1 / 19

FEDERAL TAX ISSUES

FEDERAL TAX ISSUES. John R. McQueen, Esq. Tax-Exempt Bonds as a Financing Tool for Construction of New College and University Facilities April 18, 2008. MAJOR ISSUES. Reimbursement Resolutions Capital Campaigns Limitations on Management Contracts Corporate-Sponsored Research

dlutz
Download Presentation

FEDERAL TAX ISSUES

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. FEDERAL TAX ISSUES John R. McQueen, Esq. Tax-Exempt Bonds as a Financing Tool for Construction of New College and University Facilities April 18, 2008

  2. MAJOR ISSUES • Reimbursement Resolutions • Capital Campaigns • Limitations on Management Contracts • Corporate-Sponsored Research • Financial Covenants • Tax Enforcement • Auction Rate Bonds/Bond Insurer Problems

  3. Reimbursement Resolutions • Types of Costs Covered • Timing Requirements • Content of Reimbursement Resolution

  4. Types of Costs Covered • Preliminary Expenditures Up to 20% Not Subject • Capital Expenditures • Land Acquisitions and Site Preparation

  5. Timing Requirements • 60-day Period Prior Covered • Reimbursement of Hard Costs Within 18 Months of Placed-in-Service Date • Reimbursement Within 3 Years of Original Expenditure

  6. Content of Reimbursement Resolution • General Project Description • Maximum Principal Amount of Bonds • Not Applicable to Prior Financing

  7. Capital Campaigns • “Sufficiently Direct Nexus” • Replacement Proceeds Concept • Potential Nexus Situations

  8. Capital Campaigns • Donor-Restricted Gifts • Capital Campaign Purposes • Preliminary Earmarking Not Fatal

  9. Capital Campaigns • Wording of Campaign Materials Crucial • Include Broad Number of Purposes • Campaign for Debt Service • Campaign for Operating Expenses

  10. Management Contracts • Types of Private Business Use • Leases • Corporate-Sponsored Research • Management Contracts • Special Legal Entitlements

  11. Management Contracts • Term of Agreement • Type of Compensation • No Net Profit-Sharing

  12. Management Contracts • 15-Year Safe Harbor • 10-Year Safe Harbor • 5-Year Safe Harbor • 3-Year Per-Unit Contracts • 2-Year Revenue Contracts

  13. Measurement of Private Business Use • 5% Limit • Square Footage Approach • Fair Rental Value Approach

  14. Corporate-Sponsored Research • Basic Research • Competitive Price • No Pre-Set Royalties

  15. Cooperative Research • Basic Research – Multiple Sponsors • 501(c)(3) Controls • Patent Owned by 501(c)(3) • Non-Exclusive Royalty-Free License • Federal Rights under Bayh-Dole Act

  16. Financial Covenants • Potential Arbitrage Issues • Liquidity Covenants

  17. Liquidity Covenant Safe Harbor • Semi-Annual Testing • Amount • Reasonable Needs • Provide Senior Lien

  18. Tax Enforcement • Phase I – 501(c)(3) Audit Program • Issues • Compliance Check Questionnaire • New IRS Form 990, Schedule K

  19. Auction Rate Bonds/VariableRate Demand Bonds • Conversion from Auction Rate = No Reissuance • Purchases by LOC Bank or Conduit Borrower Do Not Retire Debt • Purchases by Conduit Borrower Do Not ViolateProgram Investment Rules

More Related