On August 22, 2016, the IRS released new safe harbors from private business use of tax-exempt bond-financed facilities for management contracts that substantially change the prior safe harbors under Rev. Proc. 97-13. The new revenue procedure, Rev. Proc. 2016-44, provides more flexibility and appears to be more favorable than Rev. Proc 97-13.
The new safe harbors take effect immediately for management contracts entered into, or materially modified, on or after August 22, 2016. However, during an initial transition period running until February 18, 2017, issuers and borrowers may apply either the prior safe harbors or the new safe harbors to management contracts entered into, or materially modified, before February 18, 2017. In addition, issuers and borrowers may elect to apply the new safe harbors to management contracts entered into before August 22, 2016.
We provide a summary of Rev Proc 2016-44 in our Public Finance Tax Blog.
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