The 1986 Tax Reform Act: Its Impact, With Special Emphasis on Texas Cities
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The first purpose of this Applied Research Project is to review the literature on the 1986 Tax Reform Act in order to distill information about the Act that is relevant to the debt issue practices and policies of Texas city government. This review takes into account relevant historical changes in the law. Given the importance of the 1986 Tax Reform Act, the second purpose of this study is to determine the impact of the Act on Texas cities from the point of view of their finance directors. It is expected that the finance directors will view the impact as detrimental. In addition, the study will compare the opinions of finance directors from the "larger issuers of debt" cities to those who have issued smaller amounts of debt to see if there are differences in their opinion about the Act. IT is felt that the cities with the most debt, that is the cities with the most experience with issuing bonds, might have a different view than finance directors who had issued less debt. Hopefully the research findings will provide support to the efforts of the Government Finance Officers Association as they go about educating the Congress and the White House about the problems associated with the arbitrage rebate rules contained in the Act. Based on the above review, the following working hypotheses are presented. It is expected that the finance directors are aware of the 1986 Tax Reform Act and know the amount of their cities' outstanding bonds. Further, it is anticipated that the finance directors would have concerns and opinions about compliance with the law and the problems associated with yield burning. The directors should also be aware of the costs of arbitrage rebates, both in dollar amounts and in the lost building opportunities for their city. It is expected that the larger issuers of debt would have a different view of the Act than the smaller issuers of debt.