Repeal of Bearer Bond Exception Effective March 19, 2012
By KRISTEN CHANG WINCKLER & MARCIA N. PERSAUD
In 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. Additionally, non-U.S. holders generally will not be eligible for the portfolio interest exemption from U.S. withholding tax on bearer bonds.