WASHINGTON -- The Internal Revenue Service has cleared up the confusion over which population figures the states should use in computing their 1991 private-activity bond volume caps by ruling that they must revert back to their 1990 cap levels.

But going back to last year's figures wipes out tens of millions of dollars in bond authority under the 1991 volume cap, which for each state is $50 per capita or $150 million, whichever is larger. It means 16 states will have to cut back on their current-year cap allotment, while 12 others will see their 1991 cap increase slightly.

The switch will not affect another 22 states and the District of Columbia, which are small enough to receive the $150 million allotment each year.

Most states had been relying on a population report the Census Bureau released on Dec. 26, 1990, and a few had used numbers from a report released on Jan. 7, 1991. Last week the IRS said in Revenue Procedure 91-43 that neither set of numbers is valid and that states should rely instead on population estimates made in July 1989 that were published later that year and in March 1990.

Any states that may have already allocated more bond authority than they are entitled to under the 1990 figures may have to take back some of that allocation, according to Richard Chirls, the president of the National Association of Bond Lawyers.

When the three sets of figures are compared, the biggest losers appear to be: California, which would have to lower its cap by $38 million from figures derived from the Dec. 26 population estimate; Florida, which would lose $16.7 million; Washington State, $6.3 million; Arizona, $6.1 million; Virginia, $5.9 million; and Massachusetts, $5.8 million.

Those states that would see the biggest cap increases are; Illinois, $9.7 million; Louisiana, $7.2 million; Pennsylvania, $5.8 million; and Oklahoma, $3.4 million.

The volume cap law requires states to use "the most recent census estimates of the resident population. . . released by the Census Bureau before the beginning of such calendar year."

The report the Census Bureau released in December 1990 for computing states' 1991 caps contained voting apportionment population figures, which are generally larger than resident population figures. The bureau corrected itself and released the correct population tables on Jan. 6, 1991.

In its revenue procedure, however, the IRS said both sets of figures are invalid. The Dec. 26 figures do not conform to the letter of the law because they are not strictly "resident" population figures, and the Jan. 6 numbers cannot be used because they were not released before the beginning of 1991.

"Neither meets the statutory requirements of Section 146(j) of the [Internal Revenue] Code, and neither may be used by state agencies, states or issuing authorities for purposes of determining" the 1991 volume cap, the agency said.

To conform to the letter of the law, the IRS said states must go back and use population figures from July 1989, which were published at the end of that year and again in March 1990, in the Census publication "Current Population Reports, Series P-25: Populations and Projections, Estimates of the Population of States." States used those figures to determine their 1990 volume cap allotments.

The IRS also published in its revenue procedure a list of the correct population numbers that each state should be using -- the first time it has done so since the volume cap law was enacted in 1986.

Mr. Chirls said he was concerned by the IRS decision because "it is clear the Jan. 7 figures were the correct figures in terms of congressional intent," and they were not released on time only because of an administrative mistake on the part of the Census Bureau.

"The IRS has compounded that error in its contravention of the clear intent of the statute," said Mr. Chirls, who is also a partner with Orrick, Herrington & Sutliffe. "This was a very bureaucratic interpretation."

Lobbyists said that it is unlikely that any state has yet allocated all of its authority under the cap. Even if a state has done so, there is little chance that all the bonds have been sold.

In the revenue procedure, the IRS does not address what a state should do if all bonds have been sold.

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