comply with either the old
or the new rules during a
one-month period. The final
rules only slightly modified
the 1989 rules, mostly in the
area of refundings.
IRS Allocation and Accounting On May 12 the IRS issued final
Rules for Rebate Purposes allocation and accounting
(Fl-66-89/1.148-4) rules for rebate purposes. The
rules, which tell issuers
how to allocate and account for
the expenditures and
investments of their bond
proceeds, generally take effect
on June 17. However, the IRS
gave market participants the
option of electing to comply
with the final rules for
bonds issued after May 18, the
date the rules were published
in The Federal Register.
The final rules contain many
modifications to the rules that
had been proposed in January.
The final rules
eliminate or loosen many of the
restriction that had been
proposed for investment
contracts, but require fees
paid to investment contract
brokers to be added to issuers'
investment income, even if the
fees are paid by
contract providers rather than
the issuers. The final rules
also ease restrictions on
commingled bond and
nonbond funds.
IRS Transferred Proceeds On May 12 the IRS issued final
Rules For Refundings rules governing transferred
(Fl-90-91/1.148-11) proceeds for refundings. The
rules generally take
effect on June 17. However, the
IRS gave market participants
the option of electing to
comply with these rules
for bonds issued after May 18,
the date the rules were
published in The Federal
Register, or retroactively to the
same dates the transferred
proceeds provisions of the May
1989 arbitrage rebate rules
became effective. Those
1989 provisions generally
became effective for bonds sold
after May 15,1989, or issued
after June 14,1989.
There is one caveat: if the
transferred proceeds rules are
applied to bonds retroactively,
the savings that are
associated with the retroactive
application of them must be
used to redeem the bonds of the
refunding issue.
The final rules make few
modifications to the rules that
had been proposed in February
to simplify transferred
proceeds computations and to
provide relief from the
so-called killer suck-up
requirements that had
discouraged issuers from
partially refunding bond
issues. In one change in the
final rules, however, the IRS
said
it would allow a 90-day
temporary period for current
refundings during which
proceeds are not subject to
yield
restriction.
IRS Rules on the The IRS on May 12 issued final
Two-Year Rebate Relief Law rules telling issuers how to
(Fl-1-90/1.148-6) comply with the two-year
rebate relief law Congress
enacted in 1989 and revised in
1990. The rules are generally
effective on June 17. The IRS,
however, gave
issuers the option of complying
with these rules for bonds
issued after May 18, the date
the rules were published
in The Federal Register.
The rules contain some
modifications of rules that
were proposed in early
February. The rebate relief law
generally exempts issuers of
501 (c)(3) and governmental
bonds financing construction
from arbitrage rebate
requirements if they spend most
of their bond proceeds in two
years, according to six-month
spending targets.
The law applies only when at
least 75% of the bond proceeds
are used for construction.
The final rules clarity what
kinds of expenditures would
qualify as construction
expenditures and ease the
definition of construction to
include some kinds of software.
The rules also clarify that an
issuer must reasonably
expect to spend, rather than
actually spend, 75% of proceeds
on construction to quality for
rebate relief under
the law.
IRS Rule on Rebate and On May 12 the IRS issued a new
Yield Restriction Requirements temporary and proposed rule
(Fl-91-86/1.148-12T) allowing issuers subject to
rebate to be exempt
from yield restrictions under
certain circumstances.
The rule, which is effective
for bonds issued after May 18
but is also subject to
revision, generally applies to
bond issues that are subject to
both yield restriction and
rebate requirements but that do
not qualify for an
exemption to rebate. The rule
does not apply to certain bond
proceeds from refundings or
pools or to bonds that
are subject to a penalty under
the two-year rebate relief law.
Requests for a public hearing
on the new rule must be
submitted by July 17.
IRS Rule on Refunds The IRS on May 12 issued a new
of Overpayments of Arbitrage temporary and proposed rule
(Fl-67-89/1.148-13T) allowing issuers to obtain
refunds for legitimate
overpayments of arbitrage that
was rebated to the federal
government. The rule is
effective but subject to
revision. The new rule says
that while issuers may request
such refunds now, the IRS
commissioner will not be
required to consider the
requests until Sept. 15. Agency
officials said the delay wilI
give them time to issue
procedures to implement this
rule.
IRS Arbitrage Rules The IRS on May 12 issued final
on Student Loan Bonds rules on arbitrage restrictions
(Fl-75-89/1.148-10) for student loan bonds. The
rules are effective for
student loan bonds issued after
Jan. 5,1990.
IRS Proposed Rules on The IRS proposed rules last
Notional Principal Contracts year that affect interest rate
(Fl-16-89) swaps and other transactions
in which parties make
payments to each other based on
a principal amount that is
called notional because it is
never actually
exchanged. The rules would
govern when income and
deduction from these
transactions are recognized for
tax purposes. The IRS is
expected to issue final rules
later this year or next year.
force, headed by John Bachmann, chairman of St. Louis-based Edward D. Jones & Co., was set up in November 1991 as an outgrowth of the Group of 30, an international panel examining how to streamline clearance and seftlement of securities worldwide.
