On March 18, 2010, President Obama signed into law the
"Hiring Incentives to Restore Employment Act" (the
"HIRE Act"), which included a provision that generally
repeals the foreign targeted obligation exception for bearer bonds
issued after March 18, 2012. This repeal will likely dissuade many
U.S. issuers from issuing bearer bonds, as they will no longer be
entitled to the tax benefit of deductions for interest paid on such
bonds.
Background
Under current law, adverse tax consequences are imposed on
issuers of bearer bonds (i.e., bonds not in registered form). In
particular, an issuer may not deduct interest paid with respect to
such obligation and is subject to an excise tax equal to 1% of the
principal amount of the obligation multiplied by the number of
calendar years (or portions thereof) between the issue date and the
maturity date of such obligation. However, issuers are exempt from
the above mentioned sanctions if the bearer bonds are "foreign
targeted
