82_FR_45420 82 FR 45233 - Public Approval of Tax-Exempt Private Activity Bonds

82 FR 45233 - Public Approval of Tax-Exempt Private Activity Bonds

DEPARTMENT OF THE TREASURY
Internal Revenue Service

Federal Register Volume 82, Issue 187 (September 28, 2017)

Page Range45233-45241
FR Document2017-20661

This document contains proposed regulations to update and streamline the public approval requirement provided in section 147(f) of the Internal Revenue Code applicable to tax-exempt private activity bonds issued by State and local governments. The proposed regulations would update the existing regulations on the public approval requirement to reflect statutory changes, to streamline the public approval process, and to reduce burden on State and local governments that issue tax-exempt private activity bonds. This document also withdraws two previous notices of proposed rulemaking on this topic. The proposed regulations affect State and local governments that issue tax-exempt private activity bonds.

Federal Register, Volume 82 Issue 187 (Thursday, September 28, 2017)
[Federal Register Volume 82, Number 187 (Thursday, September 28, 2017)]
[Proposed Rules]
[Pages 45233-45241]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-20661]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 5f

[REG-128841-07]
RIN 1545-BG91


Public Approval of Tax-Exempt Private Activity Bonds

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Withdrawal of notice of proposed rulemaking and notice of 
proposed rulemaking.

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SUMMARY: This document contains proposed regulations to update and 
streamline the public approval requirement provided in section 147(f) 
of the Internal Revenue Code applicable to tax-exempt private activity 
bonds issued by State and local governments. The proposed regulations 
would update the existing regulations on the public approval 
requirement to reflect statutory changes, to streamline the public 
approval process, and to reduce burden on State and local governments 
that issue tax-exempt private activity bonds. This document also 
withdraws two previous notices of proposed rulemaking on this topic. 
The proposed regulations affect State and local governments that issue 
tax-exempt private activity bonds.

DATES: Comments and requests for a public hearing must be received by 
December 27, 2017.

ADDRESSES: Send submissions to CC:PA:LPD:PR (REG-128841-07), Room 5203, 
Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
128841-07), 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 (IRS REG-128841-07).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Spence Hanemann at (202) 317-6980; concerning submissions of comments 
and requesting a hearing, Regina Johnson at (202) 317-6901 (not toll-
free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information contained in this notice of proposed 
rulemaking has been submitted to the Office of Management and Budget 
for review under OMB Control Number 1545-2185 in accordance with the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). The collection of 
information in this proposed regulation is the requirement in Sec.  
1.147(f)-1 that certain information be contained in a public notice or 
public approval and, consequently, disclosed to the public. This 
information is required to meet the statutory public approval 
requirement provided in section 147(f). The likely respondents are the 
governmental units required to approve an issue of private activity 
bonds under section 147(f).
    Estimated total annual burden: 2,600 hours.
    Estimated average annual burden per respondent: 1.3 Hours.
    Estimated number of respondents: 2,000.
    Estimated frequency of responses: Annual.
    Comments on the collection of information should be sent to the 
Office of Management and Budget, Attn: Desk Officer for the Department 
of the Treasury, Office of Information and Regulatory Affairs, 
Washington, DC 20503, with copies to the Internal Revenue Service, 
Attn: IRS Reports Clearance Officer, SE:CAR:MP:T:T:SP, Washington, DC 
20224. Comments on the collection of information should be received by 
November 27, 2017.
    Comments are specifically requested concerning:
    Whether the proposed collection of information is necessary for the 
proper performance of the functions of the IRS, including whether the 
information will have practical utility;
    The accuracy of the estimated burden associated with the proposed 
collection of information;
    How the quality, utility, and clarity of the information to be 
collected may be enhanced;
    How the burden of complying with the proposed collection of 
information may be minimized, including through the application of 
automated collection techniques or other forms of information 
technology; and
    Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of services to provide information.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.
    Books or records relating to a collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
tax return information are confidential, as required by 26 U.S.C. 6103.

Background

    This document contains proposed amendments to 26 CFR part 1 under 
section 147(f) of the Internal Revenue Code of 1986 (the Code) and 26 
CFR part 5f under section 103(k) of the Internal Revenue Code of 1954 
(the 1954 Code). In the Tax Equity and Fiscal Responsibility Act of 
1982 (TEFRA), Public Law 97-248, 96 Stat. 324, Congress added section 
103(k) to the 1954 Code to impose a public approval requirement on tax-
exempt industrial development bonds. On May 11, 1983, the Department of 
the Treasury (Treasury Department) and the IRS published in the Federal 
Register (48 FR 21117) temporary regulations under section 103(k) of 
the 1954 Code (TD 7892) (the Existing Regulations). See Sec.  5f.103-2. 
A notice of proposed rulemaking (LR-221-82) by cross-reference to the 
temporary regulations was published in the Federal Register (48 FR 
21166) on the same day.
    In the Tax Reform Act of 1986 (1986 Tax Act), Public Law 99-514, 
100 Stat. 2085, Congress reorganized the tax-exempt bond provisions and 
carried forward the public approval requirement of section 103(k) of 
the 1954 Code in expanded form in section 147(f) of the Code. In 
section 147(f), Congress extended the public approval requirement to 
apply to all types of tax-exempt private activity bonds, as provided in 
section 141(e). The legislative history of the 1986 Tax Act indicates 
that ``[t]he conferees intend that, to the extent not amended, all 
principles of present law continue to apply under the reorganized 
provisions.'' H.R. Rep. No. 99-841, at II-686 (1986) (Conf. Rep.). 
Thus, the Existing Regulations in Sec.  5f.103-2 remain in effect.
    On September 9, 2008, the Treasury Department and the IRS published 
a

[[Page 45234]]

notice of proposed rulemaking (REG-128841-07) in the Federal Register 
(73 FR 52220) that proposed regulations to amend and supplement the 
Existing Regulations (the 2008 Proposed Regulations). The Treasury 
Department and the IRS received public comments on the 2008 Proposed 
Regulations and held a public hearing on January 26, 2009. As discussed 
more fully in the Explanation of Provisions section of this preamble, 
the Treasury Department and the IRS have decided to withdraw the 2008 
Proposed Regulations in full and to propose new regulations. This 
document contains those new proposed regulations (the Proposed 
Regulations).

Explanation of Provisions

1. Introduction

    In general, pursuant to section 103 of the Code, interest received 
by investors on eligible State and local bonds is tax-exempt for 
Federal income tax purposes. Interest on private activity bonds 
qualifies for this tax-exempt treatment only if the bonds meet the 
requirements for ``qualified bonds'' as defined in section 141(e) and 
other applicable requirements provided in section 103. Section 141(e) 
of the Code requires, among other things, that qualified bonds meet the 
public approval requirement of section 147(f).
    The Proposed Regulations would update the Existing Regulations to 
address subsequent statutory changes and to streamline the public 
approval process. The Proposed Regulations provide greater flexibility 
to State and local governments with respect to the public approval 
process to reduce administrative burdens associated with the public 
approval requirement. The Proposed Regulations recognize advances in 
technology and electronic communication that may facilitate more 
streamlined procedures for providing reasonable public notice of a 
public hearing.

2. The 2008 Proposed Regulations

    The 2008 Proposed Regulations proposed to update, clarify, and 
simplify discrete aspects of the Existing Regulations regarding the 
public approval requirement. The 2008 Proposed Regulations focused on 
the scope, information content, methods, and timing for the public 
approval process, and generally did not focus on the governmental 
entities from which public approval is required. Overall, the public 
comments on the 2008 Proposed Regulations were favorable.
    The Proposed Regulations generally incorporate the amendments 
proposed in the 2008 Proposed Regulations with modifications in 
response to the public comments. One comment focused on the structure 
of the 2008 Proposed Regulations. The 2008 Proposed Regulations would 
have revised the Existing Regulations by amending existing rules and 
adding new rules. The 2008 Proposed Regulations further provided that 
the Existing Regulations would remain in effect to the extent not 
inconsistent with the final version of the 2008 Proposed Regulations. 
Commenters expressed concern about potential confusion over two 
distinct and partially inconsistent regulation sections governing the 
public approval requirement. The Treasury Department and the IRS 
understand this concern. Accordingly, the Proposed Regulations 
consolidate the guidance in the Existing Regulations and the 2008 
Proposed Regulations, with modifications in response to the public 
comments and other recent developments, into new proposed guidance and 
provide a further opportunity for public comment.
    The Treasury Department and the IRS also received numerous comments 
regarding the level of specificity of information required to be 
contained in reasonable public notice of a public hearing or a public 
approval. Generally, the 2008 Proposed Regulations proposed to allow 
the issuer to provide streamlined information about projects to be 
financed, and the Existing Regulations require a greater level of 
specificity of information about such projects. The 2008 Proposed 
Regulations also proposed to afford issuers more flexibility regarding 
the effect of post-issuance changes from the reasonably expected facts 
provided in the reasonable public notice or public approval. Commenters 
expressed differing views on whether these proposed amendments in the 
2008 Proposed Regulations should be adopted. Commenters in favor of 
these amendments generally applauded the reduced burden that issuers 
would bear under the 2008 Proposed Regulations and suggested ways in 
which that burden could be reduced further. Commenters opposed to these 
amendments generally argued that reducing the amount of public 
information would limit the public's ability to approve or oppose on an 
informed basis new private activity bonds and proposed projects to be 
financed. The legislative history of the public approval requirement 
emphasizes the importance of ``a reasonable opportunity for persons 
with differing views on both issuance of the bonds and the location and 
nature of the proposed facility to be heard.'' S. Rep. No. 97-494, at 
171 (1982). With respect to these proposed amendments, the Treasury 
Department and the IRS have determined that the information that would 
have been required by the 2008 Proposed Regulations is sufficient to 
permit the public to evaluate the merits of both the issuance of the 
bonds and the location and nature of the financed facility. Thus, the 
burden imposed by the Existing Regulations may be reduced as provided 
in the 2008 Proposed Regulations without significantly impairing the 
public's consideration of new private activity bonds. Accordingly, the 
Proposed Regulations generally retain the streamlined information and 
post-issuance flexibility proposed in the 2008 Proposed Regulations and 
provide for additional post-issuance flexibility. (See section 6 of 
this Explanation of Provisions.)
    Commenters also provided differing views on the amendments in the 
2008 Proposed Regulations that proposed changes to the procedures for 
providing reasonable public notice of a public hearing. The Existing 
Regulations generally permit an issuer to publicize notice by 
newspaper, radio, or television, and presume notice to be reasonable if 
published at least 14 days prior to the date of the public hearing. The 
2008 Proposed Regulations proposed to expand the permitted methods of 
providing public notice to include notice by newspaper, radio, 
television, Web site, or other permitted methods of giving public 
notice under State law, and would have shortened the presumptively 
reasonable notice period to seven days in advance of the hearing. 
Commenters in favor of these amendments generally stated that the 
proposed amendments would ease the burden of providing the public 
notice. Commenters opposed to these amendments generally expressed 
concern that seven days' notice of a public hearing would not provide 
the public sufficient time to make an informed decision and to make 
arrangements to be present at the hearing. The legislative history of 
TEFRA indicates that Congress expected notice to be published no fewer 
than 14 days before the scheduled date of the hearing. See S. Rep. No. 
97-494, at 171 (1982). In response to these comments, the Proposed 
Regulations adopt and expand the permitted methods for giving notice of 
a public hearing that were proposed in the 2008 Proposed Regulations, 
but retain the 14-day notice period presumed reasonable under the 
Existing Regulations consistent with the expectations of Congress.

[[Page 45235]]

3. Host Approval and Issuer Approval

    Section 147(f) generally requires that both the governmental unit 
that issues the bonds (or on behalf of which the bonds are issued) and 
a governmental unit with jurisdiction over the location of the financed 
project approve an issue of private activity bonds (and the approvals 
are referred to as the issuer approval and the host approval, 
respectively). The Proposed Regulations generally carry forward the 
rules on issuer approval and host approval from the Existing 
Regulations, with limited revisions to address statutory changes that 
affect the application of these rules to certain types of private 
activity bonds. Thus, for example, the Proposed Regulations include 
guidance to address subsequent statutory changes in section 147(f)(3) 
and (4) that added special provisions regarding the issuer approval and 
host approval requirements for certain financings involving airports, 
high-speed rail facilities, qualified scholarship funding corporations, 
and volunteer fire departments.
    The 1986 Tax Act extended the public approval requirement beyond 
the traditional, facility-focused industrial development bonds subject 
to the requirement under the 1954 Code to include certain special types 
of financings that are not facility-specific, including ``qualified 
mortgage bonds'' as defined in section 143(a), ``qualified veterans' 
mortgage bonds'' as defined in section 143(b), ``qualified student loan 
bonds'' as defined in section 144(b), and ``qualified 501(c)(3) bonds'' 
as defined in section 145. For these types of bonds, obtaining a host 
approval may be impractical or unworkable. For example, for qualified 
mortgage bonds, the locations of many of the homes to be financed with 
qualified mortgage loans generally are unknown at the time of issuance 
of the bonds and thus it may be difficult to identify appropriate 
governmental units to provide host approval. Moreover, for qualified 
student loan bonds and for qualified 501(c)(3) bonds used to finance 
working capital expenditures, the application of the host approval 
requirement is unworkable because the assets and expenditures financed 
have no physical location. In recognition of the practical difficulties 
faced by issuers of these types of bonds under the Existing 
Regulations, the Proposed Regulations provide that no host approval is 
necessary for mortgage revenue bonds (defined as qualified mortgage 
bonds, qualified veterans' mortgage bonds, and certain refundings of 
bonds issued to finance mortgages of owner-occupied residences under 
the law prior to enactment of section 143), qualified student loan 
bonds, or qualified 501(c)(3) bonds used to finance working capital 
expenditures.

4. Reasonable Public Notice and Public Hearing

    The Existing Regulations generally provide that an applicable 
elected representative of the approving governmental unit may approve 
an issue following a public hearing for which there was reasonable 
public notice. The Existing Regulations provide guidance on permitted 
methods for giving reasonable public notice and holding public 
hearings. The Proposed Regulations would expand these methods to 
provide greater flexibility to State and local governments for 
providing reasonable public notice.
    The Existing Regulations provide generally that reasonable public 
notice must be published in a newspaper of general circulation 
available to residents of the relevant locality or announced by radio 
or television broadcast to those residents. The Proposed Regulations 
would expand the permitted methods of providing reasonable public 
notice to provide greater flexibility and to recognize advances in 
technology and electronic communications. Thus, the Proposed 
Regulations would allow reasonable public notice by newspaper 
publication, radio or television broadcast, postings on a governmental 
unit's public Web site, or alternative methods permitted under a 
general State law for public notices for public hearings of a 
governmental unit. The Treasury Department and the IRS solicit comment 
on other possible methods of providing reasonable public notice to 
foster flexibility and to reduce administrative burdens.

5. Content of Reasonable Public Notice and Public Approval

A. General Rules for Content of Reasonable Public Notice and Public 
Approval
    The Existing Regulations generally require that the reasonable 
public notice and the public approval contain the following 
information: A general, functional description of the type and use of 
the facility to be financed; the maximum aggregate face amount of the 
bonds to be issued for the facility; the initial owner, operator, or 
manager of the facility; and the location of the facility by street 
address or, if none, by a general description designed to inform 
readers of the specific location. The required level of specificity of 
information for the public approval process under the Existing 
Regulations has proven to be unduly limiting and burdensome in certain 
respects. The Proposed Regulations generally retain the requirements 
that information (public approval information) be provided for the 
public approval process but refine the required public approval 
information to reduce burden and enhance flexibility.
    Initially, the Existing Regulations focus on an individual 
``facility'' as the unit of financed property for which the issuer must 
provide the relevant information. The definition of ``facility'' in the 
Existing Regulations includes facilities on multiple tracts of land 
only if the facilities are used in an integrated operation. Whether 
facilities are part of an ``integrated operation'' has proven difficult 
to determine.
    The Proposed Regulations use the term ``project'' in lieu of the 
term ``facility'' because ``project'' more clearly indicates that 
financed property may consist of multiple buildings and multiple sites. 
The Proposed Regulations define the term ``project'' generally to mean 
one or more capital projects or facilities, including land, buildings, 
equipment, and other property, to be financed with an issue, that are 
located on the same site, or adjacent or proximate sites used for 
similar purposes. In addition, to address certain special types of loan 
financings, the definition of a project under the Proposed Regulations 
also includes mortgage loans financed by mortgage revenue bonds, 
student loans financed by qualified student loan bonds, and working 
capital expenditures financed by qualified 501(c)(3) bonds.
    The Proposed Regulations would continue to require a general 
functional description of the type and use of the financed project. The 
Proposed Regulations, however, would mitigate the required level of 
specificity of that information. Thus, the Proposed Regulations would 
allow an issuer of exempt facility bonds to satisfy this requirement 
through a statement that identifies the category of exempt facility 
bond (for example, bonds financing an airport or a mass commuting 
facility). Similarly, an issuer of other types of private activity 
bonds may satisfy this requirement through a statement that identifies 
the type of bonds and the type and use of the project (for example, 
qualified small issue bonds for a manufacturing facility).
    The Proposed Regulations would continue to require that the public 
approval information include the name of the expected initial owner or 
the principal user of the project. The Proposed Regulations, however, 
would permit an issuer to name the true

[[Page 45236]]

beneficial party of interest as an alternative to naming a legal owner 
or user (for example, the name of a nonprofit hospital organization 
instead of a limited liability company that serves as the legal owner 
of a hospital).
    The Proposed Regulations would continue to require that the public 
approval information include the location of the project by street 
address. The Proposed Regulations, however, would clarify that a 
description by boundary streets or other geographic boundaries suffices 
to meet this location requirement. The Proposed Regulations would allow 
a consolidated description of the location of a project on the same 
site or on adjacent or proximate sites (for example, a college campus).
B. Special Rules for Mortgage Revenue Bonds, Qualified Student Loan 
Bonds, and Certain Qualified 501(c)(3) Bonds
    The 1986 Tax Act extended the public approval requirement to 
mortgage revenue bonds, qualified student loan bonds, and qualified 
501(c)(3) bonds. The Existing Regulations were promulgated before the 
1986 Tax Act and thus provide no guidance tailored to the application 
of the public approval requirement to these types of bonds. In the 
General Explanation of the 1986 Tax Act, the Staff of the Joint 
Committee on Taxation stated that, ``[i]n extending this requirement to 
all private activity bonds, Congress intended that the applicable 
Treasury regulations will be amended for student loan bonds (where no 
facilities are financed), mortgage revenue bonds (where the exact 
residences to be financed may not be identified before issuance of the 
bonds), and qualified 501(c)(3) bonds that qualify for the special 
exception to the maturity limitation for pooled financings (where the 
facilities need not be identified before issuance of the bonds).'' 
Joint Committee on Taxation, General Explanation of the Tax Reform Act 
of 1986 (JCS-10-87), at 1219 (May 4, 1987). Accordingly, the Proposed 
Regulations provide special rules for public approval of mortgage 
revenue bonds, qualified student loan bonds, and qualified 501(c)(3) 
bonds issued for pooled financings as described in section 147(b)(4).
    For mortgage revenue bonds, the Proposed Regulations would require 
the public approval information to state that the bonds will finance 
residential mortgages, provide the maximum stated principal amount of 
the bonds, and generally describe the issuer's geographic jurisdiction 
in which the residences to be financed with the mortgage loans are 
expected to be located. Similarly, for qualified student loan bonds, 
the Proposed Regulations would require the public approval information 
to state that the bonds will finance student loans and provide the 
maximum stated principal amount of the bonds. For these two types of 
bonds, the Proposed Regulations would not require the names of 
borrowers to be included in the public approval information.
    For qualified 501(c)(3) bonds that finance loans described in the 
special provision for pooled loan financings in section 147(b)(4), the 
Proposed Regulations would permit the issuer to choose to apply a two-
stage public approval process if the issuer has insufficient 
information at the time of the reasonable public notice or public 
approval to meet the general public approval information requirements. 
To apply this special rule, the issuer must first obtain public 
approval within the time specified in the Proposed Regulations for 
public approval generally. For this first-stage public approval, the 
public approval information must state that the bonds will be qualified 
501(c)(3) bonds used to finance loans described in section 
147(b)(4)(B), provide the maximum stated principal amount of the bonds, 
generally describe the type of project to be financed with such loans 
(for example, loans for hospital facilities or college facilities), and 
state that the issuer will obtain an additional public approval with 
specific project information before origination of any such loans. In 
addition, before loan origination, the issuer must obtain a 
supplemental public approval of that loan containing all of the 
project-specific information that the public approval information rules 
generally require.

6. Deviations From the Information in the Reasonable Public Notice and 
Public Approval

    Differences or ``deviations'' between information regarding a 
proposed project to be financed with a proposed issuance of private 
activity bonds that serves as the basis for a public approval and the 
actual project financed with the bonds may affect the validity of the 
public approval. The Existing Regulations and the Proposed Regulations 
provide that insubstantial deviations do not invalidate a public 
approval. The Proposed Regulations provide additional guidance 
concerning differences that constitute insubstantial deviations and 
also allow remedial actions to cure certain substantial deviations.
    The Proposed Regulations provide that whether a deviation is 
substantial generally depends on all of the facts and circumstances. 
The Proposed Regulations, however, would always treat a change in the 
fundamental nature or type of a project as a substantial deviation.
    The Proposed Regulations would treat certain specified deviations 
from the public approval information provided as insubstantial 
deviations. For example, a deviation from the size of a proposed bond 
issue for a proposed project specified in public approval information 
is an insubstantial deviation if the stated principal amount of bonds 
actually issued and used for the project is no more than ten percent 
(10%) greater than the maximum stated principal amount publicly 
approved for the project or is any amount less than that maximum stated 
principal amount. Furthermore, if an issuer applies proceeds of an 
issue approved for use on one project to pay working capital 
expenditures directly associated with any project approved in the same 
public approval, that deviation is an insubstantial deviation. Finally, 
a deviation between the initial owner or principal user of the project 
identified in the public approval information and the actual initial 
owner or principal user of the project is an insubstantial deviation if 
the parties are related on the issue date.
    The Proposed Regulations would allow supplemental post-issuance 
public approvals to cure certain substantial deviations that result 
from unexpected events or unforeseen changes in circumstances that 
occur after the issuance of the bonds. This remedial action is similar 
to a permitted post-issuance public approval under Sec.  1.141-12(e)(2) 
and (f) used for remedial actions for purposes of the private business 
restrictions.

7. Applicability Dates and Reliance

    The Proposed Regulations are proposed to apply to bonds issued 
pursuant to a public approval that occurs on or after the date that is 
90 days after publication of a Treasury decision adopting these rules 
as final regulations in the Federal Register. Issuers may apply the 
Proposed Regulations, in whole but not in part, to bonds that are 
issued pursuant to a public approval that occurs on or after September 
28, 2017 and before the applicability date provided in a Treasury 
decision adopting these rules as final regulations in the Federal 
Register.
    In addition, the Treasury Department and the IRS propose to remove 
the Existing Regulations under Sec.  5f.103-2 from 26 CFR part 5f 
effective on the

[[Page 45237]]

general applicability date of the final regulations, which is proposed 
to be the date that is 90 days after publication of a Treasury decision 
adopting these rules as final regulations in the Federal Register.

Special Analyses

    Certain IRS regulations, including these, are exempt from the 
requirements of Executive Order 12866, as supplemented and reaffirmed 
by Executive Order 13563. Therefore, a regulatory impact assessment is 
not required. It is hereby certified that these regulations will not 
have a significant economic impact on a substantial number of small 
entities. The Existing Regulations provide guidance on the minimum 
informational content, procedures, and timing for the statutorily 
required public notices, public hearings, and public approvals. 
Although the Proposed Regulations are expected to affect a significant 
number of small State or local governmental units that issue tax-exempt 
private activity bonds, the Proposed Regulations are not expected to 
have a significant economic effect on those governmental units because 
the Proposed Regulations generally would streamline and simplify the 
Existing Regulations in various respects to reduce the administrative 
burdens of meeting the statutory public approval requirement. For 
example, the Proposed Regulations would permit publication of public 
notice by Web site to reduce costs associated with print publication or 
radio or television broadcast, reduce the information required to be 
contained in public notice and public approval for certain types of 
bonds, liberalize the consequences of insubstantial changes in project 
information, and permit curative actions to address certain 
circumstances in which finished projects differ from descriptions 
provided in the public notice or public approval. Accordingly, a 
regulatory flexibility analysis is not required. Pursuant to section 
7805(f) of the Code, this notice of proposed rulemaking will be 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on its impact on small entities.

Comments and Requests for Public Hearing

    Before the Proposed Regulations are adopted as final regulations, 
consideration will be given to any comments that are submitted timely 
to the IRS as prescribed in this preamble under the ADDRESSES heading. 
The Treasury Department and the IRS request comments on all aspects of 
the proposed rules. All comments will be available at 
www.regulations.gov or upon request. A public hearing will be scheduled 
if requested in writing by any person that timely submits written 
comments. If a public hearing is scheduled, notice of the date, time, 
and place for the hearing will be published in the Federal Register.

Drafting Information

    The principal authors of these regulations are Spence Hanemann and 
Vicky Tsilas, Office of Associate Chief Counsel (Financial Institutions 
and Products). However, other personnel from the Treasury Department 
and the IRS participated in their development.

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 5f

    Income taxes, Reporting and recordkeeping requirements.

Withdrawal of Notice of Proposed Rulemaking

    Accordingly, under the authority of 26 U.S.C. 7805, the notice of 
proposed rulemaking (REG-128841-07) that was published in the Federal 
Register (73 FR 52220) on September 9, 2008, is withdrawn. Also, under 
the authority of 26 U.S.C. 7805, Sec.  1.103-17 of the notice of 
proposed rulemaking (LR-221-82) published in the Federal Register (48 
FR 21166) on May 11, 1983, is withdrawn.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR parts 1 and 5f are proposed to be amended as 
follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority:  26 U.S.C. 7805 * * *

0
Par. 2. Section 1.147(f)-1 is added to read as follows:


Sec.  1.147(f)-1  Public approval of private activity bonds.

    (a) In general. Interest on a private activity bond is excludable 
from gross income under section 103(a) only if the bond meets the 
requirements for a qualified bond as defined in section 141(e) and 
other applicable requirements provided in section 103. In order to be a 
qualified bond as defined in section 141(e), among other requirements, 
a private activity bond must meet the requirements of section 147(f). A 
private activity bond meets the requirements of section 147(f) only if 
the bond is publicly approved pursuant to paragraph (b) of this section 
or the bond qualifies for the exception for refunding bonds in section 
147(f)(2)(D).
    (b) Public approval requirement--(1) In general. Except as 
otherwise provided in this section, a bond meets the requirements of 
section 147(f) if, before the issue date, the issue of which the bond 
is a part receives issuer approval and host approval (each a public 
approval) as defined in paragraphs (b)(2) and (3) of this section in 
accordance with the method and process set forth in paragraphs (c) 
through (f) of this section.
    (2) Issuer approval. Except as otherwise provided in this section, 
issuer approval means an approval that meets the requirements of this 
paragraph (b)(2). Either the governmental unit that issues the issue or 
the governmental unit on behalf of which the issue is issued must 
approve the issue. For this purpose, Sec.  1.103-1 applies to the 
determination of whether an issuer issues bonds on behalf of another 
governmental unit. If an issuer issues bonds on behalf of more than one 
governmental unit (for example, in the case of an authority that acts 
for two counties), any one of those governmental units may provide the 
issuer approval.
    (3) Host approval. Except as otherwise provided in this section, 
host approval means an approval that meets the requirements of this 
paragraph (b)(3). Each governmental unit the geographic jurisdiction of 
which contains the site of a project to be financed by the issue must 
approve the issue. If, however, the entire site of a project to be 
financed by the issue is within the geographic jurisdiction of more 
than one governmental unit within a State (counting the State as a 
governmental unit within such State), then any one of those 
governmental units may provide host approval for the issue for that 
project. For purposes of the host approval, if a project to be financed 
by the issue is located within the geographic jurisdiction of two or 
more governmental units but not entirely within any one of those 
governmental units, each portion of the project that is located 
entirely within the geographic jurisdiction of the respective 
governmental units may be treated as a separate project. The issuer 
approval provided pursuant to paragraph (b)(2) of this section may be 
treated as a host approval if the governmental unit providing the 
issuer approval is also a governmental unit eligible to provide

[[Page 45238]]

the host approval pursuant to this paragraph (b)(3).
    (4) Special rule for host approval of airports or high-speed 
intercity rail facilities. Pursuant to a special rule in section 
147(f)(3), if the proceeds of an issue are to be used to finance a 
project that consists of either facilities located at an airport 
(within the meaning of section 142(a)(1)) or high-speed intercity rail 
facilities (within the meaning of section 142(a)(11)) and the issuer of 
that issue is the owner or operator of the airport or high-speed 
intercity rail facilities, the issuer is the only governmental unit 
that is required to provide the host approval for that project.
    (5) Special rule for issuer approval of scholarship funding bond 
issues and volunteer fire department bond issues. In the case of a 
qualified scholarship funding bond as defined in section 150(d)(2), the 
governmental unit that made a request described in section 150(d)(2)(B) 
with respect to the issuer of the bond is the governmental unit on 
behalf of which the bond was issued for purposes of the issuer 
approval. If more than one governmental unit within a State made a 
request described in section 150(d)(2)(B), the State or any such 
requesting governmental unit may be treated as the governmental unit on 
behalf of which the bond was issued for purposes of the issuer 
approval. In the case of a bond of a volunteer fire department treated 
as a bond of a political subdivision of a State under section 150(e), 
the political subdivision described in section 150(e)(2)(B) with 
respect to that volunteer fire department is the governmental unit on 
behalf of which the bond is issued for purposes of the issuer approval.
    (6) Host approval not required for issues of mortgage revenue 
bonds, student loan bonds, and certain qualified 501(c)(3) bonds. In 
the case of a mortgage revenue bond (as defined in paragraph (g)(5) of 
this section), a qualified student loan bond as defined in section 
144(b), and the portion of an issue of qualified 501(c)(3) bonds as 
defined in section 145 that finances working capital expenditures, the 
issue or portion of the issue must receive an issuer approval but no 
host approval is necessary.
    (c) Method of public approval. The method of public approval of an 
issue must satisfy either paragraph (c)(1) or (2) of this section. An 
approval may satisfy the requirements of this paragraph (c) without 
regard to the authority under State or local law for the acts 
constituting that approval.
    (1) Applicable elected representative. An applicable elected 
representative of the approving governmental unit approves the issue 
following a public hearing for which there was reasonable public 
notice.
    (2) Voter referendum. A voter referendum of the approving 
governmental unit approves the issue.
    (d) Public hearing and reasonable public notice--(1) Public 
hearing. Public hearing means a forum providing a reasonable 
opportunity for interested individuals to express their views, orally 
or in writing, on the proposed issue of bonds and the location and 
nature of the proposed project to be financed.
    (2) Location of the public hearing. The public hearing must be held 
in a location that, based on the facts and circumstances, is convenient 
for residents of the approving governmental unit. The location of the 
public hearing is presumed convenient for residents of the unit if the 
public hearing is located in the approving governmental unit's capital 
or seat of government. If more than one governmental unit is required 
to hold a public hearing, the hearings may be combined as long as the 
combined hearing affords the residents of all of the participating 
governmental units a reasonable opportunity to be heard. The location 
of any combined hearing is presumed convenient for residents of each 
participating governmental unit if it is no farther than 100 miles from 
the seat of government of each participating governmental unit beyond 
whose geographic jurisdiction the hearing is conducted.
    (3) Procedures for conducting the public hearing. In general, a 
governmental unit may select its own procedure for a public hearing, 
provided that interested individuals have a reasonable opportunity to 
express their views. Thus, a governmental unit may impose reasonable 
requirements on persons who wish to participate in the hearing, such as 
a requirement that persons desiring to speak at the hearing make a 
written request to speak at least 24 hours before the hearing or that 
they limit their oral remarks to a prescribed time. For this purpose, 
it is unnecessary, for example, that the applicable elected 
representative of the approving governmental unit be present at the 
hearing, that a report on the hearing be submitted to that applicable 
elected representative, or that State administrative procedural 
requirements for public hearings be observed. Except to the extent 
State procedural requirements for public hearings are in conflict with 
a specific requirement of this section, a public hearing performed in 
compliance with State procedural requirements satisfies the 
requirements for a public hearing in this paragraph (d). A public 
hearing may be conducted by an individual appointed or employed to 
perform such function by the governmental unit or its agencies, or by 
the issuer. Thus, for example, for bonds to be issued by an authority 
that acts on behalf of a county, the hearing may be conducted by the 
authority, the county, or an appointee of either.
    (4) Reasonable public notice. Reasonable public notice means notice 
that is reasonably designed to inform residents of an approving 
governmental unit, including the issuing governmental unit and the 
governmental unit in whose geographic jurisdiction a project is to be 
located, of the proposed issue. The notice must state the time and 
place for the public hearing and contain the information required by 
paragraph (f)(2) of this section. Notice is presumed to be reasonably 
designed to inform residents of an approving governmental unit if it 
satisfies the requirements of this paragraph (d)(4) and is given no 
fewer than fourteen (14) calendar days before the public hearing in one 
or more of the ways set forth in paragraphs (d)(4)(i) through (iv) of 
this section.
    (i) Newspaper publication. Public notice may be given by 
publication in one or more newspapers of general circulation available 
to the residents of the governmental unit.
    (ii) Radio or television broadcast. Public notice may be given by 
radio or television broadcast to the residents of the governmental 
unit.
    (iii) Governmental unit Web site posting. Public notice may be 
given by electronic posting on the approving governmental unit's public 
Web site used to inform its residents about events affecting the 
residents (for example, notice of public meetings of the governmental 
unit). In the case of public notice provided as described in the first 
sentence of this paragraph (d)(4)(iii), the governmental unit must 
offer a reasonable, publicly known alternative method for obtaining the 
information contained in the public notice for residents without access 
to the Internet (such as telephone recordings).
    (iv) Alternative State law public notice procedures. Public notice 
may be given in a way that is permitted under a general State law for 
public notices for public hearings for the approving governmental unit.
    (e) Applicable elected representative--(1) In general--(i) 
Definition of applicable elected representative. The applicable elected 
representative of a governmental unit means--

[[Page 45239]]

    (A) The governmental unit's elected legislative body;
    (B) The governmental unit's chief elected executive officer;
    (C) In the case of a State, the chief elected legal officer of the 
State's executive branch of government; or
    (D) Any official elected by the voters of the governmental unit and 
designated for purposes of this section by the governmental unit's 
chief elected executive officer or by State or local law to approve 
issues for the governmental unit.
    (ii) Elected officials. For purposes of paragraphs (e)(1)(i)(B), 
(C), and (D) of this section, an official is considered elected only if 
that official is popularly elected at-large by the voters of the 
governmental unit. If an official popularly elected at-large by the 
voters of a governmental unit is appointed or selected pursuant to 
State or local law to be the chief executive officer of the unit, that 
official is deemed to be an elected chief executive officer for 
purposes of this section but for no longer than the official's tenure 
as an official popularly elected at-large.
    (iii) Legislative bodies. In the case of a bicameral legislature 
that is popularly elected, both chambers together constitute an 
applicable elected representative. Absent designation under paragraph 
(e)(1)(i)(D) of this section, however, neither such chamber 
independently constitutes an applicable elected representative. If 
multiple elected legislative bodies of a governmental unit have 
independent legislative authority, the body with the more specific 
authority relating to the issue is the only legislative body that is 
treated as an elected legislative body under paragraph (e)(1)(i)(A) of 
this section.
    (2) Governmental unit with no applicable elected representative--
(i) In general. The applicable elected representatives of a 
governmental unit with no applicable elected representative (but for 
this paragraph (e)(2) and section 147(f)(2)(E)(ii)) are the applicable 
elected representatives of the next higher governmental unit (with an 
applicable elected representative) from which the governmental unit 
derives its authority. Except as otherwise provided in this section, 
any governmental unit from which the governmental unit with no 
applicable elected representative derives its authority may be treated 
as the next higher governmental unit without regard to the relative 
status of such higher governmental unit under State law. A governmental 
unit derives its authority from another governmental unit that--
    (A) Enacts a specific law (for example, a provision in a State 
constitution, charter, or statute) by or under which the governmental 
unit is created;
    (B) Otherwise empowers or approves the creation of the governmental 
unit; or
    (C) Appoints members to the governing body of the governmental 
unit.
    (ii) Host approval. For purposes of a host approval, a governmental 
unit may be treated as the next higher governmental unit only if the 
project is located within its geographic jurisdiction and eligible 
residents of the unit are entitled to vote for its applicable elected 
representatives.
    (3) On behalf of issuers. In the case of an issuer that issues 
bonds on behalf of a governmental unit, the applicable elected 
representative is any applicable elected representative of the 
governmental unit on behalf of which the bonds are issued.
    (f) Public approval process--(1) In general. The public approval 
process for an issue, including scope, content, and timing of the 
public approval, must meet the requirements of this paragraph (f). A 
governmental unit must timely approve either each project to be 
financed with proceeds of the issue or a plan of financing for each 
project to be financed with proceeds of the issue.
    (2) General rule on information required for a reasonable public 
notice and public approval. Except as otherwise provided in this 
section, a project to be financed with proceeds of an issue is within 
the scope of a public approval under section 147(f) if the reasonable 
public notice of the public hearing, if applicable, and the public 
approval (together the notice and approval) include the information set 
forth in paragraphs (f)(2)(i) through (iv) of this section.
    (i) The project. The notice and approval must include a general 
functional description of the type and use of the project to be 
financed with the issue. For this purpose, a project description is 
sufficient if it identifies the project by reference to a particular 
category of exempt facility bond to be issued (for example, an exempt 
facility bond for an airport pursuant to section 142(a)(1)) or by 
reference to another general category of private activity bond together 
with information on the type and use of the project to be financed with 
the issue (for example, a qualified small issue bond as defined in 
section 144(a) for a manufacturing facility or a qualified 501(c)(3) 
bond as defined in section 145 for a hospital facility and working 
capital expenditures).
    (ii) The maximum stated principal amount of bonds. The notice and 
approval must include the maximum stated principal amount of the issue 
of private activity bonds to be issued to finance the project. If an 
issue finances multiple projects (for example, facilities at different 
locations on non-proximate sites that are not treated as part of the 
same project), the notice and approval must specify separately the 
maximum stated principal amount of bonds to be issued to finance each 
separate project.
    (iii) The name of the initial owner or principal user of the 
project. The notice and approval must include the name of the expected 
initial owner or principal user (within the meaning of section 144(a)) 
of the project. The name provided may be either the name of the legal 
owner or principal user of the project or, alternatively, the name of 
the true beneficial party of interest for such legal owner or user (for 
example, the name of a 501(c)(3) organization that is the sole member 
of a limited liability company that is the legal owner).
    (iv) The location of the project. The notice and approval must 
include a general description of the prospective location of the 
project by street address, reference to boundary streets or other 
geographic boundaries, or other description of the specific geographic 
location that is reasonably designed to inform readers of the location. 
For a project involving multiple capital projects or facilities located 
on the same site, or on adjacent or reasonably proximate sites with 
similar uses, a consolidated description of the location of those 
capital projects or facilities provides a sufficient description of the 
location of the project. For example, a project for a section 501(c)(3) 
educational entity involving multiple buildings on the entity's main 
urban college campus may describe the location of the project by 
reference to the outside street boundaries of that campus with a 
reference to any noncontiguous features of that campus.
    (3) Special rule for mortgage revenue bonds. Mortgage loans 
financed by mortgage revenue bonds are within the scope of a public 
approval if the notice and approval state that the bonds are to be 
issued to finance residential mortgages, provide the maximum stated 
principal amount of mortgage revenue bonds expected to be issued, and 
provide a general description of the geographic jurisdiction in which 
the residences to be financed with the proceeds of the mortgage revenue 
bonds are expected to be located (for example, residences located 
throughout a State for an issuer with a statewide jurisdiction or 
residences within a particular local geographic jurisdiction, such as 
within a city or county, for a

[[Page 45240]]

local issuer). For this purpose, in the case of mortgage revenue bonds, 
no information is required on specific names of mortgage loan borrowers 
or specific locations of individual residences to be financed.
    (4) Special rule for qualified student loan bonds. Qualified 
student loans financed by qualified student loan bonds as defined in 
section 144(b) are within the scope of a public approval if the notice 
and approval state that the bonds will be issued to finance student 
loans and state the maximum stated principal amount of qualified 
student loan bonds expected to be issued for qualified student loans. 
For this purpose, in the case of qualified student loan bonds, no 
information is required with respect to names of specific student loan 
borrowers.
    (5) Special rule for certain qualified 501(c)(3) bonds. Loans 
financed by qualified 501(c)(3) bonds issued pursuant to section 145 
and described in section 147(b)(4)(B) (without regard to any election 
under section 147(b)(4)(A)) are within the scope of a public approval 
if the requirements of paragraphs (f)(5)(i) and (ii) of this section 
are met.
    (i) Pre-issuance general public approval. Within the time period 
required by paragraph (f)(7) of this section, public approval is 
obtained after reasonable public notice of a public hearing is provided 
and a public hearing is held. For this purpose, a project is treated as 
described in the notice and approval if the notice and approval provide 
that the bonds will be qualified 501(c)(3) bonds to be used to finance 
loans described in section 147(b)(4)(B), state the maximum stated 
principal amount of bonds expected to be issued to finance loans to 
501(c)(3) organizations or governmental units as described in section 
147(b)(4)(B), provide a general description of the type of project to 
be financed with such loans (for example, loans for hospital facilities 
or college facilities), and state that an additional public approval 
that includes specific project information will be obtained before any 
such loans are originated.
    (ii) Post-issuance public approval for specific loans. Except as 
provided in paragraph (f)(5)(iii) of this section, before a loan 
described in section 147(b)(4)(B) is originated, a supplemental public 
approval for the bonds to be used to finance that loan is obtained that 
meets all the requirements of section 147(f) and the requirements for a 
public approval in paragraph (b) of this section. This post-issuance 
supplemental public approval requirement applies by treating the bonds 
to be used to finance such loan as if they were reissued for purposes 
of section 147(f) (without regard to paragraph (f)(5) of this section). 
For this purpose, proceeds to be used to finance such loan do not 
include the portion of the issue used to finance a common reserve fund 
or common costs of issuance.
    (iii) Exception to post-issuance public approval requirement. A 
post-issuance supplemental public approval pursuant to paragraph 
(f)(5)(ii) of this section is unnecessary for the initial use of 
proceeds to finance one or more loans if the pre-issuance notice and 
approval pursuant to paragraph (f)(5)(i) of this section include the 
information required by paragraphs (f)(2)(i) through (iv) of this 
section for the projects to be financed by those loans.
    (6) Deviations in public approval information--(i) In general. 
Except as otherwise provided in this section, a substantial deviation 
between the stated use of proceeds of an issue included in the 
information required to be provided in the notice and approval (public 
approval information) and the actual use of proceeds of the issue 
causes that issue to fail to meet the public approval requirement. 
Conversely, insubstantial deviations between the stated use of proceeds 
of an issue included in the public approval information and the actual 
use of proceeds of the issue do not cause such a failure. In general, 
the determination of whether a deviation is substantial is based on all 
the facts and circumstances. In all events, however, a change in the 
fundamental nature or type of a project is a substantial deviation.
    (ii) Certain insubstantial deviations in public approval 
information. The following deviations from the public approval 
information in the notice and approval are treated as insubstantial 
deviations:
    (A) Size of bond issue and use of proceeds. A deviation between the 
maximum stated principal amount of a proposed issuance of bonds to 
finance a project that is specified in public approval information and 
the actual stated principal amount of bonds issued and used to finance 
that project is an insubstantial deviation if that actual stated 
principal amount is no more than ten percent (10%) greater than that 
maximum stated principal amount or is any amount less than that maximum 
stated principal amount. In addition, the use of proceeds to pay 
working capital expenditures directly associated with any project 
specified in the public approval information is an insubstantial 
deviation.
    (B) Initial owner or principal user. A deviation between the 
initial owner or principal user of the project named in the notice and 
approval and the actual initial owner or principal user of the project 
is an insubstantial deviation if such parties are related parties on 
the issue date of the issue.
    (iii) Supplemental public approval to cure certain substantial 
deviations in public approval information. A substantial deviation 
between the stated use of proceeds of an issue included in the public 
approval information and the actual use of the proceeds of the issue 
does not cause that issue to fail to meet the public approval 
requirement if all of the following requirements are met:
    (A) Original public approval and reasonable expectations. The issue 
met the requirements for a public approval in paragraph (b) of this 
section. In addition, on the issue date of the issue, the issuer 
reasonably expected there would be no substantial deviations between 
the stated use of proceeds of an issue included in the public approval 
information and the actual use of the proceeds of the issue.
    (B) Unexpected events or unforeseen changes in circumstances. As a 
result of unexpected events or unforeseen changes in circumstances that 
occur after the issue date of the issue, the issuer determines to use 
proceeds of the issue in a manner or amount not provided in a public 
approval.
    (C) Supplemental public approval. Before using proceeds of the 
bonds in a manner or amount not provided in a public approval, the 
issuer obtains a supplemental public approval for those bonds that 
meets the public approval requirement in paragraph (b) of this section. 
This supplemental public approval requirement applies by treating those 
bonds as if they were reissued for purposes of section 147(f).
    (7) Certain timing requirements. Public approval of an issue is 
timely only if the issuer obtains the public approval within one year 
before the issue date of the issue. Public approval of a plan of 
financing is timely only if the issuer obtains public approval for the 
plan of financing within one year before the issue date of the first 
issue issued under the plan of financing and the issuer issues all 
issues under the plan of financing within three years after the issue 
date of such first issue.
    (g) Definitions. The definitions in this paragraph (g) apply for 
purposes of this section. In addition, the general definitions in Sec.  
1.150-1 apply for purposes of this section.
    (1) Geographic jurisdiction means the area encompassed by the 
boundaries prescribed by State or local law for a

[[Page 45241]]

governmental unit or, if there are no such boundaries, the area in 
which a unit may exercise such sovereign powers that make that unit a 
governmental unit for purposes of Sec.  1.103-1 and this section.
    (2) Governmental unit has the meaning of ``State or local 
governmental unit'' as defined in Sec.  1.103-1. Thus, a governmental 
unit is a State, territory, a possession of the United States, the 
District of Columbia, or any political subdivision thereof.
    (3) Host approval is defined in paragraph (b)(3) of this section.
    (4) Issuer approval is defined in paragraph (b)(2) of this section.
    (5) Mortgage revenue bonds mean qualified mortgage bonds as defined 
in section 143(a), qualified veterans' mortgage bonds as defined in 
section 143(b), or refunding bonds issued to finance mortgages of 
owner-occupied residences pursuant to applicable law in effect prior to 
enactment of section 143(a) or section 143(b).
    (6) Proceeds means ``proceeds'' as defined in Sec.  1.141-1(b), 
except that it does not include disposition proceeds.
    (7) Project generally means one or more capital projects or 
facilities, including land, buildings, equipment, and other property, 
to be financed with an issue, that are located on the same site, or 
adjacent or proximate sites used for similar purposes, and that are 
subject to the public approval requirement of section 147(f). For an 
issue of mortgage revenue bonds or an issue of qualified student loan 
bonds as defined in section 144(b), the term project means the mortgage 
loans or qualified student loans to be financed with the proceeds of 
the issue. For an issue of qualified 501(c)(3) bonds as defined in 
section 145, the term project means a project as defined in the first 
sentence of this definition, and also is deemed to include working 
capital expenditures to be financed with proceeds of the issue.
    (8) Public approval information is defined in paragraph (f)(6)(i) 
of this section.
    (9) Public hearing is defined in paragraph (d)(1) of this section.
    (10) Reasonable public notice is defined in paragraph (d)(4) of 
this section.
    (11) Voter referendum means a vote by the voters of the affected 
governmental unit conducted in the same manner and time as voter 
referenda on matters relating to governmental spending or bond 
issuances by the governmental unit under applicable State and local 
law.
    (h) Applicability date. This section applies to bonds issued 
pursuant to a public approval occurring on or after the date that is 90 
days after publication of the Treasury decision adopting these rules as 
final regulations in the Federal Register. For bonds issued pursuant to 
a public approval occurring before that date, see Sec.  5f.103-2 as 
contained in 26 CFR part 5f, revised as of the date of the most recent 
annual revision.

PART 5f--TEMPORARY INCOME TAX REGULATIONS UNDER THE TAX EQUITY AND 
FISCAL RESPONSIBILITY ACT OF 1982

0
Par. 3. The authority citation for part 5f continues to read in part as 
follows:

    Authority:  26 U.S.C. 7805 * * *


Sec.  5f.103-2   [Removed]

0
Par. 4. Section 5f.103-2 is removed.

Kirsten Wielobob,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2017-20661 Filed 9-27-17; 8:45 am]
 BILLING CODE 4830-01-P



                                                                       Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Proposed Rules                                          45233

                                                    552a; or the Indian Gaming Regulatory                   www.regulations.gov (IRS REG–128841–                  techniques or other forms of information
                                                    Act, 25 U.S.C. 2716(a).                                 07).                                                  technology; and
                                                      Dated: September 19, 2017.                            FOR FURTHER INFORMATION CONTACT:                        Estimates of capital or start-up costs
                                                                                                            Concerning the proposed regulations,                  and costs of operation, maintenance,
                                                    Jonodev O. Chaudhuri,
                                                                                                            Spence Hanemann at (202) 317–6980;                    and purchase of services to provide
                                                    Chairman.                                                                                                     information.
                                                    Kathryn Isom-Clause,
                                                                                                            concerning submissions of comments
                                                                                                            and requesting a hearing, Regina                        An agency may not conduct or
                                                    Vice Chair.                                                                                                   sponsor, and a person is not required to
                                                                                                            Johnson at (202) 317–6901 (not toll-free
                                                    E. Sequoyah Simermeyer,                                 numbers).                                             respond to, a collection of information
                                                    Associate Commissioner.                                                                                       unless it displays a valid control
                                                                                                            SUPPLEMENTARY INFORMATION:
                                                    [FR Doc. 2017–20635 Filed 9–27–17; 8:45 am]                                                                   number assigned by the Office of
                                                    BILLING CODE 7565–01–P                                  Paperwork Reduction Act                               Management and Budget.
                                                                                                                                                                    Books or records relating to a
                                                                                                               The collection of information                      collection of information must be
                                                                                                            contained in this notice of proposed                  retained as long as their contents may
                                                    DEPARTMENT OF THE TREASURY                              rulemaking has been submitted to the                  become material in the administration
                                                                                                            Office of Management and Budget for                   of any internal revenue law. Generally,
                                                    Internal Revenue Service                                review under OMB Control Number                       tax returns and tax return information
                                                                                                            1545–2185 in accordance with the                      are confidential, as required by 26
                                                    26 CFR Parts 1 and 5f                                   Paperwork Reduction Act of 1995 (44                   U.S.C. 6103.
                                                                                                            U.S.C. 3507(d)). The collection of
                                                    [REG–128841–07]                                                                                               Background
                                                                                                            information in this proposed regulation
                                                    RIN 1545–BG91                                           is the requirement in § 1.147(f)–1 that                 This document contains proposed
                                                                                                            certain information be contained in a                 amendments to 26 CFR part 1 under
                                                    Public Approval of Tax-Exempt Private                   public notice or public approval and,                 section 147(f) of the Internal Revenue
                                                    Activity Bonds                                          consequently, disclosed to the public.                Code of 1986 (the Code) and 26 CFR
                                                                                                            This information is required to meet the              part 5f under section 103(k) of the
                                                    AGENCY: Internal Revenue Service (IRS),                 statutory public approval requirement                 Internal Revenue Code of 1954 (the 1954
                                                    Treasury.                                               provided in section 147(f). The likely                Code). In the Tax Equity and Fiscal
                                                    ACTION: Withdrawal of notice of                         respondents are the governmental units                Responsibility Act of 1982 (TEFRA),
                                                    proposed rulemaking and notice of                       required to approve an issue of private               Public Law 97–248, 96 Stat. 324,
                                                    proposed rulemaking.                                    activity bonds under section 147(f).                  Congress added section 103(k) to the
                                                                                                               Estimated total annual burden: 2,600               1954 Code to impose a public approval
                                                    SUMMARY:   This document contains
                                                                                                            hours.                                                requirement on tax-exempt industrial
                                                    proposed regulations to update and                         Estimated average annual burden per
                                                    streamline the public approval                                                                                development bonds. On May 11, 1983,
                                                                                                            respondent: 1.3 Hours.                                the Department of the Treasury
                                                    requirement provided in section 147(f)                     Estimated number of respondents:
                                                    of the Internal Revenue Code applicable                                                                       (Treasury Department) and the IRS
                                                                                                            2,000.                                                published in the Federal Register (48
                                                    to tax-exempt private activity bonds                       Estimated frequency of responses:
                                                    issued by State and local governments.                                                                        FR 21117) temporary regulations under
                                                                                                            Annual.                                               section 103(k) of the 1954 Code (TD
                                                    The proposed regulations would update                      Comments on the collection of
                                                    the existing regulations on the public                                                                        7892) (the Existing Regulations). See
                                                                                                            information should be sent to the Office              § 5f.103–2. A notice of proposed
                                                    approval requirement to reflect statutory               of Management and Budget, Attn: Desk
                                                    changes, to streamline the public                                                                             rulemaking (LR–221–82) by cross-
                                                                                                            Officer for the Department of the                     reference to the temporary regulations
                                                    approval process, and to reduce burden                  Treasury, Office of Information and
                                                    on State and local governments that                                                                           was published in the Federal Register
                                                                                                            Regulatory Affairs, Washington, DC                    (48 FR 21166) on the same day.
                                                    issue tax-exempt private activity bonds.                20503, with copies to the Internal                      In the Tax Reform Act of 1986 (1986
                                                    This document also withdraws two                        Revenue Service, Attn: IRS Reports                    Tax Act), Public Law 99–514, 100 Stat.
                                                    previous notices of proposed                            Clearance Officer, SE:CAR:MP:T:T:SP,                  2085, Congress reorganized the tax-
                                                    rulemaking on this topic. The proposed                  Washington, DC 20224. Comments on                     exempt bond provisions and carried
                                                    regulations affect State and local                      the collection of information should be               forward the public approval
                                                    governments that issue tax-exempt                       received by November 27, 2017.                        requirement of section 103(k) of the
                                                    private activity bonds.                                    Comments are specifically requested                1954 Code in expanded form in section
                                                    DATES: Comments and requests for a                      concerning:                                           147(f) of the Code. In section 147(f),
                                                    public hearing must be received by                         Whether the proposed collection of                 Congress extended the public approval
                                                    December 27, 2017.                                      information is necessary for the proper               requirement to apply to all types of tax-
                                                    ADDRESSES: Send submissions to                          performance of the functions of the IRS,              exempt private activity bonds, as
                                                    CC:PA:LPD:PR (REG–128841–07), Room                      including whether the information will                provided in section 141(e). The
                                                    5203, Internal Revenue Service, P.O.                    have practical utility;                               legislative history of the 1986 Tax Act
                                                    Box 7604, Ben Franklin Station,                            The accuracy of the estimated burden               indicates that ‘‘[t]he conferees intend
                                                    Washington, DC 20044. Submissions                       associated with the proposed collection               that, to the extent not amended, all
jstallworth on DSKBBY8HB2PROD with PROPOSALS




                                                    may be hand-delivered Monday through                    of information;                                       principles of present law continue to
                                                    Friday between the hours of 8 a.m. and                     How the quality, utility, and clarity of           apply under the reorganized
                                                    4 p.m. to CC:PA:LPD:PR (REG–128841–                     the information to be collected may be                provisions.’’ H.R. Rep. No. 99–841, at II–
                                                    07), Courier’s Desk, Internal Revenue                   enhanced;                                             686 (1986) (Conf. Rep.). Thus, the
                                                    Service, 1111 Constitution Avenue NW.,                     How the burden of complying with                   Existing Regulations in § 5f.103–2
                                                    Washington, DC 20224, or sent                           the proposed collection of information                remain in effect.
                                                    electronically via the Federal                          may be minimized, including through                     On September 9, 2008, the Treasury
                                                    eRulemaking Portal at                                   the application of automated collection               Department and the IRS published a


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                                                    45234              Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Proposed Rules

                                                    notice of proposed rulemaking (REG–                     modifications in response to the public               No. 97–494, at 171 (1982). With respect
                                                    128841–07) in the Federal Register (73                  comments. One comment focused on                      to these proposed amendments, the
                                                    FR 52220) that proposed regulations to                  the structure of the 2008 Proposed                    Treasury Department and the IRS have
                                                    amend and supplement the Existing                       Regulations. The 2008 Proposed                        determined that the information that
                                                    Regulations (the 2008 Proposed                          Regulations would have revised the                    would have been required by the 2008
                                                    Regulations). The Treasury Department                   Existing Regulations by amending                      Proposed Regulations is sufficient to
                                                    and the IRS received public comments                    existing rules and adding new rules.                  permit the public to evaluate the merits
                                                    on the 2008 Proposed Regulations and                    The 2008 Proposed Regulations further                 of both the issuance of the bonds and
                                                    held a public hearing on January 26,                    provided that the Existing Regulations                the location and nature of the financed
                                                    2009. As discussed more fully in the                    would remain in effect to the extent not              facility. Thus, the burden imposed by
                                                    Explanation of Provisions section of this               inconsistent with the final version of the            the Existing Regulations may be reduced
                                                    preamble, the Treasury Department and                   2008 Proposed Regulations.                            as provided in the 2008 Proposed
                                                    the IRS have decided to withdraw the                    Commenters expressed concern about                    Regulations without significantly
                                                    2008 Proposed Regulations in full and                   potential confusion over two distinct                 impairing the public’s consideration of
                                                    to propose new regulations. This                        and partially inconsistent regulation                 new private activity bonds.
                                                    document contains those new proposed                    sections governing the public approval                Accordingly, the Proposed Regulations
                                                    regulations (the Proposed Regulations).                 requirement. The Treasury Department                  generally retain the streamlined
                                                                                                            and the IRS understand this concern.                  information and post-issuance
                                                    Explanation of Provisions
                                                                                                            Accordingly, the Proposed Regulations                 flexibility proposed in the 2008
                                                    1. Introduction                                         consolidate the guidance in the Existing              Proposed Regulations and provide for
                                                       In general, pursuant to section 103 of               Regulations and the 2008 Proposed                     additional post-issuance flexibility. (See
                                                    the Code, interest received by investors                Regulations, with modifications in                    section 6 of this Explanation of
                                                    on eligible State and local bonds is tax-               response to the public comments and                   Provisions.)
                                                    exempt for Federal income tax                           other recent developments, into new                      Commenters also provided differing
                                                    purposes. Interest on private activity                  proposed guidance and provide a                       views on the amendments in the 2008
                                                    bonds qualifies for this tax-exempt                     further opportunity for public comment.               Proposed Regulations that proposed
                                                    treatment only if the bonds meet the                       The Treasury Department and the IRS                changes to the procedures for providing
                                                    requirements for ‘‘qualified bonds’’ as                 also received numerous comments                       reasonable public notice of a public
                                                    defined in section 141(e) and other                     regarding the level of specificity of                 hearing. The Existing Regulations
                                                    applicable requirements provided in                     information required to be contained in               generally permit an issuer to publicize
                                                    section 103. Section 141(e) of the Code                 reasonable public notice of a public                  notice by newspaper, radio, or
                                                    requires, among other things, that                      hearing or a public approval. Generally,              television, and presume notice to be
                                                    qualified bonds meet the public                         the 2008 Proposed Regulations                         reasonable if published at least 14 days
                                                    approval requirement of section 147(f).                 proposed to allow the issuer to provide               prior to the date of the public hearing.
                                                       The Proposed Regulations would                       streamlined information about projects                The 2008 Proposed Regulations
                                                    update the Existing Regulations to                      to be financed, and the Existing                      proposed to expand the permitted
                                                    address subsequent statutory changes                    Regulations require a greater level of                methods of providing public notice to
                                                    and to streamline the public approval                   specificity of information about such                 include notice by newspaper, radio,
                                                    process. The Proposed Regulations                       projects. The 2008 Proposed Regulations               television, Web site, or other permitted
                                                    provide greater flexibility to State and                also proposed to afford issuers more                  methods of giving public notice under
                                                    local governments with respect to the                   flexibility regarding the effect of post-             State law, and would have shortened
                                                    public approval process to reduce                       issuance changes from the reasonably                  the presumptively reasonable notice
                                                    administrative burdens associated with                  expected facts provided in the                        period to seven days in advance of the
                                                    the public approval requirement. The                    reasonable public notice or public                    hearing. Commenters in favor of these
                                                    Proposed Regulations recognize                          approval. Commenters expressed                        amendments generally stated that the
                                                    advances in technology and electronic                   differing views on whether these                      proposed amendments would ease the
                                                    communication that may facilitate more                  proposed amendments in the 2008                       burden of providing the public notice.
                                                    streamlined procedures for providing                    Proposed Regulations should be                        Commenters opposed to these
                                                    reasonable public notice of a public                    adopted. Commenters in favor of these                 amendments generally expressed
                                                    hearing.                                                amendments generally applauded the                    concern that seven days’ notice of a
                                                                                                            reduced burden that issuers would bear                public hearing would not provide the
                                                    2. The 2008 Proposed Regulations                        under the 2008 Proposed Regulations                   public sufficient time to make an
                                                      The 2008 Proposed Regulations                         and suggested ways in which that                      informed decision and to make
                                                    proposed to update, clarify, and                        burden could be reduced further.                      arrangements to be present at the
                                                    simplify discrete aspects of the Existing               Commenters opposed to these                           hearing. The legislative history of
                                                    Regulations regarding the public                        amendments generally argued that                      TEFRA indicates that Congress expected
                                                    approval requirement. The 2008                          reducing the amount of public                         notice to be published no fewer than 14
                                                    Proposed Regulations focused on the                     information would limit the public’s                  days before the scheduled date of the
                                                    scope, information content, methods,                    ability to approve or oppose on an                    hearing. See S. Rep. No. 97–494, at 171
                                                    and timing for the public approval                      informed basis new private activity                   (1982). In response to these comments,
jstallworth on DSKBBY8HB2PROD with PROPOSALS




                                                    process, and generally did not focus on                 bonds and proposed projects to be                     the Proposed Regulations adopt and
                                                    the governmental entities from which                    financed. The legislative history of the              expand the permitted methods for
                                                    public approval is required. Overall, the               public approval requirement                           giving notice of a public hearing that
                                                    public comments on the 2008 Proposed                    emphasizes the importance of ‘‘a                      were proposed in the 2008 Proposed
                                                    Regulations were favorable.                             reasonable opportunity for persons with               Regulations, but retain the 14-day notice
                                                      The Proposed Regulations generally                    differing views on both issuance of the               period presumed reasonable under the
                                                    incorporate the amendments proposed                     bonds and the location and nature of the              Existing Regulations consistent with the
                                                    in the 2008 Proposed Regulations with                   proposed facility to be heard.’’ S. Rep.              expectations of Congress.


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                                                                       Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Proposed Rules                                           45235

                                                    3. Host Approval and Issuer Approval                    enactment of section 143), qualified                  has proven to be unduly limiting and
                                                       Section 147(f) generally requires that               student loan bonds, or qualified                      burdensome in certain respects. The
                                                    both the governmental unit that issues                  501(c)(3) bonds used to finance working               Proposed Regulations generally retain
                                                    the bonds (or on behalf of which the                    capital expenditures.                                 the requirements that information
                                                    bonds are issued) and a governmental                                                                          (public approval information) be
                                                                                                            4. Reasonable Public Notice and Public                provided for the public approval
                                                    unit with jurisdiction over the location                Hearing
                                                    of the financed project approve an issue                                                                      process but refine the required public
                                                    of private activity bonds (and the                        The Existing Regulations generally                  approval information to reduce burden
                                                    approvals are referred to as the issuer                 provide that an applicable elected                    and enhance flexibility.
                                                                                                            representative of the approving                          Initially, the Existing Regulations
                                                    approval and the host approval,
                                                                                                            governmental unit may approve an issue                focus on an individual ‘‘facility’’ as the
                                                    respectively). The Proposed Regulations
                                                                                                            following a public hearing for which                  unit of financed property for which the
                                                    generally carry forward the rules on
                                                                                                            there was reasonable public notice. The               issuer must provide the relevant
                                                    issuer approval and host approval from
                                                                                                            Existing Regulations provide guidance                 information. The definition of ‘‘facility’’
                                                    the Existing Regulations, with limited
                                                                                                            on permitted methods for giving                       in the Existing Regulations includes
                                                    revisions to address statutory changes
                                                                                                            reasonable public notice and holding                  facilities on multiple tracts of land only
                                                    that affect the application of these rules
                                                                                                            public hearings. The Proposed                         if the facilities are used in an integrated
                                                    to certain types of private activity
                                                                                                            Regulations would expand these                        operation. Whether facilities are part of
                                                    bonds. Thus, for example, the Proposed
                                                                                                            methods to provide greater flexibility to             an ‘‘integrated operation’’ has proven
                                                    Regulations include guidance to address                                                                       difficult to determine.
                                                    subsequent statutory changes in section                 State and local governments for
                                                                                                            providing reasonable public notice.                      The Proposed Regulations use the
                                                    147(f)(3) and (4) that added special                                                                          term ‘‘project’’ in lieu of the term
                                                                                                              The Existing Regulations provide
                                                    provisions regarding the issuer approval                                                                      ‘‘facility’’ because ‘‘project’’ more
                                                                                                            generally that reasonable public notice
                                                    and host approval requirements for                                                                            clearly indicates that financed property
                                                                                                            must be published in a newspaper of
                                                    certain financings involving airports,                                                                        may consist of multiple buildings and
                                                                                                            general circulation available to residents
                                                    high-speed rail facilities, qualified                                                                         multiple sites. The Proposed
                                                                                                            of the relevant locality or announced by
                                                    scholarship funding corporations, and                                                                         Regulations define the term ‘‘project’’
                                                                                                            radio or television broadcast to those
                                                    volunteer fire departments.                                                                                   generally to mean one or more capital
                                                       The 1986 Tax Act extended the public                 residents. The Proposed Regulations
                                                                                                            would expand the permitted methods of                 projects or facilities, including land,
                                                    approval requirement beyond the                                                                               buildings, equipment, and other
                                                    traditional, facility-focused industrial                providing reasonable public notice to
                                                                                                            provide greater flexibility and to                    property, to be financed with an issue,
                                                    development bonds subject to the                                                                              that are located on the same site, or
                                                    requirement under the 1954 Code to                      recognize advances in technology and
                                                                                                            electronic communications. Thus, the                  adjacent or proximate sites used for
                                                    include certain special types of                                                                              similar purposes. In addition, to address
                                                    financings that are not facility-specific,              Proposed Regulations would allow
                                                                                                            reasonable public notice by newspaper                 certain special types of loan financings,
                                                    including ‘‘qualified mortgage bonds’’ as                                                                     the definition of a project under the
                                                    defined in section 143(a), ‘‘qualified                  publication, radio or television
                                                                                                            broadcast, postings on a governmental                 Proposed Regulations also includes
                                                    veterans’ mortgage bonds’’ as defined in                                                                      mortgage loans financed by mortgage
                                                    section 143(b), ‘‘qualified student loan                unit’s public Web site, or alternative
                                                                                                            methods permitted under a general State               revenue bonds, student loans financed
                                                    bonds’’ as defined in section 144(b), and                                                                     by qualified student loan bonds, and
                                                    ‘‘qualified 501(c)(3) bonds’’ as defined                law for public notices for public
                                                                                                            hearings of a governmental unit. The                  working capital expenditures financed
                                                    in section 145. For these types of bonds,                                                                     by qualified 501(c)(3) bonds.
                                                    obtaining a host approval may be                        Treasury Department and the IRS solicit
                                                                                                                                                                     The Proposed Regulations would
                                                    impractical or unworkable. For                          comment on other possible methods of
                                                                                                                                                                  continue to require a general functional
                                                    example, for qualified mortgage bonds,                  providing reasonable public notice to
                                                                                                                                                                  description of the type and use of the
                                                    the locations of many of the homes to                   foster flexibility and to reduce
                                                                                                                                                                  financed project. The Proposed
                                                    be financed with qualified mortgage                     administrative burdens.
                                                                                                                                                                  Regulations, however, would mitigate
                                                    loans generally are unknown at the time                 5. Content of Reasonable Public Notice                the required level of specificity of that
                                                    of issuance of the bonds and thus it may                and Public Approval                                   information. Thus, the Proposed
                                                    be difficult to identify appropriate                                                                          Regulations would allow an issuer of
                                                    governmental units to provide host                      A. General Rules for Content of
                                                                                                                                                                  exempt facility bonds to satisfy this
                                                    approval. Moreover, for qualified                       Reasonable Public Notice and Public                   requirement through a statement that
                                                    student loan bonds and for qualified                    Approval                                              identifies the category of exempt facility
                                                    501(c)(3) bonds used to finance working                   The Existing Regulations generally                  bond (for example, bonds financing an
                                                    capital expenditures, the application of                require that the reasonable public notice             airport or a mass commuting facility).
                                                    the host approval requirement is                        and the public approval contain the                   Similarly, an issuer of other types of
                                                    unworkable because the assets and                       following information: A general,                     private activity bonds may satisfy this
                                                    expenditures financed have no physical                  functional description of the type and                requirement through a statement that
                                                    location. In recognition of the practical               use of the facility to be financed; the               identifies the type of bonds and the type
                                                    difficulties faced by issuers of these                  maximum aggregate face amount of the                  and use of the project (for example,
                                                    types of bonds under the Existing                       bonds to be issued for the facility; the              qualified small issue bonds for a
jstallworth on DSKBBY8HB2PROD with PROPOSALS




                                                    Regulations, the Proposed Regulations                   initial owner, operator, or manager of                manufacturing facility).
                                                    provide that no host approval is                        the facility; and the location of the                    The Proposed Regulations would
                                                    necessary for mortgage revenue bonds                    facility by street address or, if none, by            continue to require that the public
                                                    (defined as qualified mortgage bonds,                   a general description designed to inform              approval information include the name
                                                    qualified veterans’ mortgage bonds, and                 readers of the specific location. The                 of the expected initial owner or the
                                                    certain refundings of bonds issued to                   required level of specificity of                      principal user of the project. The
                                                    finance mortgages of owner-occupied                     information for the public approval                   Proposed Regulations, however, would
                                                    residences under the law prior to                       process under the Existing Regulations                permit an issuer to name the true


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                                                    45236              Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Proposed Rules

                                                    beneficial party of interest as an                      loan bonds, the Proposed Regulations                  generally depends on all of the facts and
                                                    alternative to naming a legal owner or                  would require the public approval                     circumstances. The Proposed
                                                    user (for example, the name of a                        information to state that the bonds will              Regulations, however, would always
                                                    nonprofit hospital organization instead                 finance student loans and provide the                 treat a change in the fundamental nature
                                                    of a limited liability company that                     maximum stated principal amount of                    or type of a project as a substantial
                                                    serves as the legal owner of a hospital).               the bonds. For these two types of bonds,              deviation.
                                                       The Proposed Regulations would                       the Proposed Regulations would not                       The Proposed Regulations would treat
                                                    continue to require that the public                     require the names of borrowers to be                  certain specified deviations from the
                                                    approval information include the                        included in the public approval                       public approval information provided as
                                                    location of the project by street address.              information.                                          insubstantial deviations. For example, a
                                                    The Proposed Regulations, however,                         For qualified 501(c)(3) bonds that                 deviation from the size of a proposed
                                                    would clarify that a description by                     finance loans described in the special                bond issue for a proposed project
                                                    boundary streets or other geographic                    provision for pooled loan financings in               specified in public approval information
                                                    boundaries suffices to meet this location               section 147(b)(4), the Proposed                       is an insubstantial deviation if the stated
                                                    requirement. The Proposed Regulations                   Regulations would permit the issuer to                principal amount of bonds actually
                                                    would allow a consolidated description                  choose to apply a two-stage public                    issued and used for the project is no
                                                    of the location of a project on the same                approval process if the issuer has                    more than ten percent (10%) greater
                                                    site or on adjacent or proximate sites                  insufficient information at the time of               than the maximum stated principal
                                                    (for example, a college campus).                        the reasonable public notice or public                amount publicly approved for the
                                                                                                            approval to meet the general public                   project or is any amount less than that
                                                    B. Special Rules for Mortgage Revenue
                                                                                                            approval information requirements. To                 maximum stated principal amount.
                                                    Bonds, Qualified Student Loan Bonds,
                                                                                                            apply this special rule, the issuer must              Furthermore, if an issuer applies
                                                    and Certain Qualified 501(c)(3) Bonds
                                                                                                            first obtain public approval within the               proceeds of an issue approved for use
                                                       The 1986 Tax Act extended the public                 time specified in the Proposed                        on one project to pay working capital
                                                    approval requirement to mortgage                        Regulations for public approval                       expenditures directly associated with
                                                    revenue bonds, qualified student loan                   generally. For this first-stage public                any project approved in the same public
                                                    bonds, and qualified 501(c)(3) bonds.                   approval, the public approval                         approval, that deviation is an
                                                    The Existing Regulations were                           information must state that the bonds                 insubstantial deviation. Finally, a
                                                    promulgated before the 1986 Tax Act                     will be qualified 501(c)(3) bonds used to             deviation between the initial owner or
                                                    and thus provide no guidance tailored                   finance loans described in section                    principal user of the project identified
                                                    to the application of the public approval               147(b)(4)(B), provide the maximum                     in the public approval information and
                                                    requirement to these types of bonds. In                 stated principal amount of the bonds,                 the actual initial owner or principal user
                                                    the General Explanation of the 1986 Tax                 generally describe the type of project to             of the project is an insubstantial
                                                    Act, the Staff of the Joint Committee on                be financed with such loans (for                      deviation if the parties are related on the
                                                    Taxation stated that, ‘‘[i]n extending this             example, loans for hospital facilities or             issue date.
                                                    requirement to all private activity                     college facilities), and state that the                  The Proposed Regulations would
                                                    bonds, Congress intended that the                       issuer will obtain an additional public               allow supplemental post-issuance
                                                    applicable Treasury regulations will be                 approval with specific project                        public approvals to cure certain
                                                    amended for student loan bonds (where                   information before origination of any                 substantial deviations that result from
                                                    no facilities are financed), mortgage                   such loans. In addition, before loan                  unexpected events or unforeseen
                                                    revenue bonds (where the exact                          origination, the issuer must obtain a                 changes in circumstances that occur
                                                    residences to be financed may not be                    supplemental public approval of that                  after the issuance of the bonds. This
                                                    identified before issuance of the bonds),               loan containing all of the project-                   remedial action is similar to a permitted
                                                    and qualified 501(c)(3) bonds that                      specific information that the public                  post-issuance public approval under
                                                    qualify for the special exception to the                approval information rules generally                  § 1.141–12(e)(2) and (f) used for
                                                    maturity limitation for pooled                          require.                                              remedial actions for purposes of the
                                                    financings (where the facilities need not                                                                     private business restrictions.
                                                    be identified before issuance of the                    6. Deviations From the Information in
                                                    bonds).’’ Joint Committee on Taxation,                  the Reasonable Public Notice and Public               7. Applicability Dates and Reliance
                                                    General Explanation of the Tax Reform                   Approval                                                 The Proposed Regulations are
                                                    Act of 1986 (JCS–10–87), at 1219 (May                      Differences or ‘‘deviations’’ between              proposed to apply to bonds issued
                                                    4, 1987). Accordingly, the Proposed                     information regarding a proposed                      pursuant to a public approval that
                                                    Regulations provide special rules for                   project to be financed with a proposed                occurs on or after the date that is 90
                                                    public approval of mortgage revenue                     issuance of private activity bonds that               days after publication of a Treasury
                                                    bonds, qualified student loan bonds,                    serves as the basis for a public approval             decision adopting these rules as final
                                                    and qualified 501(c)(3) bonds issued for                and the actual project financed with the              regulations in the Federal Register.
                                                    pooled financings as described in                       bonds may affect the validity of the                  Issuers may apply the Proposed
                                                    section 147(b)(4).                                      public approval. The Existing                         Regulations, in whole but not in part, to
                                                       For mortgage revenue bonds, the                      Regulations and the Proposed                          bonds that are issued pursuant to a
                                                    Proposed Regulations would require the                  Regulations provide that insubstantial                public approval that occurs on or after
                                                    public approval information to state that               deviations do not invalidate a public                 September 28, 2017 and before the
jstallworth on DSKBBY8HB2PROD with PROPOSALS




                                                    the bonds will finance residential                      approval. The Proposed Regulations                    applicability date provided in a
                                                    mortgages, provide the maximum stated                   provide additional guidance concerning                Treasury decision adopting these rules
                                                    principal amount of the bonds, and                      differences that constitute insubstantial             as final regulations in the Federal
                                                    generally describe the issuer’s                         deviations and also allow remedial                    Register.
                                                    geographic jurisdiction in which the                    actions to cure certain substantial                      In addition, the Treasury Department
                                                    residences to be financed with the                      deviations.                                           and the IRS propose to remove the
                                                    mortgage loans are expected to be                          The Proposed Regulations provide                   Existing Regulations under § 5f.103–2
                                                    located. Similarly, for qualified student               that whether a deviation is substantial               from 26 CFR part 5f effective on the


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                                                                       Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Proposed Rules                                          45237

                                                    general applicability date of the final                 proposed rules. All comments will be                  147(f). A private activity bond meets the
                                                    regulations, which is proposed to be the                available at www.regulations.gov or                   requirements of section 147(f) only if
                                                    date that is 90 days after publication of               upon request. A public hearing will be                the bond is publicly approved pursuant
                                                    a Treasury decision adopting these rules                scheduled if requested in writing by any              to paragraph (b) of this section or the
                                                    as final regulations in the Federal                     person that timely submits written                    bond qualifies for the exception for
                                                    Register.                                               comments. If a public hearing is                      refunding bonds in section 147(f)(2)(D).
                                                    Special Analyses                                        scheduled, notice of the date, time, and                 (b) Public approval requirement—(1)
                                                                                                            place for the hearing will be published               In general. Except as otherwise
                                                       Certain IRS regulations, including                   in the Federal Register.                              provided in this section, a bond meets
                                                    these, are exempt from the requirements                                                                       the requirements of section 147(f) if,
                                                    of Executive Order 12866, as                            Drafting Information
                                                                                                                                                                  before the issue date, the issue of which
                                                    supplemented and reaffirmed by                             The principal authors of these                     the bond is a part receives issuer
                                                    Executive Order 13563. Therefore, a                     regulations are Spence Hanemann and                   approval and host approval (each a
                                                    regulatory impact assessment is not                     Vicky Tsilas, Office of Associate Chief               public approval) as defined in
                                                    required. It is hereby certified that these             Counsel (Financial Institutions and                   paragraphs (b)(2) and (3) of this section
                                                    regulations will not have a significant                 Products). However, other personnel                   in accordance with the method and
                                                    economic impact on a substantial                        from the Treasury Department and the                  process set forth in paragraphs (c)
                                                    number of small entities. The Existing                  IRS participated in their development.                through (f) of this section.
                                                    Regulations provide guidance on the
                                                                                                            List of Subjects                                         (2) Issuer approval. Except as
                                                    minimum informational content,
                                                                                                                                                                  otherwise provided in this section,
                                                    procedures, and timing for the                          26 CFR Part 1                                         issuer approval means an approval that
                                                    statutorily required public notices,
                                                                                                              Income taxes, Reporting and                         meets the requirements of this
                                                    public hearings, and public approvals.
                                                                                                            recordkeeping requirements.                           paragraph (b)(2). Either the
                                                    Although the Proposed Regulations are
                                                                                                            26 CFR Part 5f                                        governmental unit that issues the issue
                                                    expected to affect a significant number
                                                    of small State or local governmental                                                                          or the governmental unit on behalf of
                                                                                                              Income taxes, Reporting and                         which the issue is issued must approve
                                                    units that issue tax-exempt private                     recordkeeping requirements.
                                                    activity bonds, the Proposed                                                                                  the issue. For this purpose, § 1.103–1
                                                    Regulations are not expected to have a                  Withdrawal of Notice of Proposed                      applies to the determination of whether
                                                    significant economic effect on those                    Rulemaking                                            an issuer issues bonds on behalf of
                                                    governmental units because the                                                                                another governmental unit. If an issuer
                                                                                                              Accordingly, under the authority of
                                                    Proposed Regulations generally would                                                                          issues bonds on behalf of more than one
                                                                                                            26 U.S.C. 7805, the notice of proposed
                                                    streamline and simplify the Existing                                                                          governmental unit (for example, in the
                                                                                                            rulemaking (REG–128841–07) that was
                                                    Regulations in various respects to                                                                            case of an authority that acts for two
                                                                                                            published in the Federal Register (73
                                                    reduce the administrative burdens of                                                                          counties), any one of those
                                                                                                            FR 52220) on September 9, 2008, is
                                                    meeting the statutory public approval                                                                         governmental units may provide the
                                                                                                            withdrawn. Also, under the authority of
                                                    requirement. For example, the Proposed                                                                        issuer approval.
                                                                                                            26 U.S.C. 7805, § 1.103–17 of the notice
                                                    Regulations would permit publication of                                                                          (3) Host approval. Except as otherwise
                                                                                                            of proposed rulemaking (LR–221–82)
                                                    public notice by Web site to reduce                                                                           provided in this section, host approval
                                                                                                            published in the Federal Register (48
                                                    costs associated with print publication                                                                       means an approval that meets the
                                                                                                            FR 21166) on May 11, 1983, is
                                                    or radio or television broadcast, reduce                                                                      requirements of this paragraph (b)(3).
                                                                                                            withdrawn.
                                                    the information required to be contained                                                                      Each governmental unit the geographic
                                                    in public notice and public approval for                Proposed Amendments to the                            jurisdiction of which contains the site of
                                                    certain types of bonds, liberalize the                  Regulations                                           a project to be financed by the issue
                                                    consequences of insubstantial changes                     Accordingly, 26 CFR parts 1 and 5f                  must approve the issue. If, however, the
                                                    in project information, and permit                      are proposed to be amended as follows:                entire site of a project to be financed by
                                                    curative actions to address certain                                                                           the issue is within the geographic
                                                    circumstances in which finished                         PART 1—INCOME TAXES                                   jurisdiction of more than one
                                                    projects differ from descriptions                                                                             governmental unit within a State
                                                    provided in the public notice or public                 ■ Paragraph 1. The authority citation                 (counting the State as a governmental
                                                    approval. Accordingly, a regulatory                     for part 1 continues to read in part as               unit within such State), then any one of
                                                    flexibility analysis is not required.                   follows:                                              those governmental units may provide
                                                    Pursuant to section 7805(f) of the Code,                    Authority: 26 U.S.C. 7805 * * *                   host approval for the issue for that
                                                    this notice of proposed rulemaking will                 ■ Par. 2. Section 1.147(f)–1 is added to              project. For purposes of the host
                                                    be submitted to the Chief Counsel for                   read as follows:                                      approval, if a project to be financed by
                                                    Advocacy of the Small Business                                                                                the issue is located within the
                                                    Administration for comment on its                       § 1.147(f)–1 Public approval of private               geographic jurisdiction of two or more
                                                    impact on small entities.                               activity bonds.                                       governmental units but not entirely
                                                                                                              (a) In general. Interest on a private               within any one of those governmental
                                                    Comments and Requests for Public                        activity bond is excludable from gross                units, each portion of the project that is
                                                    Hearing                                                 income under section 103(a) only if the               located entirely within the geographic
jstallworth on DSKBBY8HB2PROD with PROPOSALS




                                                      Before the Proposed Regulations are                   bond meets the requirements for a                     jurisdiction of the respective
                                                    adopted as final regulations,                           qualified bond as defined in section                  governmental units may be treated as a
                                                    consideration will be given to any                      141(e) and other applicable                           separate project. The issuer approval
                                                    comments that are submitted timely to                   requirements provided in section 103.                 provided pursuant to paragraph (b)(2) of
                                                    the IRS as prescribed in this preamble                  In order to be a qualified bond as                    this section may be treated as a host
                                                    under the ADDRESSES heading. The                        defined in section 141(e), among other                approval if the governmental unit
                                                    Treasury Department and the IRS                         requirements, a private activity bond                 providing the issuer approval is also a
                                                    request comments on all aspects of the                  must meet the requirements of section                 governmental unit eligible to provide


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                                                    45238              Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Proposed Rules

                                                    the host approval pursuant to this                      the approving governmental unit                       for a public hearing in this paragraph
                                                    paragraph (b)(3).                                       approves the issue following a public                 (d). A public hearing may be conducted
                                                       (4) Special rule for host approval of                hearing for which there was reasonable                by an individual appointed or employed
                                                    airports or high-speed intercity rail                   public notice.                                        to perform such function by the
                                                    facilities. Pursuant to a special rule in                  (2) Voter referendum. A voter                      governmental unit or its agencies, or by
                                                    section 147(f)(3), if the proceeds of an                referendum of the approving                           the issuer. Thus, for example, for bonds
                                                    issue are to be used to finance a project               governmental unit approves the issue.                 to be issued by an authority that acts on
                                                    that consists of either facilities located                 (d) Public hearing and reasonable                  behalf of a county, the hearing may be
                                                    at an airport (within the meaning of                    public notice—(1) Public hearing. Public              conducted by the authority, the county,
                                                    section 142(a)(1)) or high-speed intercity              hearing means a forum providing a                     or an appointee of either.
                                                    rail facilities (within the meaning of                  reasonable opportunity for interested                    (4) Reasonable public notice.
                                                    section 142(a)(11)) and the issuer of that              individuals to express their views,                   Reasonable public notice means notice
                                                    issue is the owner or operator of the                   orally or in writing, on the proposed                 that is reasonably designed to inform
                                                    airport or high-speed intercity rail                    issue of bonds and the location and                   residents of an approving governmental
                                                    facilities, the issuer is the only                      nature of the proposed project to be                  unit, including the issuing
                                                    governmental unit that is required to                   financed.                                             governmental unit and the
                                                    provide the host approval for that                         (2) Location of the public hearing. The            governmental unit in whose geographic
                                                    project.                                                public hearing must be held in a                      jurisdiction a project is to be located, of
                                                       (5) Special rule for issuer approval of              location that, based on the facts and                 the proposed issue. The notice must
                                                    scholarship funding bond issues and                     circumstances, is convenient for                      state the time and place for the public
                                                    volunteer fire department bond issues.                  residents of the approving governmental               hearing and contain the information
                                                    In the case of a qualified scholarship                  unit. The location of the public hearing
                                                                                                                                                                  required by paragraph (f)(2) of this
                                                    funding bond as defined in section                      is presumed convenient for residents of
                                                                                                                                                                  section. Notice is presumed to be
                                                    150(d)(2), the governmental unit that                   the unit if the public hearing is located
                                                                                                                                                                  reasonably designed to inform residents
                                                    made a request described in section                     in the approving governmental unit’s
                                                                                                                                                                  of an approving governmental unit if it
                                                    150(d)(2)(B) with respect to the issuer of              capital or seat of government. If more
                                                                                                                                                                  satisfies the requirements of this
                                                    the bond is the governmental unit on                    than one governmental unit is required
                                                                                                                                                                  paragraph (d)(4) and is given no fewer
                                                    behalf of which the bond was issued for                 to hold a public hearing, the hearings
                                                                                                                                                                  than fourteen (14) calendar days before
                                                    purposes of the issuer approval. If more                may be combined as long as the
                                                                                                                                                                  the public hearing in one or more of the
                                                    than one governmental unit within a                     combined hearing affords the residents
                                                                                                                                                                  ways set forth in paragraphs (d)(4)(i)
                                                    State made a request described in                       of all of the participating governmental
                                                                                                            units a reasonable opportunity to be                  through (iv) of this section.
                                                    section 150(d)(2)(B), the State or any
                                                                                                            heard. The location of any combined                      (i) Newspaper publication. Public
                                                    such requesting governmental unit may
                                                                                                            hearing is presumed convenient for                    notice may be given by publication in
                                                    be treated as the governmental unit on
                                                    behalf of which the bond was issued for                 residents of each participating                       one or more newspapers of general
                                                    purposes of the issuer approval. In the                 governmental unit if it is no farther than            circulation available to the residents of
                                                    case of a bond of a volunteer fire                      100 miles from the seat of government                 the governmental unit.
                                                    department treated as a bond of a                       of each participating governmental unit                  (ii) Radio or television broadcast.
                                                    political subdivision of a State under                  beyond whose geographic jurisdiction                  Public notice may be given by radio or
                                                    section 150(e), the political subdivision               the hearing is conducted.                             television broadcast to the residents of
                                                    described in section 150(e)(2)(B) with                     (3) Procedures for conducting the                  the governmental unit.
                                                    respect to that volunteer fire department               public hearing. In general, a                            (iii) Governmental unit Web site
                                                    is the governmental unit on behalf of                   governmental unit may select its own                  posting. Public notice may be given by
                                                    which the bond is issued for purposes                   procedure for a public hearing, provided              electronic posting on the approving
                                                    of the issuer approval.                                 that interested individuals have a                    governmental unit’s public Web site
                                                       (6) Host approval not required for                   reasonable opportunity to express their               used to inform its residents about events
                                                    issues of mortgage revenue bonds,                       views. Thus, a governmental unit may                  affecting the residents (for example,
                                                    student loan bonds, and certain                         impose reasonable requirements on                     notice of public meetings of the
                                                    qualified 501(c)(3) bonds. In the case of               persons who wish to participate in the                governmental unit). In the case of public
                                                    a mortgage revenue bond (as defined in                  hearing, such as a requirement that                   notice provided as described in the first
                                                    paragraph (g)(5) of this section), a                    persons desiring to speak at the hearing              sentence of this paragraph (d)(4)(iii), the
                                                    qualified student loan bond as defined                  make a written request to speak at least              governmental unit must offer a
                                                    in section 144(b), and the portion of an                24 hours before the hearing or that they              reasonable, publicly known alternative
                                                    issue of qualified 501(c)(3) bonds as                   limit their oral remarks to a prescribed              method for obtaining the information
                                                    defined in section 145 that finances                    time. For this purpose, it is unnecessary,            contained in the public notice for
                                                    working capital expenditures, the issue                 for example, that the applicable elected              residents without access to the Internet
                                                    or portion of the issue must receive an                 representative of the approving                       (such as telephone recordings).
                                                    issuer approval but no host approval is                 governmental unit be present at the                      (iv) Alternative State law public
                                                    necessary.                                              hearing, that a report on the hearing be              notice procedures. Public notice may be
                                                       (c) Method of public approval. The                   submitted to that applicable elected                  given in a way that is permitted under
                                                    method of public approval of an issue                   representative, or that State                         a general State law for public notices for
jstallworth on DSKBBY8HB2PROD with PROPOSALS




                                                    must satisfy either paragraph (c)(1) or                 administrative procedural requirements                public hearings for the approving
                                                    (2) of this section. An approval may                    for public hearings be observed. Except               governmental unit.
                                                    satisfy the requirements of this                        to the extent State procedural                           (e) Applicable elected
                                                    paragraph (c) without regard to the                     requirements for public hearings are in               representative—(1) In general—(i)
                                                    authority under State or local law for                  conflict with a specific requirement of               Definition of applicable elected
                                                    the acts constituting that approval.                    this section, a public hearing performed              representative. The applicable elected
                                                       (1) Applicable elected representative.               in compliance with State procedural                   representative of a governmental unit
                                                    An applicable elected representative of                 requirements satisfies the requirements               means—


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                                                                       Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Proposed Rules                                          45239

                                                       (A) The governmental unit’s elected                     (A) Enacts a specific law (for example,            approval must include the maximum
                                                    legislative body;                                       a provision in a State constitution,                  stated principal amount of the issue of
                                                       (B) The governmental unit’s chief                    charter, or statute) by or under which                private activity bonds to be issued to
                                                    elected executive officer;                              the governmental unit is created;                     finance the project. If an issue finances
                                                       (C) In the case of a State, the chief                   (B) Otherwise empowers or approves                 multiple projects (for example, facilities
                                                    elected legal officer of the State’s                    the creation of the governmental unit; or             at different locations on non-proximate
                                                    executive branch of government; or                         (C) Appoints members to the                        sites that are not treated as part of the
                                                       (D) Any official elected by the voters               governing body of the governmental                    same project), the notice and approval
                                                    of the governmental unit and designated                 unit.                                                 must specify separately the maximum
                                                    for purposes of this section by the                        (ii) Host approval. For purposes of a              stated principal amount of bonds to be
                                                    governmental unit’s chief elected                       host approval, a governmental unit may                issued to finance each separate project.
                                                    executive officer or by State or local law              be treated as the next higher                            (iii) The name of the initial owner or
                                                    to approve issues for the governmental                  governmental unit only if the project is              principal user of the project. The notice
                                                                                                            located within its geographic                         and approval must include the name of
                                                    unit.
                                                                                                            jurisdiction and eligible residents of the            the expected initial owner or principal
                                                       (ii) Elected officials. For purposes of
                                                                                                            unit are entitled to vote for its                     user (within the meaning of section
                                                    paragraphs (e)(1)(i)(B), (C), and (D) of
                                                                                                            applicable elected representatives.                   144(a)) of the project. The name
                                                    this section, an official is considered                    (3) On behalf of issuers. In the case of
                                                    elected only if that official is popularly                                                                    provided may be either the name of the
                                                                                                            an issuer that issues bonds on behalf of              legal owner or principal user of the
                                                    elected at-large by the voters of the                   a governmental unit, the applicable
                                                    governmental unit. If an official                                                                             project or, alternatively, the name of the
                                                                                                            elected representative is any applicable              true beneficial party of interest for such
                                                    popularly elected at-large by the voters                elected representative of the
                                                    of a governmental unit is appointed or                                                                        legal owner or user (for example, the
                                                                                                            governmental unit on behalf of which                  name of a 501(c)(3) organization that is
                                                    selected pursuant to State or local law                 the bonds are issued.                                 the sole member of a limited liability
                                                    to be the chief executive officer of the                   (f) Public approval process—(1) In                 company that is the legal owner).
                                                    unit, that official is deemed to be an                  general. The public approval process for                 (iv) The location of the project. The
                                                    elected chief executive officer for                     an issue, including scope, content, and               notice and approval must include a
                                                    purposes of this section but for no                     timing of the public approval, must                   general description of the prospective
                                                    longer than the official’s tenure as an                 meet the requirements of this paragraph               location of the project by street address,
                                                    official popularly elected at-large.                    (f). A governmental unit must timely                  reference to boundary streets or other
                                                       (iii) Legislative bodies. In the case of             approve either each project to be                     geographic boundaries, or other
                                                    a bicameral legislature that is popularly               financed with proceeds of the issue or                description of the specific geographic
                                                    elected, both chambers together                         a plan of financing for each project to               location that is reasonably designed to
                                                    constitute an applicable elected                        be financed with proceeds of the issue.               inform readers of the location. For a
                                                    representative. Absent designation                         (2) General rule on information                    project involving multiple capital
                                                    under paragraph (e)(1)(i)(D) of this                    required for a reasonable public notice               projects or facilities located on the same
                                                    section, however, neither such chamber                  and public approval. Except as                        site, or on adjacent or reasonably
                                                    independently constitutes an applicable                 otherwise provided in this section, a                 proximate sites with similar uses, a
                                                    elected representative. If multiple                     project to be financed with proceeds of               consolidated description of the location
                                                    elected legislative bodies of a                         an issue is within the scope of a public              of those capital projects or facilities
                                                    governmental unit have independent                      approval under section 147(f) if the                  provides a sufficient description of the
                                                    legislative authority, the body with the                reasonable public notice of the public                location of the project. For example, a
                                                    more specific authority relating to the                 hearing, if applicable, and the public                project for a section 501(c)(3)
                                                    issue is the only legislative body that is              approval (together the notice and                     educational entity involving multiple
                                                    treated as an elected legislative body                  approval) include the information set                 buildings on the entity’s main urban
                                                    under paragraph (e)(1)(i)(A) of this                    forth in paragraphs (f)(2)(i) through (iv)            college campus may describe the
                                                    section.                                                of this section.                                      location of the project by reference to
                                                       (2) Governmental unit with no                           (i) The project. The notice and                    the outside street boundaries of that
                                                    applicable elected representative—(i) In                approval must include a general                       campus with a reference to any
                                                    general. The applicable elected                         functional description of the type and                noncontiguous features of that campus.
                                                    representatives of a governmental unit                  use of the project to be financed with                   (3) Special rule for mortgage revenue
                                                    with no applicable elected                              the issue. For this purpose, a project                bonds. Mortgage loans financed by
                                                    representative (but for this paragraph                  description is sufficient if it identifies            mortgage revenue bonds are within the
                                                    (e)(2) and section 147(f)(2)(E)(ii)) are the            the project by reference to a particular              scope of a public approval if the notice
                                                    applicable elected representatives of the               category of exempt facility bond to be                and approval state that the bonds are to
                                                    next higher governmental unit (with an                  issued (for example, an exempt facility               be issued to finance residential
                                                    applicable elected representative) from                 bond for an airport pursuant to section               mortgages, provide the maximum stated
                                                    which the governmental unit derives its                 142(a)(1)) or by reference to another                 principal amount of mortgage revenue
                                                    authority. Except as otherwise provided                 general category of private activity bond             bonds expected to be issued, and
                                                    in this section, any governmental unit                  together with information on the type                 provide a general description of the
                                                    from which the governmental unit with                   and use of the project to be financed                 geographic jurisdiction in which the
jstallworth on DSKBBY8HB2PROD with PROPOSALS




                                                    no applicable elected representative                    with the issue (for example, a qualified              residences to be financed with the
                                                    derives its authority may be treated as                 small issue bond as defined in section                proceeds of the mortgage revenue bonds
                                                    the next higher governmental unit                       144(a) for a manufacturing facility or a              are expected to be located (for example,
                                                    without regard to the relative status of                qualified 501(c)(3) bond as defined in                residences located throughout a State
                                                    such higher governmental unit under                     section 145 for a hospital facility and               for an issuer with a statewide
                                                    State law. A governmental unit derives                  working capital expenditures).                        jurisdiction or residences within a
                                                    its authority from another governmental                    (ii) The maximum stated principal                  particular local geographic jurisdiction,
                                                    unit that—                                              amount of bonds. The notice and                       such as within a city or county, for a


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                                                    45240              Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Proposed Rules

                                                    local issuer). For this purpose, in the                 bonds to be used to finance such loan                    (B) Initial owner or principal user. A
                                                    case of mortgage revenue bonds, no                      as if they were reissued for purposes of              deviation between the initial owner or
                                                    information is required on specific                     section 147(f) (without regard to                     principal user of the project named in
                                                    names of mortgage loan borrowers or                     paragraph (f)(5) of this section). For this           the notice and approval and the actual
                                                    specific locations of individual                        purpose, proceeds to be used to finance               initial owner or principal user of the
                                                    residences to be financed.                              such loan do not include the portion of               project is an insubstantial deviation if
                                                       (4) Special rule for qualified student               the issue used to finance a common                    such parties are related parties on the
                                                    loan bonds. Qualified student loans                     reserve fund or common costs of                       issue date of the issue.
                                                    financed by qualified student loan                      issuance.                                                (iii) Supplemental public approval to
                                                    bonds as defined in section 144(b) are                     (iii) Exception to post-issuance public            cure certain substantial deviations in
                                                    within the scope of a public approval if                approval requirement. A post-issuance                 public approval information. A
                                                    the notice and approval state that the                  supplemental public approval pursuant                 substantial deviation between the stated
                                                    bonds will be issued to finance student                 to paragraph (f)(5)(ii) of this section is            use of proceeds of an issue included in
                                                    loans and state the maximum stated                      unnecessary for the initial use of                    the public approval information and the
                                                    principal amount of qualified student                   proceeds to finance one or more loans                 actual use of the proceeds of the issue
                                                    loan bonds expected to be issued for                    if the pre-issuance notice and approval               does not cause that issue to fail to meet
                                                    qualified student loans. For this                       pursuant to paragraph (f)(5)(i) of this               the public approval requirement if all of
                                                    purpose, in the case of qualified student               section include the information required              the following requirements are met:
                                                    loan bonds, no information is required                  by paragraphs (f)(2)(i) through (iv) of                  (A) Original public approval and
                                                    with respect to names of specific                       this section for the projects to be                   reasonable expectations. The issue met
                                                    student loan borrowers.                                 financed by those loans.                              the requirements for a public approval
                                                       (5) Special rule for certain qualified                                                                     in paragraph (b) of this section. In
                                                                                                               (6) Deviations in public approval
                                                    501(c)(3) bonds. Loans financed by                                                                            addition, on the issue date of the issue,
                                                                                                            information—(i) In general. Except as
                                                    qualified 501(c)(3) bonds issued                                                                              the issuer reasonably expected there
                                                                                                            otherwise provided in this section, a
                                                    pursuant to section 145 and described                                                                         would be no substantial deviations
                                                                                                            substantial deviation between the stated
                                                    in section 147(b)(4)(B) (without regard                                                                       between the stated use of proceeds of an
                                                                                                            use of proceeds of an issue included in
                                                    to any election under section                                                                                 issue included in the public approval
                                                                                                            the information required to be provided
                                                    147(b)(4)(A)) are within the scope of a                                                                       information and the actual use of the
                                                                                                            in the notice and approval (public
                                                    public approval if the requirements of                                                                        proceeds of the issue.
                                                                                                            approval information) and the actual                     (B) Unexpected events or unforeseen
                                                    paragraphs (f)(5)(i) and (ii) of this
                                                                                                            use of proceeds of the issue causes that              changes in circumstances. As a result of
                                                    section are met.
                                                       (i) Pre-issuance general public                      issue to fail to meet the public approval             unexpected events or unforeseen
                                                    approval. Within the time period                        requirement. Conversely, insubstantial                changes in circumstances that occur
                                                    required by paragraph (f)(7) of this                    deviations between the stated use of                  after the issue date of the issue, the
                                                    section, public approval is obtained                    proceeds of an issue included in the                  issuer determines to use proceeds of the
                                                    after reasonable public notice of a                     public approval information and the                   issue in a manner or amount not
                                                    public hearing is provided and a public                 actual use of proceeds of the issue do                provided in a public approval.
                                                    hearing is held. For this purpose, a                    not cause such a failure. In general, the                (C) Supplemental public approval.
                                                    project is treated as described in the                  determination of whether a deviation is               Before using proceeds of the bonds in a
                                                    notice and approval if the notice and                   substantial is based on all the facts and             manner or amount not provided in a
                                                    approval provide that the bonds will be                 circumstances. In all events, however, a              public approval, the issuer obtains a
                                                    qualified 501(c)(3) bonds to be used to                 change in the fundamental nature or                   supplemental public approval for those
                                                    finance loans described in section                      type of a project is a substantial                    bonds that meets the public approval
                                                    147(b)(4)(B), state the maximum stated                  deviation.                                            requirement in paragraph (b) of this
                                                    principal amount of bonds expected to                      (ii) Certain insubstantial deviations in           section. This supplemental public
                                                    be issued to finance loans to 501(c)(3)                 public approval information. The                      approval requirement applies by
                                                    organizations or governmental units as                  following deviations from the public                  treating those bonds as if they were
                                                    described in section 147(b)(4)(B),                      approval information in the notice and                reissued for purposes of section 147(f).
                                                    provide a general description of the type               approval are treated as insubstantial                    (7) Certain timing requirements.
                                                    of project to be financed with such loans               deviations:                                           Public approval of an issue is timely
                                                    (for example, loans for hospital facilities                (A) Size of bond issue and use of                  only if the issuer obtains the public
                                                    or college facilities), and state that an               proceeds. A deviation between the                     approval within one year before the
                                                    additional public approval that includes                maximum stated principal amount of a                  issue date of the issue. Public approval
                                                    specific project information will be                    proposed issuance of bonds to finance a               of a plan of financing is timely only if
                                                    obtained before any such loans are                      project that is specified in public                   the issuer obtains public approval for
                                                    originated.                                             approval information and the actual                   the plan of financing within one year
                                                       (ii) Post-issuance public approval for               stated principal amount of bonds issued               before the issue date of the first issue
                                                    specific loans. Except as provided in                   and used to finance that project is an                issued under the plan of financing and
                                                    paragraph (f)(5)(iii) of this section,                  insubstantial deviation if that actual                the issuer issues all issues under the
                                                    before a loan described in section                      stated principal amount is no more than               plan of financing within three years
                                                    147(b)(4)(B) is originated, a                           ten percent (10%) greater than that
jstallworth on DSKBBY8HB2PROD with PROPOSALS




                                                                                                                                                                  after the issue date of such first issue.
                                                    supplemental public approval for the                    maximum stated principal amount or is                    (g) Definitions. The definitions in this
                                                    bonds to be used to finance that loan is                any amount less than that maximum                     paragraph (g) apply for purposes of this
                                                    obtained that meets all the requirements                stated principal amount. In addition, the             section. In addition, the general
                                                    of section 147(f) and the requirements                  use of proceeds to pay working capital                definitions in § 1.150–1 apply for
                                                    for a public approval in paragraph (b) of               expenditures directly associated with                 purposes of this section.
                                                    this section. This post-issuance                        any project specified in the public                      (1) Geographic jurisdiction means the
                                                    supplemental public approval                            approval information is an insubstantial              area encompassed by the boundaries
                                                    requirement applies by treating the                     deviation.                                            prescribed by State or local law for a


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                                                                       Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Proposed Rules                                          45241

                                                    governmental unit or, if there are no                   public approval occurring on or after the             adverse comments are received in
                                                    such boundaries, the area in which a                    date that is 90 days after publication of             response to this action, no further
                                                    unit may exercise such sovereign                        the Treasury decision adopting these                  activity is contemplated. If EPA receives
                                                    powers that make that unit a                            rules as final regulations in the Federal             adverse comments, the direct final rule
                                                    governmental unit for purposes of                       Register. For bonds issued pursuant to                will be withdrawn and all public
                                                    § 1.103–1 and this section.                             a public approval occurring before that               comments received will be addressed in
                                                       (2) Governmental unit has the                        date, see § 5f.103–2 as contained in 26               a subsequent final rule based on this
                                                    meaning of ‘‘State or local governmental                CFR part 5f, revised as of the date of the            proposed rule. EPA will not institute a
                                                    unit’’ as defined in § 1.103–1. Thus, a                 most recent annual revision.                          second comment period. Any parties
                                                    governmental unit is a State, territory, a                                                                    interested in commenting on this action
                                                    possession of the United States, the                    PART 5f—TEMPORARY INCOME TAX                          should do so at this time.
                                                    District of Columbia, or any political                  REGULATIONS UNDER THE TAX
                                                    subdivision thereof.                                    EQUITY AND FISCAL RESPONSIBILITY                      DATES: Comments must be received in
                                                       (3) Host approval is defined in                      ACT OF 1982                                           writing by October 30, 2017.
                                                    paragraph (b)(3) of this section.                                                                             ADDRESSES:   Submit your comments,
                                                                                                            ■ Par. 3. The authority citation for part
                                                       (4) Issuer approval is defined in                                                                          identified by Docket ID No. EPA–R03–
                                                                                                            5f continues to read in part as follows:
                                                    paragraph (b)(2) of this section.                                                                             OAR–2017–0215 at https://
                                                       (5) Mortgage revenue bonds mean                          Authority: 26 U.S.C. 7805 * * *
                                                                                                                                                                  www.regulations.gov, or via email to
                                                    qualified mortgage bonds as defined in
                                                                                                            § 5f.103–2    [Removed]                               stahl.cynthia@epa.gov. For comments
                                                    section 143(a), qualified veterans’
                                                                                                            ■   Par. 4. Section 5f.103–2 is removed.              submitted at Regulations.gov, follow the
                                                    mortgage bonds as defined in section
                                                                                                                                                                  online instructions for submitting
                                                    143(b), or refunding bonds issued to                    Kirsten Wielobob,                                     comments. Once submitted, comments
                                                    finance mortgages of owner-occupied                     Deputy Commissioner for Services and                  cannot be edited or removed from
                                                    residences pursuant to applicable law in                Enforcement.
                                                                                                                                                                  Regulations.gov. For either manner of
                                                    effect prior to enactment of section                    [FR Doc. 2017–20661 Filed 9–27–17; 8:45 am]           submission, the EPA may publish any
                                                    143(a) or section 143(b).                               BILLING CODE 4830–01–P                                comment received to its public docket.
                                                       (6) Proceeds means ‘‘proceeds’’ as
                                                                                                                                                                  Do not submit electronically any
                                                    defined in § 1.141–1(b), except that it
                                                                                                                                                                  information you consider to be
                                                    does not include disposition proceeds.                  ENVIRONMENTAL PROTECTION
                                                       (7) Project generally means one or                                                                         confidential business information (CBI)
                                                                                                            AGENCY                                                or other information whose disclosure is
                                                    more capital projects or facilities,
                                                    including land, buildings, equipment,                                                                         restricted by statute. Multimedia
                                                                                                            40 CFR Part 52                                        submissions (audio, video, etc.) must be
                                                    and other property, to be financed with
                                                    an issue, that are located on the same                  [EPA–R03–OAR–2017–0215; FRL–9968–32–                  accompanied by a written comment.
                                                    site, or adjacent or proximate sites used               Region 3]                                             The written comment is considered the
                                                    for similar purposes, and that are                                                                            official comment and should include
                                                                                                            Approval and Promulgation of Air                      discussion of all points you wish to
                                                    subject to the public approval                          Quality Implementation Plans; Virginia;
                                                    requirement of section 147(f). For an                                                                         make. EPA will generally not consider
                                                                                                            Removal of Clean Air Interstate Rule                  comments or comment contents located
                                                    issue of mortgage revenue bonds or an                   (CAIR) Trading Programs
                                                    issue of qualified student loan bonds as                                                                      outside of the primary submission (i.e.
                                                    defined in section 144(b), the term                     AGENCY:  Environmental Protection                     on the web, cloud, or other file sharing
                                                    project means the mortgage loans or                     Agency (EPA).                                         system). For additional submission
                                                    qualified student loans to be financed                  ACTION: Proposed rule.
                                                                                                                                                                  methods, please contact the person
                                                    with the proceeds of the issue. For an                                                                        identified in the FOR FURTHER
                                                                                                            SUMMARY:   The Environmental Protection               INFORMATION CONTACT section. For the
                                                    issue of qualified 501(c)(3) bonds as
                                                    defined in section 145, the term project                Agency (EPA) proposes to approve the                  full EPA public comment policy,
                                                    means a project as defined in the first                 state implementation plan (SIP) revision              information about CBI or multimedia
                                                    sentence of this definition, and also is                submitted by the Commonwealth of                      submissions, and general guidance on
                                                    deemed to include working capital                       Virginia for the purpose of removing                  making effective comments, please visit
                                                    expenditures to be financed with                        regulations from the Virginia SIP that                https://www2.epa.gov/dockets/
                                                    proceeds of the issue.                                  established EPA-administered annual                   commenting-epa-dockets.
                                                       (8) Public approval information is                   NOX, ozone season NOX, and sulfur
                                                                                                                                                                  FOR FURTHER INFORMATION CONTACT:   Sara
                                                    defined in paragraph (f)(6)(i) of this                  dioxide (SO2) trading programs under
                                                                                                                                                                  Calcinore, (215) 814 2043, or by email
                                                    section.                                                the Clean Air Interstate Rule (CAIR).
                                                                                                                                                                  at calcinore.sara@epa.gov.
                                                       (9) Public hearing is defined in                     These EPA-administered trading
                                                    paragraph (d)(1) of this section.                       programs under CAIR were                              SUPPLEMENTARY INFORMATION:      For
                                                       (10) Reasonable public notice is                     discontinued on December 31, 2014                     further information, please see the
                                                    defined in paragraph (d)(4) of this                     upon the implementation of the Cross-                 information provided in the direct final
                                                    section.                                                State Air Pollution Rule (CASPR),                     action, with the same title, that is
                                                       (11) Voter referendum means a vote                   which was promulgated by EPA to                       located in the ‘‘Rules and Regulations’’
                                                    by the voters of the affected                           replace CAIR. In the Final Rules section              section of this Federal Register
jstallworth on DSKBBY8HB2PROD with PROPOSALS




                                                    governmental unit conducted in the                      of this Federal Register, EPA is                      publication. Please note that if EPA
                                                    same manner and time as voter                           approving the State’s SIP submittal as a              receives adverse comment on an
                                                    referenda on matters relating to                        direct final rule without prior proposal              amendment, paragraph, or section of
                                                    governmental spending or bond                           because the Agency views this as a                    this rule and if that provision may be
                                                    issuances by the governmental unit                      noncontroversial submittal and                        severed from the remainder of the rule,
                                                    under applicable State and local law.                   anticipates no adverse comments. A                    EPA may adopt as final those provisions
                                                       (h) Applicability date. This section                 detailed rationale for the approval is set            of the rule that are not the subject of an
                                                    applies to bonds issued pursuant to a                   forth in the direct final rule. If no                 adverse comment.


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Document Created: 2017-09-28 01:32:40
Document Modified: 2017-09-28 01:32:40
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionProposed Rules
ActionWithdrawal of notice of proposed rulemaking and notice of proposed rulemaking.
DatesComments and requests for a public hearing must be received by December 27, 2017.
ContactConcerning the proposed regulations, Spence Hanemann at (202) 317-6980; concerning submissions of comments and requesting a hearing, Regina Johnson at (202) 317-6901 (not toll- free numbers).
FR Citation82 FR 45233 
RIN Number1545-BG91
CFR Citation26 CFR 1
26 CFR 5
CFR AssociatedIncome Taxes and Reporting and Recordkeeping Requirements

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