Final Regulations Governing Qualified Zone Academy Bonds Released (T.D. 9495)

The IRS has issued final regulations on qualified zone academy bonds (QZABs). A QZAB is a taxable bond that is issued by a state or local government, the proceeds of which are used to improve certain eligible public schools. The regulations, which generally adopt temporary regulations released in 2007 (T.D. 9339), provide guidance on the maximum term, permissible use of proceeds and remedial actions for QZABs. In addition, the regulations address the repeal of the Code Sec. 1397E QZAB rules and the adoption of similar rules under Code Secs. 54A and 54E.

Code Sec. 1397E provides that an eligible taxpayer that holds a QZAB on a credit allowance date is entitled to a nonrefundable tax credit for each year in which the bond is held. The provisions of Code Sec. 1397E terminated in the fall of 2008 and are only applicable to bonds issued on or before October 3, 2008. However, state and local governments may continue to issue qualified zone academy bonds after October 3, 2008, under Code Secs. 54A and 54E.

Although generally not applicable to QZABs issued under Code Secs. 54A and 54E, the final regulations contain a limited reliance provision for such QZABs. Under this reliance provision, issuers and taxpayers may rely on the final regulations for QZABs that are issued under Code Secs. 54A and 54E except to the extent the final regulations conflict with other applicable guidance or rules. Furthermore, issuers of QZABs under Code Secs. 54A and 54E for which the issuer elects the federal direct payment subsidy option under Code Sec. 6431(f) may not rely on the remedial action provisions in Reg. §1.1397E-1(h). Remedial action guidance for such issuances will be released in the future.


Wolters Kluwer Tax and Accounting

Wolters Kluwer Tax and Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency. Wolters Kluwer Tax and Accounting is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

All stories by: Wolters Kluwer Tax and Accounting