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B-247969 1 (1992-06-17)

handle is hein.gao/gaobablgr0001 and id is 1 raw text is: ARM61V O United States GAO General Accounting Office Washington, D.C. 20548 Office of the General Counsel B-247969 June 17, 1992 The Honorable Wendell Ford United States Senate Dear Senator Ford: On March 2, 1992, you forwarded to our office a request from Ms. Jo Ann Kaeuler. Ms. K~euper asked about requirements in the.internal Revenue Code for issuance of private activity bonds to finance expansion of the Northern Kentucky/Greater Cincinnati Airport. The bonds were discussed at a public hearing held at on the airport grounds on February 12, 1992, and approved by the Kenton County Airport Board the next day. A final determination as to whether these or any other particular bonds qualify for tax exempt status rests with the Internal Revenue Service. However, we have reviewed the materials Ms. Kaeuper submitted and we offer some observations on several of the matters raised. The Internal Revenue Code permits an exemption from federal tax for the interest on properly issued municipal bonds. So-called private activity bonds (I.R.C. § 141 et seg.) are among the types of bonds that enjoy this tax advantage. Airport expansion is one of the activities for which private activity bonds may be issued. (I.R.C. § 142(a) (1).) The Code also establishes certain procedural requirements that must be met in order for a municipal bond to qualify for the tax benefit. One specific requirement is public approval of the bond issue. According to the Code, public approval occurs when bonds are issued by appropriate action of the cognizant governmental unit (I.R.C. § 147(f) (2) (E) (3) after holding a public hearing with adequate notice (I.R.C. § 147(f) (2) (B)). Ms. Kaeuper asked some specific questions regarding the procedural requisites for the public hearing. Most significant among her concerns are whether the negative statements made at the public hearing indicate a lack of public approval for the bond issue and whether her town government or some other local government entity could stop issuance of the bonds. (a 5A -1:K/k(7

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