The Treasury Department is seeking comments from Tribal Governments and interested individuals regarding the ability of Tribes to issue tax-exempt bonds. This includes Tribal Economic Development Bonds (TEDBs) that were authorized by ARRA. The attached PDF document contains the Treasury Department’s notice, and comments are due by September 10, 2010.
Questions posed by the Department include:
Are there any specific additional types of projects or activities beyond those allowed for State and local governments for which Indian tribal governments should be authorized (or not authorized) to use qualified tax-exempt private activity bonds (i.e., in which private business ownership, leasing, or other private business use of the bond-financed projects would be permitted) in light of their special needs or unique circumstances?
Should the limitation on use of Tribal Economic Development Bonds to finance projects that are located outside of Indian reservations be modified to address special needs or unique circumstances of Indian tribal governments?
Should consideration be given to changing the law permanently to authorize Indian tribal governments to use qualified tax-exempt private activity bonds for the same types of projects and activities as are allowed for State and local governments?
Many Tribes and their partners have chafed over the past decade as the IRS introduced, largely on a retroactive basis through its audit program, new requirements that prohibited Tribes from issuing debt on a tax-exempt basis (e.g. there could be no commercial aspects of a bond-financed project and a tribe would need to prove that numerous state and local governments had been financing similar improvements with bonds over long periods of time).
Comments can include real-life examples of projects that Tribes had to forego (or finance on a more expensive taxable basis) because the current tax laws prohibited tax-exempt financing. It may also be helpful to identify frustrations Tribes have encountered trying to use TEDBs, and debunk the myth that tribes are mainly focused on casinos.