81 FR 13305 - Definition of Political Subdivision; Correction

DEPARTMENT OF THE TREASURY
Internal Revenue Service

Federal Register Volume 81, Issue 49 (March 14, 2016)

This document contains corrections to a notice of proposed rulemaking and notice of public hearing (REG-129067-15) published in the Federal Register on Tuesday, February 23, 2016, (81 FR 8870) that specifies the elements of a political subdivision for purposes of tax- exempt bonds. The corrections amend the applicability dates of the proposed definition of political subdivision to provide transition rules with respect to bonds issued before the general applicability date and certain refunding bonds.

[Federal Register Volume 81, Number 49 (Monday, March 14, 2016)]
[Proposed Rules]
[Pages 13305-13306]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-05624]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-129067-15]
RIN 1545-BM99


Definition of Political Subdivision; Correction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correction to notice of proposed rulemaking.

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SUMMARY: This document contains corrections to a notice of proposed 
rulemaking and notice of public hearing (REG-129067-15) published in 
the Federal Register on Tuesday, February 23, 2016, (81 FR 8870) that 
specifies the elements of a political subdivision for purposes of tax-
exempt bonds. The corrections amend the applicability dates of the 
proposed definition of political subdivision to provide transition 
rules with respect to bonds issued before the general applicability 
date and certain refunding bonds.

DATES: Written or electronic comments for the notice of proposed 
rulemaking and notice of public hearing published at 81 FR 8870, 
February 23, 2016, are still being accepted and must be received by May 
23, 2016. Request to speak and outlines of topics to be discussed at 
the public hearing scheduled for June 6, 2016, at 10:00 a.m., are also 
still being accepted and must be received by May 23, 2016.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-129067-15), Internal 
Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 
20044. Submissions may be hand delivered to: CC:PA:LPD:PR Monday 
through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR 
(REG-129067-15), Courier's Desk, Internal Revenue Service, 1111 
Constitution Avenue NW., Washington, DC 20224 or sent electronically 
via the Federal eRulemaking Portal at www.regulations.gov (REG-129067-
15). The public hearing will be held at the Internal Revenue Building, 
1111 Constitution Avenue NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the correction to the 
proposed regulations, Spence Hanemann at (202) 317-6980; concerning 
submissions of comments and the hearing, Oluwafunmilayo (Funmi) Taylor 
at (202) 317-6901 (not toll-free numbers).

SUPPLEMENTARY INFORMATION: 

Background

    The notice of proposed rulemaking and notice of public hearing that 
is the subject of this correction is under section 103 of the Internal 
Revenue Code.

Need for Correction

    As published in the Federal Register (81 FR 8870, February 23, 
2016), Sec.  1.103-1(c) of the notice of proposed rulemaking and notice 
of public hearing proposes a new definition of political subdivision. 
Section 1.103-1(d)(1) provides that, except as otherwise provided in 
Sec. Sec.  1.103-1(d)(2) through (4), Sec.  1.103-1 (including Sec.  
1.103-1(c)) applies to all entities for all purposes of sections 103 
and 141 through 150 beginning on the date 90 days after the publication 
of the Treasury decision adopting the rules as final regulations in the 
Federal Register. Section 1.103-1(d)(2) provides that, for purposes of 
determining whether bonds are obligations of a political subdivision 
under section 103, the definition of political subdivision in Sec.  
1.103-1(c) does not apply to an entity with respect to bonds that are 
issued before the general applicability date under Sec.  1.103-1(d)(1). 
Section 1.103-1(d)(3)

[[Page 13306]]

provides that, for purposes of determining whether refunding bonds of 
an entity are obligations of a political subdivision under section 103, 
the definition of political subdivision in Sec.  1.103-1(c) does not 
apply to an entity with respect to refunding bonds that are issued on 
or after the general applicability date under Sec.  1.103-1(d)(1) to 
refund bonds with respect to which Sec.  1.103-1(c) otherwise does not 
apply, provided the weighted average maturity of the refunding bonds is 
no longer than the remaining weighted average maturity of the refunded 
bonds. Section 1.103-1(d)(4) provides that, for existing entities that 
are created or organized before March 24, 2016, the definition of 
political subdivision in Sec.  1.103-1(c) does not apply for any 
purpose of sections 103 and 141 to 150 during the three-year period 
beginning on the general applicability date under Sec.  1.103-1(d)(1).
    After publication of the notice of proposed rulemaking and notice 
of public hearing in the Federal Register (81 FR 8870, February 23, 
2016), the Treasury Department and the IRS received comments requesting 
that the transition rule in Sec.  1.103-1(d)(2) be applied not only for 
purposes of determining whether bonds are the obligations of a 
political subdivision under section 103 but also for other purposes of 
sections 103 and 141 through 150. Commenters explained that, without a 
transition rule for the private activity bond rules under section 141, 
certain bonds issued before the notice of proposed rulemaking and 
notice of public hearing was published in the Federal Register may 
become private activity bonds under section 141 at the expiration of 
the three-year period provided in Sec.  1.103-1(d)(4). Certain bonds 
offered after the notice of proposed rulemaking and notice of public 
hearing was published in the Federal Register but before the general 
applicability date under Sec.  1.103-1(d)(1) present similar issues.
    In response to these comments and to ensure that the notice of 
proposed rulemaking and notice of public hearing is fully prospective 
in effect, this document amends the transition rules for the definition 
of political subdivision in Sec. Sec.  1.103-1(d)(2) and (3) to apply 
not only for purposes of determining whether bonds are the obligations 
of a political subdivision under section 103 but also for all other 
purposes of sections 103 and 141 through 150, including the private 
activity bond rules. This document also amends the transition rule for 
refunding bonds in Sec.  1.103-1(d)(3) to provide relief consistent 
with that provided in Sec.  1.103-1(d)(2), as amended. The effect of 
the amendment to Sec.  1.103-1(d)(2) is that the proposed definition of 
political subdivision will not apply for any purpose under sections 103 
and 141 through 150 to any bond issued prior to the general 
applicability date under Sec.  1.103-1(d)(1). The effect of the 
amendment to Sec.  1.103-1(d)(3) is that the proposed definition of 
political subdivision will not apply for any purpose under sections 103 
and 141 through 150 to bonds issued to refund bonds covered by the 
transition rule in Sec.  1.103-1(d)(2), provided that the weighted 
average maturity is not extended.

Correction to Publication

    Accordingly, the notice of proposed rulemaking and notice of public 
hearing published in the Federal Register (81 FR 8870) on February 23, 
2016, is corrected as follows:


Sec.  1.103-1  [Corrected]

0
1. On page 8873, third column, the third through twelfth lines of 
paragraph (d)(2) are corrected to read ``bonds. For all purposes of 
sections 103 and 141 through 150, the definition of political 
subdivision in paragraph (c) of this section does not apply with 
respect to bonds that are issued before the general applicability date 
under paragraph (d)(1) of this section.''

0
2. On page 8873, third column, the third through eighteenth lines of 
paragraph (d)(3) are corrected to read ``bonds. For all purposes of 
sections 103 and 141 through 150, the definition of political 
subdivision in paragraph (c) of this section does not apply with 
respect to refunding bonds that are issued on or after the general 
applicability date under paragraph (d)(1) of this section to refund 
bonds with respect to which paragraph (c) of this section otherwise 
does not apply, provided that the weighted average maturity of the 
refunding bonds is no longer than the remaining weighted average 
maturity of the refunded bonds.''

Martin V. Franks,
Chief, Publications and Regulations Branch, Legal Processing Division, 
Associate Chief Counsel (Procedure and Administration).
[FR Doc. 2016-05624 Filed 3-9-16; 4:15 pm]
BILLING CODE 4830-01-P