The Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities Financing Authority (AFICA) issued $9M in new bonds to finance the construction and development of a library, a science center and other improvements for Baldwin School of Puerto Rico. It is the first AFICA issue for a new investment since the early 2000s.

The IRS released regulations regarding the requirements for public notice, hearing, and approval of qualified private activity bonds. The Final TEFRA Regulations replace temporary regulations under the Internal Revenue Code of 1954 by finalizing rules set forth in proposed regulations issued in 2017 with a few notable improvements and clarifications.

The Department of the Treasury's IRS released new Proposed Regulations regarding Bond Reissuance. The Proposed Regulations address the subject of "reissuance" in connection with issues of tax-exempt obligations. The Proposed Regulations generally follow the guidance set forth in IRS Notice 2008-41, 2008-1 CB 742.

The small oil companies and banks holding more than $800M in refundable tax credits scored a victory when an AK Superior Court judge threw out a lawsuit challenging the state's plan to sell bonds to pay off those credits. State attorneys successfully contended the plan is legal because the bonds would be "subject to appropriation" by the Legislature.

The legislative outlook for the tax treatment of municipal bonds is brighter in 2019 than a year ago with a strong supporter of municipal bonds ascending to the chairmanship of the Ways and Means Committee as part of the new Democratic majority. Rep. Richard Neal begins serving with a pledge to ask municipal market advocates to testify on the impact of the TCJA.

In 2018, a proposed House bill would have cleared the way for pensions to buy municipal assets, such as water and sewer authorities. The idea has advantages for pensions and is likely to be attractive to governments with major pension funding issues. With infrastructure likely to be a top priority in the new Congress, similar ideas may gain traction in 2019.

The impact of the federal tax overhaul on the municipal bond market hasn't been as bad as many feared, but the elimination of advanced refunding bonds has reduced the overall supply of municipal bond offerings. While banks are retreating from the muni market, taxpayers in high-tax states are sheltering more of their income in municipal bonds.

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