WASHINGTON -- An Internal Revenue Service ruling that allowed a Rhode Island corporation to issue $56 million of tax-exempt bonds to pay the depositors of failed credit unions was unusual and issued in record time, the recently published ruling shows.

The letter ruling concluded that bonds issued by the Rhode Island Depositors Economic Protection Corp. would not be taxable arbitrage bonds even though they would be paid with credit union assets which, if marketed to market. would have a higher yield than the bond yield.

Bond lawyers said the Rhode Island corporation's financing could have been viewed as analogous to one in a 1982 ruling involving Alabama.

In that revenue ruling, the IRS found that general obligation bonds issued by Alabama were taxable arbitrage bonds because they effectively would be paid from the revenues of a perpetual fund that the state had established and invested in higher-yielding securities.

But the IRS took the opposite view in the Rhode Island ruling. This time, it found that the credit union assets that were to back the bonds were virtually unmarketable and were therefore not really higher yielding than the bonds.

"It was a situation where they technically could have applied the rules to get the wrong result," said Timothy D. Wolfe, a lawyer with the bond counsel firm of Greenberg, Traurig, Hoffman Lipoff, Rosen & Quentel in Miami. "But they did the right thing. The didn't apply the Alabama ruling because this situation was unique," he said.

The IRS ruling also was noteworthy because it was issued less than three weeks after it was requested. Usually, the IRS takes months, ideally three to six months, to issue private letter rulings. But the Rhode Island corporation, which asked for the ruling on May 1, needed a quick response because it was under a statutory deadline to pay the depositors by June 30. The IRS issued the ruling on May 20, but did not make it publicly available until last week.

"They did a wonderful job," said Richard Gaskill, executive director of the corporation. "They focused on our problem and they dealt with it, and we were very happy with the service we got," he said.

Mr. Wolfe said while the IRS ruling was unusual, so was Rhode Island's situation. "I'm not sure what situations you could think of that would be similar," he said.

The $56 million tax-exempt bond issue was needed to help bail out credit union depositors after a banking crisis rocked the state. The crisis occurred when the Rhode Island Share and Deposit Indemnity Corp., which had insured dozens of financial institutions, shut own because it could not cover losses stemming from an embezzlement of funds at a private loan and investment company.

Some 45 financial institutions that had been insured by the state insurer had to be shut down. Most of them were able to reopen after they obtained federal deposit insurance. Some of them were able to sell their assets, most of which were mortgage loans, and pay off depositors. But a few credit unions, with unmarketable assets, became insolvent, and the state promised to bail out their depositors.

The Rhode Island corporation was formed to issue bonds to pay depositors and to help finance some asset sales for the insolvent institutions. Its first two issues consisted of $456 million of special purpose tax-exempt bonds that were backed by a percentage of the state's sales tax revenues.

The third issue consisted of two series of bonds. The first was a $125 million issue of senior taxable bonds, which were backed with a pledge of assets from failed financial institutions and by a federal guarantee. The second series was the $56 million tax-exempt general obligation issue, which was backed by the full faith and credit of the corporation. That meant, however, that the source of payment for the bonds would be the unmarketable assets of the insolvent credit unions.

The IRS ruling was sought mostly because of concerns that the Rhode Island corporation's 56 million bond issue would be compared to the Alabama issue and treated as taxable. "We just wanted to make sure that it wouldn't be viewed as a sinking fund arrangement," said Mr. Gaskill.

The IRS ruling was published last week without identifying the Rhode Island corporation. State officials confirmed, however, that it applied to the Rhode Island Depositors Economic Protection Corp.

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