Today, Treasury and the IRS released proposed regulations (REG-129067-15) under section 103 that provide guidance regarding the definition of “political subdivision” for purposes of tax-exempt bonds. Section 103 generally provides that, with certain exceptions, gross income does not include interest on any obligation of a state or political subdivision thereof. The proposed regulations clarify and further develop, for purposes of section 103, the eligibility requirements for a political subdivision. More specifically, to qualify as a political subdivision under the proposed regulations, an entity must meet certain requirements in three areas: sovereign powers, governmental purpose, and governmental control. The definition of political subdivision in the proposed regulations does not apply in determining whether an entity is treated as a political subdivision of a state for purposes of section 414(d). Comments and requests to speak at the June 6 public hearing must be received by May 23.