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Tax 103

McCarter & English is well-recognized for the depth of its public finance tax practice. The firm has three tax professionals who devote all of their practice to public finance work, Gary Duescher, Tom Collins, and Jeannette Bond. Each of these attorneys has over 25 years experience in all aspects of a 103 practice, including matters such as complex advance refundings involving transferred proceeds, interest rate swaps, including termination of swaps, use of proceeds limits for tax-exempt and Build America Bond issues, and private activity limits. Their practice covers governmental bonds, hospital financings, higher education financings, cultural and other 501(c) financings, exempt facility financings such as solid waste, airport and port financings, single family and multi-family housing, small issue manufacturing bonds, and state revolving fund financings for sewer and water facilities.

In addition to supporting the firm’s bond counsel practice by undertaking due diligence and preparing tax documentation for the financings, they are also attuned to on-going post-issuance tax compliance. They have assisted clients in the development of internal policies and procedures for post-issuance compliance and in completing Internal Revenue Service (“IRS”) filings, such as Form 990, Schedule K for 501(c)(3) organizations. They have provided advice in IRS audits of bond transactions and have helped clients obtain private letter rulings and VCAP settlements from the IRS. The tax attorneys also play an instrumental role in the work-out of troubled bond issues.

McCarter & English has served as special tax counsel for complex bond issues. The firm also provides tax counsel services to bond counsel firms that do not have their own 103 tax counsel. In that capacity they prepare or review tax due diligence material and tax documents for the financing transactions and participate in the transactions to the extent desired by the particular bond counsel firm.

The tax attorneys are active in the legislative and regulatory process through work with the National Association of Bond Lawyers and the American Bar Association.

Key areas in which our Tax attorneys have substantial expertise include:

  • Determining and monitoring compliance with rebate obligations;
  • Structuring the investment of reserve funds to comply with arbitrage limitations;
  • Structuring management contracts with private service providers for bond-financed facilities;
  • Determining whether interest based in part on the cash flow of a project constitutes true interest; 
  • Analyzing arbitrage and other tax considerations in connection with swaps and other derivative instruments;
  • Applying the mixed escrow rules to an advance refunding utilizing both bond proceeds and other moneys; 
  • Analyzing restrictions on unspent construction fund moneys when the initial temporary period has expired; and
  • Post-issuance compliance matters, including negotiating closing agreements with the Internal Revenue Service.

Complex advance refunding issues addressed by the firm:

  • Applying the multi-purpose allocation rules to advance refunding issues;
  • Structuring variable interest rate refunding issues; 
  • Rolling over an existing derivative instrument to refunding bonds; 
  • Using forward purchased treasuries in a refunding escrow; 
  • Using different versions of Section 103 applicable to refunded bonds issued over a long period; 
  • Resolving issues regarding unspent bond proceeds; 
  • Preparing a complex defeasance opinion for a rating agency; and 
  • Structuring tax-exempt/taxable structures consistent with IRS anti-abuse rules.