Share with your friends

Rev. Proc. 2018-26: Nonqualified uses of proceeds from tax-exempt bonds

Nonqualified uses of proceeds from tax-exempt bonds

The IRS today released an advance version of Rev. Proc. 2018-26 that provides remedial actions that issuers of state and local tax-exempt bonds—and other tax-advantaged bonds—may apply to preserve the tax-advantaged status of the bonds when nonqualified uses of the bond proceeds occur.


Related content

Rev. Proc. 2018-26 [PDF 51 KB] notes that for some types of tax-advantaged bonds, existing regulations provide remedial actions to cure certain nonqualified uses of bond proceeds. 

However, there are situations—for instance, nonqualified uses that generally result from longer-term leases of financed property to private businesses (other than the remedial action of bond redemption or defeasance), regarding an adjustment of the refundable federal tax credit for nonqualified uses, and that flow from certain types of tax credit bonds and for direct pay bonds—for which there have been no remedial actions to cure such nonqualified uses. Rev. Proc. 2018-26 sets forth how the issuer of the bond may cure nonqualified use in these situations.

Rev. Proc. 2018-26 applies to a nonqualified use that occurs on or after April 11, 2018, and may be applied to a nonqualified use that occurs before April 11, 2018.

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us


Want to do business with KPMG?


loading image Request for proposal