Aug 15, 2024
KAV Tax Partner Victoria S. Byerly, a specialist in Section 103 of the Internal Revenue Code, will be a speaker on the panel titled “The Ethical Reality of Artificial Intelligence: Competence, Conflicts & Confidentiality” at NABL’s The Workshop 2024. This ethics panel will analyze the ethical implications of, and considerations regarding, the use of artificial intelligence (AI) in our legal practice.
Sep 16, 2022
House Resolution 5376—known as the Inflation Reduction Act of 2022 (the “IRA”)—was signed into law by the President Biden on August 16, 2022. Among other legislative changes, the IRA imposes a 15% alternative minimum tax on any “applicable corporation” based upon an “average annual adjusted financial statement income test” as defined by the IRA, for taxable years beginning after December 31, 2022. The corporate alternative minimum tax was previously repealed by the Tax Cuts and Jobs Act passed in 2017. The applicable corporations will pay the higher of the minimum corporate tax established under the IRA or the regular tax rate.
Within the public finance sector, the alternative minimum tax may affect taxpayers such as banks, insurance companies, and property and casualty insurers. Interest on Municipal Bonds will be taken into account in calculating the adjusted financial statement income that may be subject to the alternative minimum tax applicable to certain corporations for taxable years beginning after December 31, 2022. In addition, the tax disclosure language within offering statements and tax opinion language will likely be revised to reflect this change under the IRA.
It is unclear how much of an impact this will have on corporate demand for municipal securities at this time. Please contact any member of our Public Finance team for additional guidance at Public Finance Law | Kline Alvarado Veio, PC (kvfirm.com).
Nov 18, 2021
On November 15, 2021, President Biden signed the Infrastructure Investment and Jobs Act (H.R. 3684) making it law. H.R. 3684 modifies Section 142 of the Internal Revenue Code to allow “qualified broadband projects” and “qualified carbon dioxide capture facilities” to be financed with private activity bonds. In summary, for a qualified broadband project, the issuer must provide notice to each broadband service provider in the area within which broadband services are to be provided and give at least ninety days to respond. A qualified broadband project is defined as a project which is designed to provide service solely to one or more census block groups in which more than 50 percent of residential households do not have access to fixed, terrestrial broadband service which delivers at least 25 megabits per second downstream and at least three megabits service upstream, and results in internet access to residential locations, commercial locations or a combination of both at speeds not less than 100 megabits per second for downloads and 20 megabits per second for uploads, but only if at least 90 percent of the locations where access is to be provided are locations where a broadband service provider did not provide service before the project or did not provide service meeting the minimum speed requirements described above.
Qualified Carbon Dioxide Capture Facility is defined as the eligible components of an industrial dioxide facility and direct air capture facility. Equipment installed in an industrial carbon dioxide facility used for the purpose of capture, treatment and purification, compression, transportation, or onsite storage of carbon dioxide produced by the industrial carbon dioxide facility or integral or functionally related and subordinate to a process which converts a solid or liquid product from coal, petroleum residue, biomass or other materials recovered for their energy or feedstock value into a synthesis gas composed primarily of carbon dioxide and hydrogen for direct use or subsequent chemical or physical conversion should qualify, generally.
The Infrastructure Investment and Jobs Act also increases the national limitation for qualified highway or surface freight transportation facilities to $30,000,000,000 as well as provides a partial exception for volume cap for qualified broadband projects.
Victoria S. Byerly is an attorney in KAV’s Public Finance Group. A specialist in Section 103 of the Internal Revenue Code, her practice is exclusively dedicated to state and federal tax matters related to the issuance of tax-exempt debt obligations.
Oct 12, 2021
KAV Tax Partner Victoria S. Byerly, a specialist in Section 103 of the Internal Revenue Code, is the author of Taxation of Public Utilities which has been recently updated to reflect current regulatory standards. First published in 2020, Victoria’s landmark publication is the first comprehensive treatise ever published on the public utility industry’s unique tax problems. Victoria’s treatise is available for purchase at https://bit.ly/3ADc3Zr.
Oct 1, 2021
House Ways and Means Committee Draft Bill May Affect the Municipal Bond Market
On September 10, 2021 the House Ways and Means Committee released details for their portion of the reconciliation package. While the Committee will continue to work, the following is what has been released.
Credit for Certain Infrastructure Bonds
American Recovery and Reinvestment Act issuers of qualified infrastructure bonds would receive a credit equal to an applicable percentage of the interest, providing direct financing support for infrastructure investments made by state and local governments. To receive the credit, the entire net proceeds must be used for capital expenditures or the operation and maintenance of capital expenditures. 100% of the bond proceeds must meet the requirements of the Davis-Bacon Act. This would apply to bonds issued after December 31, 2021.
Advance Refunding Bonds
Advance refunding would once again be permitted. The interest on advance refunding bonds issued by state and local governments would be exempt from tax.
Permanent Modification of the Small Issuer Exception to Tax Exempt Interest Expense Allocation Rules for Financial Institutions.
Currently, there’s an exception for interest expense allocable to certain tax-exempt obligations issued by qualified small issues. Qualified small issues are defined as issues that are not reasonably expected to issue more than $10 million in tax exempt obligations during a calendar year, generally. This revision would increase the $10 million limit to $30 million (indexed annually for inflation). Also, qualified 501(c)(3) bonds would be treated as tax exempt obligations for purposes of the small issue exception.
Modification to Qualified Small Issue Bonds
The definition of eligible manufacturing facilities eligible for financing through qualified small issue bonds would be expanded to include facilities used for the creation or production of intangible property, and facilities functionally related and subordinate to facilities used for the manufacturing, creation, or productions of tangible and intangible property. The aggregate cap would also be increased to $30 million, indexed annually for inflation.
Expansion of Certain Exceptions to the Private Activity Bond Rules for First Time Farmers
The limitation on the exemption of the use of private activity bonds for first-time farmers would be increased to $552,500, indexed for inflation on an annual basis. The separate lower dollar limitation on the purchase of used farm equipment would be repealed.
Water and Sewage Facility Bonds
As of July 1, 2020, exempt facility bonds for existing water and sewage facilities would be exempt from the private activity bond volume cap.
Exempt Facility Bonds to Include Zero Emission Vehicle Infrastructure
The definition of exempt facility bond eligible for tax exempt private activity bond financing would be expanded to include zero emission vehicle infrastructure. Zero emission vehicle infrastructure is defined as any depreciable property (excluding a building and its structural components) used to charge or fuel zero emissions vehicles.
Davis Bacon Act’s Prevailing Wage Requirement
The Davis Bacon Act’s prevailing wage requirements will be required to proceeds of exempt facility bonds used for the construction, alteration, or repair of water furnishing facilities, sewage facilities, zero emission vehicle infrastructure facilities, or highway or surface freight transfer facilities after the date of enactment.
Victoria S. Byerly is an attorney in KAV’s Public Finance Group. A specialist in Section 103 of the Internal Revenue Code, her practice is exclusively dedicated to state and federal tax matters related to the issuance of tax-exempt debt obligations.
Sep 23, 2021
Credit for Government Owned Broadband
The proposal includes a 30% credit for state, local, and tribal governments for the operation and maintenance of government owned broadband systems. Requirements for the credit include a download speed of at least 25 Mbps and an upload speed of at least 3 Mbps. Expenses are capped at $400 per newly subscribed household living in a low-income community. The credit phases down to 26% in 2027, 24% in 2028, and expires at the beginning of 2029.
New Markets Tax Credit
The new markets tax credit would be permanent, if accepted in its current form. For the 2022 and 2023 allocation rounds, it provides an additional allocation amount of $2 billion (for a total of $7 billion in 2022) and $1 billion (for a total of $6 billion in 2023). It sets the allocation amounts at $5 billion for 2024 and all years thereafter. Beginning in 2024, it indexes the annual allocation amount to inflation. Finally, the provision provides AMT relief to taxpayers claiming the NMTC.
Low Income Housing Tax Credit
There are a number of proposed changes affecting the low-income housing tax credit. The 9% housing credit and the small state minimum would increase by 50% and phases in this increase over five years. This would be effective for buildings financed by the proceeds of certain tax-exempt bonds issued in calendar years 2022, 2023, 2024, 2025, 2026, 2027, or 2028 (and not financed by previous bonds issued in tax years 2019-2021) for buildings placed in service in taxable years after December 31, 2021.
For buildings designated to serve extremely low-income households, there would be a 50% basis boost for LIHTC buildings that designate at least 20% of their occupied units for extremely low-income tenants and limit rent to no more than 30% of the greater of: 30% of area median income or the federal poverty line. For more details, contact our office or your tax professional.
Victoria S. Byerly is an attorney in KAV’s Public Finance Group. A specialist in Section 103 of the Internal Revenue Code, her practice is exclusively dedicated to state and federal tax matters related to the issuance of tax-exempt debt obligations.
