BLX

FORM ADV
BLX Post-Issuance Compliance Workshop, October 25-26, 2018 at the Vdara Hotel in Las Vegas, NV
BLX

Final Agenda
Updated September 25, 2018

Thursday, October 25

I. POST-ISSUANCE TAX COMPLIANCE INTRODUCTION

Presenter 1: Alan Bond – BLX
Presenter 2: Richard Chirls – Orrick
Time: 20 minutes

This session will review the components of an effective post-issuance tax compliance program, including the benefits of such a program. In addition, this session will include a discussion of the items that should be included in written post-issuance tax compliance policies, the evolving expectations of the IRS with respect to such policies, and what organizations should be doing to update and modify policies that they have previously adopted. This session will provide participants with an introduction and basis for the detailed topics to be addressed at the Workshop.

II. UNDERSTANDING PRIVATE BUSINESS USE

Presenter 1: Ed Oswald – Orrick
Presenter 2: Alan Bond – BLX
Time: 60 minutes

Understanding and complying with the federal tax rules and regulations relating to tax-exempt debt is critical to ensuring that the tax-exempt status of such debt is not compromised. This session will provide a thorough review of the federal tax rules and tax-exempt bond regulations relating to Private Business Use (and Unrelated Trade or Business Use for nonprofits), which in the aggregate cannot exceed 10% per bond issue for governmental bonds and 5% per bond issue for qualified 501(c)(3) bonds. Understanding the relevant Private Business Use restrictions will allow issuers and borrowers of tax-exempt bonds to make sound and prudent decisions about the activities occurring in their tax-exempt bond financed facilities. In today’s economic environment, this information is increasingly important as organizations and issuers seek to maximize revenue generating activities in tax-exempt bond financed space.

III. PRIVATE BUSINESS USE EXCEPTIONS (NEW SESSION)

Presenter 1: Barbara League – Orrick
Presenter 2: Richard Chirls – Orrick
Presenter 3: Larry Sobel – Orrick
Time: 30 minutes

Utilizing certain private use exceptions provided by the Treasury regulations can be an effective tool in managing Private Business Use. This session will review the available exceptions to Private Business Use, including short-term use, incidental use, and the qualified improvements exception. Understanding the appropriate application of these exceptions will provide a benefit to all institutions.

IV. SPONSORED RESEARCH AGREEMENTS - IRS SAFE HARBOR RULES (NEW SESSION)

Presenter 1: Ed Oswald – Orrick
Presenter 2: Larry Sobel – Orrick
Time: 60 minutes

In connection with sponsored scientific research, certain arrangements may give rise to Private Business Use depending on how rights to use intellectual property resulting from the research are managed. This session will discuss the IRS safe harbor rules regarding sponsored research as provided in Rev Proc 2007-47. As the trend continues for organizations to undertake more sponsored research, participants will be better equipped to make decisions regarding the use of their bond financed facilities in sponsored research endeavors and to structure agreements to be safe harbor compliant.

V. MANAGEMENT AND SERVICE CONTRACTS – IRS SAFE HARBOR RULES

Presenter 1: Ed Oswald – Orrick
Presenter 2: Barbara League – Orrick
Time: 60 minutes

Management contracts and other use agreements with outside parties may give rise to private business use if occurring in bond financed facilities. In early 2017, for the second time in 6 months, the IRS released updated guidance (Rev Proc 2017-13) with respect to the safe harbor requirements for contracts for services performed in tax-exempt bond-financed facilities. While this new revenue procedure is generally helpful, issuers and borrowers will need to carefully navigate these principle-based concepts to help minimize the impact that these contracts have on their private business use percentage. This session will review Rev Proc 2017-13 and how its application will impact the determination of private business use. Specific techniques and guidance for structuring contracts and agreements to be “safe harbor” compliant will also be discussed.

VI. FLOATING EQUITY – USING EQUITY TO MITIGATE PRIVATE BUSINESS USE

Presenter 1: Richard Chirls – Orrick
Presenter 2: Larry Sobel – Orrick
Time: 45 minutes

The accurate allocation of tax-exempt bond proceeds and other available funds plays a crucial role in managing Private Business Use. This session will discuss and explain the Treasury and IRS final regulations on accounting and allocation for certain mixed use projects (the “Final Regulations”). The presentation will provide participants with a robust overview of the Final Regulations, and explain their meaning from both a regulatory, legal, and practical perspective. If properly applied, the Final Regulations should be helpful and provide flexibility for dealing with private business use in mixed use projects. This session will offer valuable information to assist participants with a better understanding of how private business use is determined in certain mixed use facilities and will provide participants with information to allow their organizations to properly apply and maximize the benefit of the Final Regulations.

VII. CALCULATING PBU

Presenter 1: Ed Oswald – Orrick
Presenter 2: Larry Sobel – Orrick
Presenter 3: Caleb Lansky – BLX
Time: 90 minutes

Accurate and timely calculation of Private Business Use is an essential element of an effective Post-Issuance Compliance Program. This session will review specific examples of where and how Private Business Use can occur. In addition, the session will examine the specific steps involved in calculating Private Business Use, including a detailed discussion of the permissible regulatory methods for performing such calculations. The discussion will include detailed examples of the calculation of Private Business Use of bond financed facilities involving typical problem areas such as: central utility plants, sponsored research activities, management contracts and leases, summer use of facilities, and physician group contracts. Examples will also include how funding a portion of a project with non-bond proceeds and floating equity will impact the calculation of Private Business Use and how Private Business Use is carried forward in a refunding transaction. This session will allow participants to gain a better understanding of the impact of various types of activities or uses on the overall allowable Private Business Use limitation within a single tax-exempt bond issue and the methods used to measure Private Business Use.

VIII. LIBOR CHANGE PREPAREDNESS (NEW SESSION)

Presenter 1: Jenna Magan – Orrick
Presenter 2: James Kim – Barclays
Presenter 3: Larry Sobel – Orrick
Time: 45 minutes

LIBOR is widely used to determine interest rates in the tax-exempt bond market. It has been announced that LIBOR will no longer be determined after 2021. This panel will review what LIBOR is, how LIBOR is calculated and why LIBOR is being discontinued. We will also discuss how issuers and borrowers with bonds or swap agreements using LIBOR should prepare for the change in LIBOR and what tax implications may arise.

CONCURRENT BREAKOUT SESSIONS:

IX-A. [501(c)(3) Organizations]
2017 IRS SCHEDULE K REVIEW

Presenter 1: Caleb Lansky – BLX
Presenter 2: Aviva Roth – Orrick
Time: 75 minutes

This session will provide a review of the 2017 IRS Schedule K with commentary on the information being requested on the form and on specific calculations required by nonprofit borrowers with respect to their outstanding tax-exempt bonds. The panel will also discuss the relationship of certain questions on the form that may not be obvious to some and provide guidance with respect to answering specific questions. This session will allow 501(c)(3) organizations to more fully understand the information being provided to the IRS on an annual basis and why the information being requested is important to the IRS.

IX-B. Governmental Issuer and Public Entities Track
OPEN FORUM

Presenter 1: Ed Oswald – Orrick
Presenter 2: Alan Bond – BLX
Time: 50 minutes

This roundtable discussion will cover areas of post-issuance compliance unique to governmental bond issuers. This session will allow participants to raise and discuss issues they are observing day-to-day and share ideas and concerns with fellow finance professionals. Orrick and BLX participants will share their views and insights on the topics discussed.

Friday, October 26

X. TAX REFORM AND ALTERNATIVES TO ADVANCE REFUNDINGS (NEW SESSION)

Presenter 1: Richard Chirls – Orrick
Presenter 1: Ed Oswald – Orrick
Time: 45 minutes

On December 22, 2017, the Tax Cuts and Jobs Act (the "New Tax Act") was signed by the President. The New Tax Act adversely impacts the municipal bond market in several ways. This session will discuss both the direct and indirect effects of the New Tax Act on municipal bonds, including the elimination of tax-exempt advance refundings and alternatives to advance refunding structures.

XI. ISSUER AND BORROWER PERSPECTIVE – OUR POST-ISSUANCE COMPLIANCE PROGRAM

Presenter 1: Ed Jennings – University of Michigan
Presenter 2: Susan Lin – University of Hawaii
Moderator: Alan Bond – BLX
Time: 45 minutes

This session will highlight the post-issuance tax compliance programs of two different institutions. Borrower panelists will discuss the effort expended to position themselves to be prepared to respond accurately to IRS compliance and reporting requirements and how their focus has shifted over time. Their stories can serve as a valuable resource to other organizations facing similar tax compliance burdens.

XII. MUNICIPAL DISCLOSURE – RULE 15c2-12 AMENDMENTS (NEW DEVELOPMENT)

Presenter 1: Jeff Higgins – BLX
Presenter 2: Jenna Magan – Orrick
Time: 60 minutes

On August 20, 2018, the SEC adopted amendments to Rule 15c2-12 in order to enhance transparency in the municipal securities market. The amendments specifically focus on the incurrence of material financial obligations that could impact an issuer’s liquidity, overall creditworthiness, or an existing security holder’s rights. This session will provide an overview of Rule 15c2-12, including the new amendments, recent enforcement actions by the SEC, and what issuers and underwriters can learn from such SEC actions.

XIII. ARBITRAGE BASICS

Presenter 1: Glenn Casterline – BLX
Presenter 2: Sandee Stallings – BLX
Time: 60 minutes

Make sure that your organization understands the requirements and is properly documenting compliance. This session will review the arbitrage rebate and yield restriction requirements relating to tax-exempt bonds. Topics to be discussed include investment and expenditure allocations, exceptions to rebate and yield restriction requirements, reporting and filing requirements, fixed and variable rate bond yield calculations, and document retention and compliance substantiation. This session will equip participants with the knowledge to better understand the complex arbitrage rebate regulations and provide participants with the tools to effectively manage compliance.

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