Responsible public borrowing requires explaining what a number means before asking people to trust it. The IRS's December 9, 2016 final rule defined issue price for arbitrage restrictions on tax-exempt and other tax-advantaged bonds. Looking back from the December 10 weekend, its significance is a bounded accounting responsibility for state and local issuers, not a moral endorsement of any borrowing program. [2016-29486][2015-15411]

The general rule for bonds issued for money looked to the first price at which a substantial amount sold to the public, with ten percent defined as substantial. The public excluded underwriters and related parties, and bonds with different credit and payment terms required separate determinations. Those limits discourage an explanation that treats unlike transactions as interchangeable evidence of a single price. [2016-29486][2015-15411]

The earlier, June 2015 proposal considered an alternative initial-price method with a ceiling on certain orders before issuance and a market-change exception. The final optional method replaced that timing with a written restriction ending at the earlier of the fifth business day's close after sale or qualifying substantial public sales. The proposal and final show a policy choice within one process, not competing independent accounts of its success. [2016-29486][2015-15411]

A stewardship reading keeps documentation beside discretion: when more than one method was available, the issuer had to identify its selection in its records by issuance. The final was effective December 9 and applied the new definition to bonds sold from June 7, 2017. Clear records can support scrutiny, but these documents do not establish fair distribution of a project's benefits, lower borrowing costs or wise use of the borrowed money. [2016-29486][2015-15411]

Source documents

  1. Issue Price Definition for Tax-Exempt Bondshttps://www.govinfo.gov/content/pkg/FR-2016-12-09/html/2016-29486.htm
  2. Issue Price Definition for Tax-Exempt Bondshttps://www.govinfo.gov/content/pkg/FR-2015-06-24/html/2015-15411.htm