• Revenue Procedure 2018-26: New Remedial Actions
  • May 7, 2018
  • Revenue Procedure 2018-26, issued April 11, 2018, provides new or additional remedial actions to issuers of tax-advantaged bonds (tax-exempt bonds, tax-credit bonds, and direct-pay bonds): 1) to remediate certain long-term leases of property financed with tax-advantaged bonds, and 2) to permit remedial actions for certain types of true tax-credit bonds (i.e., bonds using actual credits rather than direct-pay subsidies) and direct-pay bonds (i.e., those tax credit bonds where the issuer receives subsidies in lieu of credits (which includes most outstanding build America bonds)). Tax-credit and direct-pay bonds previously had very limited potential for remediation, and, among other remedial actions, Revenue Procedure 2018-26 allows issuers of direct-pay bonds to adjust the tax credit subsidy claimed with respect to those bonds to account for nonqualified use. These new remedies are presented as an overlay on the existing remedial action regulations. In applying these new rules, one should consider the specific definitions and rules set forth in Revenue Procedure 2018-26 because, although the procedure incorporates several existing rules, it modifies others, adds new ones, and, in certain cases, provides different rules depending on the type of bond and type of noncompliance. The chart at the bottom of this Alert identifies permitted remedial actions for different types of bonds and some key requirements for those actions.