For many years multifamily housing apartment projects could be financed with tax-exempt drawn-down bonds and loans with all of the bonds issued pursuant to a draw-down loan being treated as part of a single issue. The date of issuance for the bonds would be the first date on which the aggregate draws exceeded the lesser of $50,000 or 5 percent of the issue price of the bonds. Draw-down bond structures were used in many private placements as a means to eliminate negative arbitrage.

Faced with the possibility that a governmental issuer could use a draw-down structure for a Build America Bond (BABs) issue and avoid the statutory deadline for issuance of BABs, the Internal Review Service issued Notice 2010-81 creating separate definitions for (i) the issue date of a bond and (ii) the issue date of an issue of bonds. The issue date of a bond was determined to be the date that the issuer received funds in exchange for the bonds and the issue date of an issue of bonds was determined to be the first date on which the aggregate draws exceeded the lesser of $50,000 or 5 percent of the issue price of the bonds.

After the release of Notice 2010-81, the Internal Revenue received comments that the definition of the issue date of a bond in Notice 2010-81 created concerns for the treatment of draw-down bonds for purposes of the allocation and administration of volume cap on private activity bonds. Finally, in 2011 the Internal Revenue Service issued Notice 2011-63 and indicated that, solely for purposes of private activity bond volume cap under Section 146 of the Internal Revenue Code, an issuer may treat a bond as issued either (i) on the issue date of the bonds under the general rule of Notice 2010-81, or (ii) on the issue date of the issue, provided that all of the bonds of the issue are delivered no later than the earlier of (a) the statutory deadline of issuing the bonds, or (b) the end of the maximum carryforward period of unused volume cap under the applicable statute treating all of the unused volume cap for the issue as volume cap arising in the year in which the issue date of the issue occurs. Notice 2011-63 also indicates that an issuer must type special language on the IRS form 8030 filed with respect to the bonds.

Although Notice 2010-81 gives guidance as to which definition to use for purposes of the administration of volume cap, several questions remain. For example, which definition of issue date should be used in applying the public hearing rules and should all draw-down bonds be treated as a single issue for purposes of applying use of proceeds rules such as limits for land and bad costs.