Elder Law by Tina Marie Soriano : Administrative Law

In a memorandum dated December 9, 1974, the Income Tax Division (T:I:I:P) requested our concurrence or comment on a proposed revenue ruling.

1. Whether the interest paid on bonds issued by a municipal public housing authority to finance construction of low-rent housing is subject to the Federal income tax exemption provision in the United States Housing Act of 1937, 42 U.S.C. § 1405(d) (1970), or 42 U.S.C. § 1437(i), rather than to Int. Rev. Code of 1954, § 103 [hereinafter cited as Code].

2. Whether, if one of the bond interest exemption provisions in the United States Housing Act of 1937 is applicable, an exemption should be allowed under that act.

1. We agree with the proposed revenue ruling that interest paid on bonds issued by a municipal public housing authority to finance construction of low-rent housing is subject to the income tax exemption provisions in the United States Housing Act of 1937 rather than to Code § 103. However, we believe that this conclusion requires the reconsideration of a revenue ruling and two G.C.M.s.

2. We believe that interest on the bonds in the proposed revenue ruling may be exempt from Federal income taxation under the1937 Housing Act; however, we suggest that publication of the proposed ruling be delayed until the Department of Housing and Urban Development issues regulations on the subject.

A municipal public housing authority was created in accordance with state statute for the purpose of providing housing for low-income persons. The municipal authority is a ‘public housing agency’ as defined in the United States Housing Act of 1937, 42 U.S.C. 1402(11), and in 42 U.S.C. § 1437(a)(6), which was added by Pub. L. No. 93-383, § 3(6) (Aug. 22, 1974). The authority proposes to issue bonds to finance construction of low-income housing. Principal and interest on the bonds will be payable from lease revenues and from subsidy payments to be received by the housing authority from the United States Department of Housingand Urban Development.