IRS Issues Final Yield Burning Regs.(Internal Revenue Services issues rules on municipal bonds)(Brief Article)

Nation's Cities Weekly, January, 1999 by Shafroth, Frank

The Internal Revenue Service (IRS) issued final "yield burning" regulations (T.D.8801) last week, providing guidance for cities that refinance tax-exempt municipal bonds.

The new rules respond to efforts by NLC and other organizations representing state and local governments to provide clear guidance--or a safe harbor--that cities and towns can use to ensure they do not violate federal arbitrage rules when they invest bond proceeds in Treasury securities.

The U.S. Treasury estimates the rules will affect nearly 1,500 cities and towns on an annual basis.

While responsive to municipal concerns, and a significant improvement over the proposed regulations issued in June of 1996, the rules are prospective and provide little, clear relief to the...

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