The IRS, when it issued its initial proposed rules on yield burning
, had projected it would collect in excess of $1 billion in charges from cities and towns who had paid too much when they refunded outstanding tax-exempt general obligation and revenue bonds earlier this decade to take advantage of sharp drops in interest rates.
The SEC's Chairman hailed the settlement as a milestone in the federal effort to combat yield burning
"in a way that protects innocent municipalities and bondholders," adding that "a dark cloud has been lifted from the municipal securities market.
The agencies claim that yield burning
occurs when the underwriters charge inflated prices on these bonds, artificially lowering or "burning down the yield," generating inflated profits on sales of these Treasury securities to the city or town.
Collier County, Florida, is the named plaintiff on a yield burning
Often the yield burning
rooked the city and its taxpayers.
Since the summer of 1996, state and local government issuers have faced the prospect of being compelled to enter into closing agreements with the Internal Revenue Service (IRS) to protect the tax-exempt status of advance refundings because of possible overpricing by bond underwriters - yield burning
- in connection with the investment of the advance refunding bond escrows.
Schwartz was referring to the federal government's landmark, global settlement to protect cities and their municipal bondholders in a major yield burning
In what could be a major breakthrough for cities and towns, the federal government last week reached a global settlement to protect cities and their municipal bondholders in a major yield burning
The overpricing of open-market investments purchased for tax-exempt advance refunding bond escrows is commonly referred to as yield burning
That authority is part of what is at issue in the yield burning
cases involving billions of dollars of outstanding municipal tax-exempt bonds and IRS threats to declare those bonds taxable.
This action again fans the yield burning
fire, which first flared up in the summer of 1996.
The parent and child agencies have set forward an agenda that includes a "major initiative" to focus on state and local payments of Social Security taxes, efforts to determine the impact of electric utility deregulation on municipally owned utilities, and accelerated examinations of so-called municipal yield burning