PROCEDURES PROVIDED FOR NONISSUERS TO REQUEST RULINGS ON QUALIFICATION OF TAX-EXEMPT BONDS.

Rev. Proc. 88-33

SECTION 1. PURPOSE

The purpose of this revenue procedure is to update the procedures under Rev. Proc. 84-49, 1984-1 C.B. 548, for submission of requests for rulings to the Internal Revenue Service under section 103 of the Internal Revenue Code when the requester of the ruling is not the issuer, or when the request relates to outstanding obligations. This revenue procedure also updates and amplifies Rev. Proc. 84-50, 1984-1 C.B. 550, which sets forth the procedures for requesting a ruling to which certain of the arbitrage provisions under former section 103(c) (now section 148) apply when the requester is other than the issuer of the prospective obligations. See Rev. Proc. 88-32, page 4, this Bulletin, for the procedures when the issuer of prospective obligations requests a ruling form the Service. References to section 103 of the Code also refer to sections 141-150 and 7871 of the Code.

SEC. 2. BACKGROUND

01. Section 103(a) of the Code provides that, except as provided in subsection (b), gross income does not include interest on any state or local bond. Section 7478 provides that the issuer of the prospective obligations may 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). After the obligations have been issued, the issuer may no longer obtain a declaratory judgment under section 7478. The issuer then 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 obligations 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 142(a)(2), but would not express an opinion with respect to whether the prospective obligations were otherwise described in section 103(a).

03. However, in light of the provisions of section 7478 of the Code, the Service has set forth procedures in Rev. Proc. 88-32, page 46, this Bulletin, 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 address all issues pertaining to whether the prospective obligations are described in section 103(a). See section 3.04 of Rev. Proc. 88-32. The reason for the requirements set forth in Rev. Proc. 88-32 is that, under section 7478, the issuer of the prospective obligations may 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. 88-32. 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).

04. Section 10511 of the Revenue Act of 1987, 1987-3 C.B. provides that a user fee must be paid with respect to requests to the Service for rulings. Also see Rev. Proc. 88-8, 1988-4 I.R.B. 22.

SEC. 3. APPLICATION

01. In the case of requests for rulings made by a person (other than the issuer) with a material financial interest in the issuance of the obligations, to which neither section 3.02 of Rev. Proc. 88-32 (joint submission) nor section 3.03 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 prospective obligations are described in section 103(a) of the Code. Further, the Service will continue to issue rulings to these requesters in those situations in which the Income Tax Regulations require or permit the issuer to request a ruling. For example, a party that has a material financial 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 (issued under former section 103(c) of the Code). The Service also will issue rulings to these requesters as to whether 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. 88-32, 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 is not 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. 88-32 must be satisfied. The Service will notify in writing the joint requesters 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. 88-32.

04. In the case of requests for rulings with respect to outstanding obligations made by the issuer or a person (other than the issuer) with a material financial interest in the issuance of the obligations, the Service will continue to issue rulings that address one or more issues pertaining to whether the outstanding obligations are described in section 103(a) of the Code. The request for ruling must comply with the requirements of any other revenue procedures, other than Rev. Proc. 88-32, 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.

SEC. 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 and International), Attention: CC:IND:2, 1111 Constitution Avenue, N.W., Washington, D.C. 20224.

SEC. 5. EFFECT ON OTHER DOCUMENTS

This revenue procedure supplements Rev. Proc. 88-1, 1988-1 I.R.B. 7, supersedes Rev. Proc. 84-49, and amplifies and supersedes Rev. Proc. 84-50.

DRAFTING INFORMATION

The principal author of this revenue procedure is Gene Overton of the Individual Tax Division. For further information regarding this revenue procedure contact Mr. Overton on (202) 566-3650 (not a toll-free call).