SECTION 1. BACKGROUND AND

PURPOSE

A prospective issuer of bonds, the interest on which is intended to be excludable from gross income under § 103(a) of the Internal Revenue Code, can request a ruling that is subject to the declaratory judgment procedures of § 7478. Section 7478 provides the United States Tax Court with jurisdiction to issue declaratory judgments with respect to certain governmental obligations. A prospective issuer can file a petition under § 7478 if the Service determines that the interest on bonds will not be excludable from gross income under § 103(a) or if the Service fails to make a determination with respect to the excludability of the interest within 180 days from the time the request for a determination is made. In a declaratory judgment case, the Tax Court determines whether the interest on the bonds will be excludable under § 103 and thus must consider all of the requirements for the exclusion.

A prospective issuer or holder of bonds may also request a ruling that is not subject to the declaratory judgment provisions of § 7478. For example, the request may ask for a ruling about one or more of the various requirements for excludability under § 103(a) rather than excludability in general under § 103(a). Alternatively, the request may relate to the effect of a proposed transaction on an outstanding issue of bonds.

This revenue procedure updates existing procedures with respect to both reviewable and nonreviewable rulings. Thus, Rev. Proc. 88–32, 1988–1 C.B. 833, relating to reviewable rulings, and Rev. Proc. 88–33, 1988–1 C.B. 835, relating to nonreviewable rulings, are obsolete as provided in section 7 of this revenue procedure.

This revenue procedure provides definitions of the two types of ruling

requests and procedures for each. The procedures are designed to make it clear to both the requesting party and the Service whether a ruling request is reviewable under § 7478. For a request that is reviewable, the procedures are designed to ensure that the administrative record is fully developed with respect to each requirement for exclusion of interest under § 103(a). In addition, for a request that is reviewable, the procedures are designed to ensure that all necessary information with respect to the proposed issue of bonds is provided in a timely manner that will allow the Service to make its determination within 180 days from the date the request for a ruling is filed.