PROCEDURES ARE OUTLINED FOR RULING REQUESTS ON GOVERNMENT OBLIGATIONS

Rev. Proc. 84-49

SECTION 1. PURPOSE

The purpose of this Revenue Procedure is to set forth the procedures for submission of requests for rulings to the Internal Revenue Service where section 103 of the Internal Revenue Code 1954 applies, in those instances where the requester of the ruling is other than the issuer of the prospective obligation, or in those instances where the issuer of an outstanding obligation makes a ruling request with respect to that obligation. See Rev. Proc. 84-48, for the procedures where the issuer of a prospective bond issue requests a ruling from the Service. References in this Revenue Procedure to section 103 of the Code also refer to section 103A of the Code.

SECTION 2. BACKGROUND

01 Section 103(a) of the Code provides that gross income does not include interest on 1) the obligations of a state or political subdivision thereof, and 2) qualified scholarship funding bonds. Section 7478 allows the issuer of prospective obligations to petition the United States Tax Court for a declaratory judgment in a case of actual controversy involving a determination by the Service, or a failure by the Service to make a determination, with respect to whether prospective obligations are described in section 103(a). The Tax Court may not issue a declaratory judgment or decree under section 7478 in any proceeding unless it determines that the issuer of the prospective obligations has exhausted all available administrative remedies within the Service. After obligations have been issued, the issuer is no longer eligible to petition the Tax Court for a declaratory judgment under section 7478 of the Code. The issuer may seek a ruling under this Revenue Procedure. See section 3.04, below.

02 Historically, the Service has issued rulings under section 103 of the Code to an issuer of governmental obligations (issuer) and other parties with a material financial interest in the issuance. In addition, it has been the practice of the Service to issue rulings, in its discretion, that address only certain issues pertaining to whether an obligation is described in section 103(a). In the case of a ruling request that addressed only certain issues, the request would contain a statement of facts, reasons, and legal authority, together with supporting documents, that would discuss only the issue raised by the person requesting the ruling and would not address other issues pertaining to whether the obligations were described in section 103(a). In response to such requests, the Service might issue a ruling in which it would determine, for example, that a dock financed by governmental obligations was a facility described in section 103(b)(4)(D), but would not express an opinion with respect to whether the prospective obligations were otherwise described in section 103(a).

03 However, to comply with the provisions of section 7478 of the Code, the Service has set forth procedures in Rev. Proc. 84-48 that preclude the issuance of a ruling to an issuer of prospective obligations (or to an issuer and another party in a joint submission) unless the issuer has submitted a statement of facts, reasons, and legal authority, together with supporting documents, that addresses all issues pertaining to whether the prospective obligations are described in section 103(a). See section 3.04 of Rev. Proc. 84-48. The reason for the requirements set forth in Rev. Proc. 84-48 is that, under section 7478, the issuer (and only the issuer) of the prospective obligations may ultimately petition the United States Tax Court to determine whether the prospective obligations are described in section 103(a). See section 2.01 of Rev. Proc. 84-48. Because that determination involves an examination of all issues pertaining to the status of the prospective obligations, the Service must in the ruling process examine and address all issues pertaining to whether the prospective obligations are described in section 103(a) to assure that the issuer has exhausted its administrative remedies.

04 In the case of requests for rulings made by a person, other than the issuer, with a material financial interest in the issuance of governmental obligations, the Service will issue rulings whether such obligations are arbitrage bonds as defined in section 103(c)(2) of the Code in situations referred to in Rev. Proc. 84-50. Thus, for example, a party that has a material finanical interest in the issue may request a ruling that a single computation of yield may be made pursuant to section 1.103-13(c)(1)(ii) of the regulations.

SECTION 3. APPLICATION

01 In the case of requests for rulings made by a person other than the issuer, to which neither section 3.02 of Rev. Proc. 84-48 (joint submission) nor section 3.04 of this Revenue Procedure (requester subsequently joined by issuer) applies, the Service will continue to issue rulings that address a specific issue pertaining to whether the prospective obligations are described in section 103(a) of the Code. The Service also will issue rulings to these requesters that the prospective obligations are described in section 103(a). The requester must comply with the requirements of any other applicable Revenue Procedures, other than Rev. Proc. 84-48, that relate to submission to the Service of requests for ruling.

02 In the case of requests for rulings by a person other than the issuer, the failure of the Service to issue a ruling or the issuance of an adverse ruling will not be considered by the Service as either a failure to make a determination within the meaning of section 7478(a)(2) of the Code or an exhaustion of administrative remedies by the issuer within the meaning of section 7478(b)(2).

03 If, subsequent to the date a person other than the issuer requests a ruling, the issuer of the prospective obligations joins in the request, the Service will treat the request as a joint submission by the issuer and the original requester and the requirements set forth in Rev. Proc. 84-48 must be satisfied. The Service will notify in writing the joint requester of any additional information or documents required. In the case of requests for rulings that are subject to the provisions of this subsection, the 180-day period referred to in section 7478(b)(2) of the Code will be considered to begin on the later of the date the issuer joins in the request or the date set forth in section 4.01 of Rev. Proc. 84-48.

04 In the case of requests for rulings made by an issuer after the issuance of the governmental obligation, the Service will continue to issue rulings that address one or more tax questions pertaining to whether the outstanding obligation is described in section 103(a) of the Code. The issuer requesting a ruling must comply with the requirements of any other Revenue Procedure, other than Rev. Proc. 84-48, that relate to the submission to the Service of requests for a ruling. If interest has been paid on the obligation, the Service will determine whether the subject of the request should be processed as a ruling request in the National Office or should be referred to the district director having jurisdiction over the matter.

SECTION 4. INQUIRIES

01 Inquiries with respect to this Revenue Procedure should refer to its number and should be addressed to the Internal Revenue Service, Associate Chief Counsel (Technical), Attention CC:IND:S, 1111 Constitution Avenue, N.W., Washington, D.C. 20224.

SECTION 5. EFFECT ON OTHER DOCUMENTS

This Revenue Procedure supersedes Rev. Proc. 79-12,