US

How Will Changes to the US Tax Code Affect European Municipalities?

David M. Ellis, PhD, Vice President, NERA Economic Consulting

Proposed changes to the United States Internal Revenue Code related to lease transactions with tax-exempt entities would severely restrict the availability of this transaction as a financing source for municipalities. The proposed changes in the Code, if enacted, will reduce the ability of traditional US investors to enter into such transactions by effectively subjecting them to material tax increases in connection with this activity. Moreover, the effective date of these changes may be retroactive, placing already-completed transactions at risk of losing the favourable tax treatment that was incorporated into their structure and pricing.