Nuveen New Jersey Municipal Value Fund (NJV)
Filed: 24 Apr 09, 12:00am
| April 24, 2009 | David P. Glatz D 312.807.4295 F 312.827.8065 david.glatz@klgates.com |
John Grzeskiewicz
Senior Counsel
Division of Investment Management
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Mr. Grzeskiewicz:
Nuveen New Jersey Municipal Value Fund
333-157055
811-22274
This letter responds to the comment you verbally conveyed to me on April 23, 2009, regarding pre-effective amendment no. 1 to the registration statement on Form N-2 of Nuveen New Jersey Municipal Value Fund (the “Fund”). For convenience, your comment is repeated below, with a response immediately following. For purposes of this letter, “state” refers to New Jersey.
1.Comment: Please inform the staff whether the Internal Revenue Service or state tax authorities have issued any guidance that would change the fundamental nature of inverse floating rate securities as tax-exempt municipal securities, for federal or state income tax purposes. Please include citations to any relevant and recent IRS guidance on this subject.
Response: As explained in greater detail below, no administrative guidance issued in 2008 or 2009 caused any fundamental change in the tax-exempt nature of allocations with respect to tender option bonds or inverse floaters for federal or state income tax purposes. The IRS guidance discussed below also did not affect the treatment of tax-exempt interest for purposes of state tax purposes.
The IRS issued a number of notices in 2008 dealing with the general issue of when a tax-exempt bond is treated as being reissued for purposes of the tax-exempt bond provisions. The reissuance of a tax-exempt bond triggers retesting of all the various program requirements for new issues of tax-exempt bonds, which can have a number of negative consequences for the issuer, including, for example, a change in yield which could affect how arbitrage investment restrictions apply to the issuer. Problems arose in the tax-exempt bond market in 2008 as a result of rating agency downgrades of major municipal bond
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issuers and failures of auctions in the auctions rate bond sector of the tax-exempt bond market. Long-standing IRS guidance on reissuances did not address these new circumstances, in particular actions by tax-exempt issuers to bid on and repurchase their own bonds in reliance on recent SEC guidance. The IRS issued a number of notices—with Notice 2008-88, 2008-42 IRB 933, issued on October 1, 2008, being currently in effect—providing circumstances in which tax-exempt issuers may purchase their own bonds without causing a “reissuance” of those bonds for purposes of the tax-exempt bond provisions.
In 2008, the IRS also issued Notice 2008-80, 2008-40 IRB 20, which proposed new eligibility criteria that certain partnerships investing in tax-exempt bonds must meet to qualify for monthly closing elections. Without such an election, a holder, such as a regulated investment company, that has a tax year that differs from the tax year of the partnership can have difficulty distributing tax-exempt interest received from the partnership in compliance with its own qualification requirements. Existing guidance—Revenue Procedure 2003-84, 2003-2 CB 1159—already permits monthly closing elections, and Notice 2008-80 merely proposes new eligibility requirements. The criteria in the notice will not take effect unless and until this guidance is issued in final form.
Thus, as discussed above, there have been no changes in the basic tax-exempt nature of allocations with respect to tender option bonds or inverse floaters for federal or state income tax purposes.
We believe that this information responds to your comment. If you should require additional information, please call me at 312.807.4295 or Stacy Winick at 202.778.9252.
Very truly yours,
| /s/ David P. Glatz |
| David P. Glatz |
Enclosures
Copies (w/encl.) to | Kevin J. McCarthy | |
| Mark L. Winget | ||
| Leonard B. Mackey, Jr. |