SECTION 1. BACKGROUND

Section 1402 of Title I of Division B of the American Recovery and Reinvestment Act of 2009, Pub. L. No. 111–5, 123 Stat. 115 (2009), added § 7871(f) to the Internal Revenue Code (the “Code”). In general, the purpose of § 7871(f) is to give Indian tribal governments greater flexibility to use tax-exempt bonds to finance economic development projects, through the issuance of tribal economic development bonds (“Tribal Economic Development Bonds”), than is allowable under the existing standard of § 7871(c). Section 7871(f)(1) provides that the Treasury Department shall allocate the $2 billion national bond volume limitation authority (“Volume Cap”) for Tribal Economic Development Bonds among the Indian tribal governments in such manner as the Treasury Department, in consultation with the Secretary of the Interior, determines appropriate.

2011–46 I.R.B. 770 November 14, 2011

ments to the process and reallocation criteria. The IRS is seeking additional input on the processes and criteria to be included in a method for reallocation. In addition to other processes and criteria, the IRS is considering improvements relating to the following categories of information to increase the likelihood that an allocation will result in issuance of Tribal Economic Development Bonds. The IRS seeks general comments on each of these proposed improvements. Certain additional comments about a proposed improvement are also specifically requested below.

may require information regarding the estimated cost of the project, including the portion to be financed by Tribal Economic Development Bonds and any portion to be financed by other sources, if any, and how the estimated cost was determined.

process may require information on the plan for financing for the project, including the following: (1) all reasonably expected sources and uses of financing and the expected security and sources of payment for the bonds, (2) the anticipated date of issuance of the Tribal Economic Development Bonds and any other source of financing, (3) the issuer’s reasonably expected schedule for spending proceeds of the Tribal Economic Development Bonds and any other financing taking into account such things as required permits, engineering studies, architectural plans, and other commitments or studies that are required in order for the project to proceed with due diligence, (4) whether amounts to be made available by the Tribal Economic Development Bonds plus other available funds (whether obtained through financing or otherwise) are sufficient to pay for the cost of the project, (5) whether the Tribal Economic Development Bonds are marketable taking into account the type and location of project, the creditworthiness of the applicant, and other considerations, and (6) whether the applicant will be able to obtain financing from other sources if required for project costs. The IRS seeks specific comments on appropri- ate evidence to show the applicant’s

In Notice 2009–51, 2009–28 I.R.B. 128 (July 13, 2009), the Treasury Department and the IRS addressed administrative procedures for initial allocations of the $2 billion Volume Cap.

On September 15, 2009, the IRS announced allocations in an aggregate amount of approximately $1 billion of Volume Cap in the first tranche of allocation (the “First Allocation”) of authority to issue Tribal Economic Development Bonds. Section 7(f) of Notice 2009–51 provided that if bonds were not issued by December 31, 2010, for any or all of the allocation received by an Indian tribal government from the First Allocation, then such allocation would be treated as forfeited. In Announcement 2010–88, 2010–47 I.R.B. 753 (November 22, 2010), the IRS announced an automatic six-month extension of the administrative deadline to issue bonds under bonding authority from the First Allocation from December 31, 2010, to June 30, 2011, and a process by which Indian tribal governments could receive an additional six-month extension of the administrative deadline to issue bonds under bonding authority from the First Allocation from June 30, 2011, to December 31, 2011. Section 3 of Announcement 2010–88 provides that an allocation received pursuant to the First Allocation shall be treated as forfeited if bonds are not issued by June 30, 2011, for an allocation with respect to which the Indian tribal government does not receive an additional extension as described in the announcement, or by December 31, 2011, for an allocation with respect to which the Indian tribal government receives an additional extension.

On February 9, 2010, the IRS announced allocations in an aggregate amount of approximately $1 billion of Volume Cap in the second tranche of allocation (the “Second Allocation”) of authority to issue Tribal Economic Development Bonds. Section 7(f) of Notice 2009–51 provides that if bonds are not issued by December 31, 2011, for any or all of the allocation received by an Indian tribal government from the Second Allocation, then such allocation will be treated as forfeited.

Both Notice 2009–51 and Announcement 2010–88 provide that any allocation

amounts treated as forfeited may be available for allocation by the IRS as part of an allocation process to be announced by the IRS at some future date. The IRS estimates that, as of the date of this announcement, up to 95% or more of the $2 billion in Volume Cap authorized for Tribal Economic Development Bonds may become available for reallocation as of January 1, 2012.