Skip to Main Content
Services Talent Knowledge
Site Search


Our attorneys stay on top of changes in legislation, agency regulations, case law, and industry trends—then craft timely legal alerts to keep clients up to date on legal developments important to their business.

May 8, 2020

COVID-19: IRS Allows Governmental Issuers to Purchase and Hold Certain of Their Own Tax-Exempt Bonds

In response to the COVID-19 pandemic and resulting market instability and economic disruption in the short-term tax-exempt bond market, the Internal Revenue Service (IRS) issued
Notice 2020-25 on May 4, 2020, temporarily expanding the circumstances and time period in which governmental issuers may purchase and hold their own tax-exempt qualified tender bonds and tax-exempt commercial paper solely for purposes of §103 and §§141 through 150 of the Internal Revenue Code.

Notice 2020-25 allows a governmental issuer to purchase and hold, on a temporary basis, its own tax-exempt qualified tender bond or tax-exempt commercial paper without resulting in a reissuance or retirement of the purchased tax-exempt bond if the governmental issuer purchases the tax-exempt qualified tender bond or tax-exempt commercial paper during the permitted holding period and holds the bond no later than the end of the permitted holding period. For purposes of Notice 2020-25, the term “permitted holding period” means calendar year 2020.

During the permitted holding period, the governmental issuer may refund the purchased bond with a refunding bond, tender the purchased bond for purchase in a qualified tender right in its capacity as a bondholder, or resell the purchased bond. In addition, Notice 2020-25 states that a refunding of tax-exempt commercial paper, including tax-exempt commercial paper purchased at maturity with tax-exempt commercial paper during the permitted holding period, will be treated as part of the same issue as the purchased tax-exempt commercial paper.

Notice 2020-25 also modifies and supplements the guidance provided in Notice 2008-41 and the proposed Treasury Regulations set forth in §1.150-3 dealing with reissuance of tax-exempt obligations (the "Proposed Treasury Regulations"). Pursuant to Notice 2008-41 and the Proposed Treasury Regulations, a tax-exempt bond purchased by or on behalf of a governmental issuer pursuant to a qualified tender right is not treated as retired during a 90-day period starting on the date of acquisition of the tax-exempt qualified tender bond. Notice 2020-25 extends the 90-day period provided in Notice 2008-41 and the Proposed Treasury Regulations during which qualified tender bonds may be held by or on behalf of a governmental issuer without causing such bonds to be retired to 180 days as long as the acquisition occurs during the permitted holding period.

Notice 2020-25 states that for arbitrage purposes under §148 of the Internal Revenue Code, a qualified hedge with respect to bonds will not be deemed terminated because the governmental issuer holds the hedged bonds during the periods permitted in the Notice.

Notice 2020-25 became effective on May 4, 2020. However, it may be applied retroactively to purchases on or after January 1, 2020. Notice 2020-25 should only be relied on for the purposes described therein.

If you have any questions regarding the content of this alert, please contact Sharon Brown, partner, at; Shali Natesan, associate, at; or another member of the firm’s Public Finance Practice Area.

We also have a specific team of Barclay Damon attorneys who are actively working on assessing regulatory, legislative, and other governmental updates related to COVID-19 and who are prepared to assist clients. You can reach our COVID-19 Response Team at


Click here to sign up for alerts, blog posts, and firm news.

Featured Media


Fourth Department Finds Language in 1980 Statute Is Gender Neutral for Purposes of Child Victims Act


Priority of Federal Tax Lien on Personal Property: Secured Lender vs. IRS


COVID-19 Business Interruption Update: New York High Court Affirms in Favor of Insurer


USFWS Introduces General Permit for Bald and Golden Eagle Incidental Take


ORES Executive Director Issues First Denial of Section 94-C Permit Application Following Applicant's Partial Loss of Site Control


New Details About OPWDD Spending in the New York State FY 2025 Executive Budget

We're Growing in DC!

We’re excited to announce Barclay Damon’s combination with Washington DC–based Shapiro, Lifschitz & Schram. SLS’s 10 lawyers, three paralegals, and four administrative staff will join Barclay Damon while maintaining their current office in DC’s central business district. Our clients will benefit from SLS’s corporate, real estate, finance, and construction litigation experience and national energy-industry profile, and their clients from our full range of services.

Read More

This site uses cookies to give you the best experience possible on our site and in some cases direct advertisements to you based upon your use of our site.

By clicking [I agree], you are agreeing to our use of cookies. For information on what cookies we use and how to manage our use of cookies, please visit our Privacy Statement.

I AgreeOpt-Out