Thank you for taking a minute to fill out this survey.

The following survey is designed to ask specifically how the IRS proposed regulations that would restrict the use of tax exempt debt for development districts will affect your jurisdiction. These proposed regulations will implement a three-pronged test to determine whether an entity is a political subdivision. If adopted, the Proposed Regulations would provide new limitations on the types of entities that qualify as political subdivisions that are permitted to issue tax-exempt bonds. See HERE for the text and background of the proposed rule.

The first test, as under the current rules, is that a political subdivision must have the ability to exercise a substantial amount of at least one sovereign power.

The second test is that the entity must have been formed for and actually serve a governmental purpose, including whether the entity operates in a manner that provides significant public benefit with no more than an incidental benefit to private persons.

Finally, the third test is that the entity must be “governmentally controlled,” by which the IRS contemplates ongoing rights or powers to: (1) approve and remove a majority of the governing board of the entity, (2) elect a majority of the governing body of the entity, or (3) approve or direct significant uses of funds or assets of the entity. Governmental control requires the control to be by either a general purpose governmental unit or an established electorate, but not an electorate controlled by a small number of individuals, corporations, or other private entities.

The IRS recognizes that under the proposed regulations, certain community development and similar districts would not qualify as political subdivisions and has requested comments on whether to permit such districts to qualify in the future.

How will these proposed regulations affect your jurisdiction?

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* 1. Are you concerned about an entity in your jurisdiction that does not pass the first test that "a political subdivision must have the ability to exercise a substantial amount of at least one sovereign power."

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* 2. Are you concerned about an entity in your jurisdiction that does not pass the second test that "the entity must have been formed for and actually serve a governmental purpose, including whether the entity operates in a manner that provides significant public benefit with no more than an incidental benefit to private persons."

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* 3. Are you concerned about an entity in your jurisdiction that may not pass the third test that "the entity must be “governmentally controlled,” by which the IRS contemplates ongoing rights or powers to: (1) approve and remove a majority of the governing board of the entity, (2) elect a majority of the governing body of the entity, or (3) approve or direct significant uses of funds or assets of the entity."

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* 4. If you do anticipate an adverse impact on development districts in your area if this rule was to pass as written, please let us know the potential magnitude of the fiscal impact here.

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