SECTION 2. 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 (Code). In general, the purpose of § 7871(f) is to give Indian tribal governments greater flexibility than is allowable under the existing standard of § 7871(c) through the issuance of Tribal Economic Development Bonds to finance economic development projects. Section 7871(f)(1) provides that the Secretary shall allocate the $2 billion volume cap among the Indian tribal governments in such manner as the Secretary, in consultation with the Secretary of the Interior, determines appropriate.

In Notice 2009–51, the Treasury and the IRS solicited applications for allocations of volume cap and addressed administrative procedures for the 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 for the first allocation (2009 First Allocation) of authority to issue Tribal Economic Development Bonds. On February 9, 2010,

the IRS announced allocations in an aggregate amount of approximately $1 billion of volume cap in the second allocation (2010 Second Allocation) of authority to issue Tribal Economic Development Bonds.

Section 7.f. of Notice 2009–51 provides 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 2009 First Allocation, or by December 31, 2011, for any or all of the allocation received by an Indian tribal government from the 2010 Second Allocation, then any or all of such allocation not used to issue bonds would be treated as forfeited.

In Announcement 2010–88, the IRS announced an automatic six-month extension of the administrative deadline to issue bonds under bonding authority from the 2009 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 2009 First Allocation from June 30, 2011, to December 31, 2011. Section 3 of Announcement 2010–88 provides that an allocation received pursuant to the 2009 First Allocation shall be treated as forfeited if bonds are not issued by the applicable deadline.

In Announcement 2011–71, the IRS notified eligible Indian tribal governments that they could request a three-month extension from December 31, 2011, to March 31, 2012, to issue Tribal Economic Development Bonds. Indian tribal governments eligible for such extension were (1) those that had received an allocation of volume cap from the 2009 First Allocation if an extension of the deadline to issue bonds from June 30, 2011, to December 31, 2011 had been granted pursuant to the process described in Announcement 2010–88, or (2) Indian tribal governments that had received an allocation from the 2010 Second Allocation. Section 4 of Announcement 2011–71 also provides that an allocation with respect to which the Indian tribal government received an extension pursuant to the process described in Announcement 2011–71 is treated as forfeited if bonds were not issued by March 31, 2012.

Notice 2009–51, Announcement 2010–88, and Announcement 2011–71 provide that any allocation amounts treated as forfeited may be available for allocation by the IRS. Indian tribal governments have reported to the IRS the issuance of Tribal Economic Development Bonds in the amount of $197,153,357. Based on these reports and the passage of the deadlines described above for issuing Tribal Economic Development Bonds, the IRS has identified $1,802,846,643 of volume cap that is available for reallocation.

In Announcement 2011–71, and pursuant to Executive Order 13175 on tribal consultation, the IRS announced that it was seeking public comment from Indian tribal governments and other interested members of the public on the reallocation of available volume cap in order to facilitate issuance of Tribal Economic Development Bonds by Indian tribal governments. Pursuant to the Announcement and the Executive Order, consultation sessions were held in person and by telephone with tribal organizations.