"On July 16, 2012, the Department of Treasury (“Treasury”) and the Internal Revenue Service (the “IRS”) released Notice 2012-48 (the “Notice”), establishing new guidelines for allocating approximately $1.8 billion dollars in issuance authority for tribal economic development bonds (“TEDBs”).

As described in our earlier Alerts, TEDBs are a financing tool created by the American Recovery and Reinvestment Act of 2009 (“ARRA”). This financing tool, codified as section 7871(f) of the Internal Revenue Code of 1986, as amended (the “Code”), allows Indian tribal governments, for the first time, to issue tax-exempt bonds for the same purposes as state and local governments without regard to two existing limitations: (1) the “essential governmental function” test, which the IRS has interpreted to bar certain projects that it believes are “commercial” in nature, and (2) the prohibition against the issuance of “private activity bonds” (other than for certain manufacturing facilities).

In authorizing TEDBs, ARRA imposed a $2 billion national volume cap on total issuance. Under previous IRS guidance, the entire $2 billion was allocated to tribes in 2009 and 2010. The original allocations, however, were subject to sunset provisions if tribes receiving the allocations were unable to complete their proposed financing transactions by prescribed sunset dates. As a result, over $1.8 billion of the original $2 billion in volume cap allocations was forfeited as of March 31, 2012."

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Richard A. Helde: Treasury Department and IRS provide new allocation guidelines for approximately $1.8 billion of TEDB volume cap (Lexology 7/19)
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