Disclosure Considerations and Tax Reform

by Bracewell LLP

Bracewell LLP

The impact of tax reform is on the minds of many.  While there are currently many unknowns, municipal issuers and conduit borrowers (collectively, “obligated persons”) should consider whether changes in tax law could impact their disclosure obligations.  The Securities and Exchange Commission (“SEC”) has stated that investors consider the tax status of securities to be of great importance when making investment decisions because that status goes directly to the value of the securities.  As such, it is important that obligated persons pay particular attention to proposed or future changes in tax law and consider what impact, if any, such changes may have on their disclosure obligations under the federal securities laws and existing continuing disclosure undertakings. 

Discussed below are a few disclosure considerations.  

  • Primary Market Disclosure:  It is important that an obligated person consider, when drafting its official statement, whether to include different or more robust disclosure about proposed or future changes in tax law.  In certain scenarios more robust disclosure may be appropriate, depending on the facts and circumstances.  For example, under the U.S. House of Representatives tax reform legislation, more robust disclosure may be appropriate (i) if the elimination of private activity bonds will adversely affect an obligated person’s existing capital projects or plans; or (ii) if the elimination of tax-exempt advance refundings will adversely affect an obligated person’s current budget or financial condition.  On the other hand, there may be scenarios where different or more robust disclosure is not appropriate. For example, disclosure provided by a municipality, in connection with tax-exempt governmental bonds, may already contemplate proposed or future changes in tax law, and the tax reform legislation may not have a material impact on the municipality’s financial condition.  
  • Secondary Market Disclosure:  With respect to event notices, there is no requirement under Rule 15c2-12 to provide notification of general events having a widespread market impact, such as a change in tax law.  That said, there is a requirement to provide an event notice for other material events affecting the tax status of the municipal securities.  Accordingly, it is important that an obligated person consider whether changes in tax law affect the tax status of its outstanding municipal securities and, if so, whether the related continuing disclosure agreement requires an event notice. 
  • Voluntary Disclosure:  An obligated person may choose to provide voluntary disclosure about changes in tax law.  For example, if the consequences of tax reform eliminates direct subsidy payments that an obligated person receives for its outstanding tax credit bonds (including build America bonds, qualified school construction bonds, among others), the obligated person could consider whether to provide a voluntary notice describing the elimination of the subsidy and any related consequences.  In such a case, an obligated person should consider the manner in which it will communicate with investors (e.g., investor call or EMMA filing) and the substance of the disclosure.  The SEC has stated that disclosure that is reasonably expected to reach investors is subject to the antifraud provisions of the federal securities laws. As such, it is important that an obligated person and its outside professionals (e.g., bond counsel or disclosure counsel) carefully draft and review such disclosure.

While the SEC has repeatedly made clear that the obligation to ensure adequate disclosure rests primarily with the obligated person and its officials, it is equally important that regulated municipal market professionals pay particular attention to proposed or future changes in tax law to ensure compliance with federal securities laws and MSRB rules, including municipal advisors engaging in municipal advisory activities, underwriters participating in primary offerings, and brokers and dealers transacting in municipal securities.

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.

© Bracewell LLP | Attorney Advertising

Written by:

Bracewell LLP

Bracewell LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.