The IRS will permanently allow state and local governments to hold public hearings using a toll-free telephone number to satisfy the TEFRA hearing requirement for private activity bonds. No in-person option will be required to satisfy the TEFRA public hearing requirement, but state and local governments must continue to follow applicable local laws, which may require public meetings to be held in person.
Under the TEFRA notice/hearing/approval requirements, a governmental unit that is required to hold a public hearing must provide “a reasonable opportunity for interested individuals to express their views, orally or in writing, on the proposed issue of bonds and the location and nature of the proposed project to be financed.” The hearing must “be held in a location that, based on the facts and circumstances, is convenient for residents of the approving governmental unit.” At the start of the pandemic, recognizing that COVID-based restrictions on in-person gatherings could prevent state and local governments from satisfying this requirement, the IRS announced that hearings held via toll-free telephone call would satisfy it.
The IRS has extended the relief several times, even as many jurisdictions were removing restrictions on in-person gatherings. The latest iteration of the telephone relief, Rev. Proc. 2021-39, was scheduled to expire on March 31, 2022. In the meantime, the IRS received comments from various stakeholders that the telephone option has increased participation in these public hearings. Residents have found it easier to dial into the calls than to travel to hearings that may be many miles from their homes and workplaces. In other words, the telephone relief had a beneficial side effect unrelated to the original reason for its existence.
In response to these comments, and despite the fact that the IRS originally rejected a phone option in the 2018 final TEFRA regulations, the IRS has issued Revenue Procedure 2022-20, which eliminates “the time period limitation on holding public hearings telephonically.” The new guidance applies to public hearings held on or after March 18, 2022.
Two final points: First, issuers can still offer in-person hearings and/or web-based service access (Zoom, Webex, etc.) to the hearing. But a toll-free option is all you need. Second, “toll-free” means “toll-free.” State and local governments cannot rely on a local area code or insist that most people have unlimited data plans on their mobile phones. A toll-free number is one that has a specific three-digit prefix. Some web-based services may require upgrades or premium packages to provide participants with a toll-free number.
The IRS should be commended on taking this common-sense step and making telephone TEFRA hearings a permanent fixture. The move increases flexibility and efficiency for state and local governments that are required to comply with the TEFRA rules, and it increases access to the hearings for all concerned citizens, which is the point of the TEFRA rules in the first place.
 Rev. Proc. 2022-20, Section 6. This stated effective date eliminates any potential technical concern about the fact that the Rev. Proc. won’t be published in the Internal Revenue Bulletin until April 4, 2022 and the prior relief would have expired on March 31, 2022.
© Copyright 2022 Squire Patton Boggs (US) LLPNational Law Review, Volume XII, Number 79