Restructuring of tax-exempt obligations used to finance affordable housing projects and “tax reissuance”

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ConstructionRestructuring tax-exempt obligations

Recently I have assisted several clients restructure the tax-exempt obligations originally issued to finance their affordable housing projects. The purpose of these restructurings has been for anything from reducing the monthly principal and interest payments on the obligation, to converting some of the obligations to a subordinate lien position, to simply making a clarification in the documents about the obligation terms.

Reissuance of tax-exempt obligations

Changes to tax-exempt obligations may cause a reissuance of the obligations under federal tax law if the changes are so significant that the obligations cease to be the same obligations for tax purposes. You might ask why does a reissuance matter? Or, what happens if my tax-exempt obligations have been modified so as to trigger a reissuance? Answers to these questions and a basic discussion of reissuance may be found at the Internal Revenue Service website. Because the reissuance rules and regulations are complicated, the IRS recommends you contact your counsel before making modifications to tax-exempt obligations.

 


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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