Mark W. Everson, Commissioner
CC:PA:LPD:PR (REG-122379-02)
Courier's Desk
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224

Proposed Regulations Published December 30, 2003, Regulations Governing Practice Before the Internal Revenue Service

Dear Mr. Everson:

The Healthcare Financial Management Association (HFMA) is pleased to submit the following comments regarding the proposed "Circular 230" regulations (REG-122379-02, 68 FR 75186) on behalf of our many members who are involved in raising capital through the issuance of tax-exempt bonds. The proposed rule was published in the December 30, 2003, Federal Register.

HFMA is the professional membership organization for individuals involved in the financial management of health care. HFMA's more than 32,000 members work in a variety of healthcare settings-hospitals, long-term care facilities, managed care organizations, and physician groups-as well as public accounting and consulting firms and other organizations.

It is our understanding that the proposed changes to the Circular 230 standards governing tax shelter opinions revise the definition of "tax shelter," and that the definition is key to the imposition of "tax shelter opinion" standards. We understand, too, that the definition and standards, under the proposed rule, would no longer include an exception for "municipal bonds" while the definition of tax shelter in the existing Circular 230 regulations specifically excludes municipal bonds from that definition.

HFMA is concerned that the proposed rule makes no mention of an end to the tax-exempt bond issue exemption from treatment as a tax shelter, and the scope of the rule was not apparent in either the title or summary description. Consequently, the significance of the rule was late in coming to the attention of affected parties, because there has been insufficient time for experts in the field to analyze the full impact of the proposal on the ability to borrow funds expeditiously and cost-effectively. HFMA recommends there be an extension of the deadline for submitting comments and a postponement of the hearing for at least sixty days.

There is a concern that the proposed changes to long-standing practice with regard to bond counsel opinions could add significantly to the cost of issuing bonds and result in a serious disruption to the municipal bond market. Imposing the tax shelter definition, with the related requirements, on tax-exempt bonds when there is no material Federal tax issue seems unnecessary and may have been unintended. There needs to be specific recognition of the exemption for tax-exempt bonds, which was not included in the proposed regulations. Therefore, HFMA asks that you (1) modify the proposed regulations to clarify that bond counsel opinions are not tax shelter opinions, and (2) continue the exception for municipal bond issues in the definition of tax shelter.

Finally, we ask that any final regulation's effective date be substantially deferred after adoption in order to allow bond attorneys, investment bankers, and institutional buyers a reasonable opportunity to assimilate new rules and determine the extent to which they are relevant to particular transactions or categories of transactions. Having an immediate effective date would make an orderly transition to any new regulations extremely difficult in a financial market that may have to substantially rework an opinion practice that is decades old. HFMA requests that the final regulations provide for a transition period of at least six months.

HFMA takes pride in its longstanding ability to provide technical expertise to federal agencies. We hope that these comments prove useful.

We would welcome the opportunity to provide further assistance with this issue. Please do not hesitate to call on me at (202) 296-2920.

Sincerely,

Richard L. Gundling, FHFMA
Vice President

Publication Date: Friday, February 13, 2004