IRS

IRS Publishes Guidance on Real Property Lien Releases by REMICs

On August 17th, the IRS published Revenue Procedure 2010-30, which responds to various requests for relief made by CMBS market participants in response to final regulations issued by the IRS on September 16, 2009. The final regulations introduced a new “principally secured” requirement for the REMIC rules relating to lien releases. Under the new revenue procedure, if a release of a lien on an interest in real property that secures a mortgage loan held by a REMIC satisfies certain requirements, then the IRS will not challenge the mortgage loan’s status as a “qualified mortgage” on the grounds that it fails to be principally secured by an interest in real property. A lien release effected by a “grandfathered transaction” or by a “qualified pay-down transaction” generally will qualify for the benefits of the revenue procedure. Revenue Procedure 2010-30.

See our Financial Industry Week in Review of September 18, 2009 for additional background regarding the September 16, 2009, final regulations

Emergency Economic Stabilization Act Developments

Agreements were signed over the past weekend with the initial nine institutions electing to participate in Treasury’s Capital Purchase Program.  Treasury began delivering $125 billion in capital to those institutions on October 28.  A number of regional banks have also applied to receive approximately $35 billion in capital under the program.  CPP Transaction Report.  Treasury Press Release. 

On October 28, SIFMA and ASF jointly issued a comment letter relating to the development of the asset guarantee program authorized under the Emergency Economic Stabilization Act and requested that Treasury consider limiting and targeting the circumstances in which the guarantee program might be effectively used.  SIFMA/ASF Comment Letter

Internal Revenue Code Sec. 597 provides for rules to prevent a double tax benefit on the receipt by a bank or S&L of “federal financial assistance” pursuant to section 406(f) of the National Housing Act, section 21A of the Federal Home Loan Bank Act or section 11(f) or 13(c) of the Federal Deposit Insurance Act.  On October 14, the IRS announced that amounts furnished to financial institutions under TARP will not be treated as “federal financial assistance” within the meaning of Sec. 597.  IRS Notice 2008-101.