"In the July 12, 2010 Federal Register, the Department of the Treasury (the “Department” or “Treasury”) published a notice and request for comments (the “Notice”), with respect to tribal economic development bonds (“TEDBs”). The Notice was issued pursuant to a directive in the American Recovery and Reinvestment Act of 2009 (“ARRA”) that Treasury conduct a study this year on TEDBs and report back to Congress with recommendations regarding the use of TEDBs.

As described in our earlier Alerts, TEDBs are a financing tool created by ARRA. This financing tool allows tribes, for the first time, to issue tax-exempt bonds for the same purposes as states and local governments without regard to two existing limitations: the “essential governmental function” test, which the Internal Revenue Service (“IRS”) has interpreted to bar certain projects that it believes are “commercial” in nature, and the prohibition against the issuance of “private activity bonds” (other than for certain manufacturing facilities).

This Alert summarizes the key points set forth in the Notice, following up on our earlier Economic Stimulus Alerts dated February 24, 2009, March 12, 20, and June 26, 2009, describing TEDBs, the status of IRS guidance with respect to TEDBs, and IRS guidance on allocations of TEDBs issuance authority. This Alert also raises questions tribes may wish to consider in providing comments in response to the Notice. The deadline for submitting comments is September 10, 2010.

The Notice solicits comments from tribes on the following specific questions: (1) whether the state or local governmental standard for tax-exempt governmental bond status should replace the essential governmental function standard; (2) what types of projects and activities should be eligible for financing with private activity bonds; (3) whether and how to apply volume cap allocations to private activity bonds issued by tribes; (4) whether to modify the current restriction that projects funded by TEDBs must be located on reservations; and (5) whether to modify the current restriction against financing gaming facilities with TEDBs.

In addition, Treasury has requested tribes to comment on additional factors that should be considered in refining the statutory scope of tax-exempt financing for tribes or better address the special needs or unique circumstances of tribal governments."

Get the Story:
Richard A. Helde, Thomas D. Vander Molen, Skip Durocher, Mary J. Streitz, Christine L. Swanick and Wilda Wahpepah of Dorsey & Whitney: Treasury requests comments on tribal economic development bonds (Lexology 7/16)
Sign up for a subscription.