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Several recent developments have underscored the importance for
Section 501(c)(3) organizations with outstanding tax exempt bonds
of adopting and implementing procedures for monitoring their post
issuance compliance with federal tax requirements.
At the recent Bond Attorneys Workshop of the National
Association of Bond Lawyers, Steven Chamberlin, Manager of the
IRS's office of Compliance and Program Management, announced
that the IRS will be committing resources to review the annual
filings of Form 990 Schedule K (Supplemental Information on
Tax-Exempt Bonds). This is the first time that the IRS has publicly
stated it will actually screen the Form 990 data now submitted
annually by Section 501(c)(3) organizations with outstanding
tax-exempt bonds. The IRS plans to use the submitted information to
initiate limited scope examinations designed to obtain additional
information in problematic areas to assess whether further complete
examinations should be commenced.
Mr. Chamberlin's announcement follows on the heels of an
Advanced Refunding Bonds Compliance Check Questionnaire sent out to
269 governmental entities and 31 exempt organizations in May of
2011. The Questionnaire, among other things, inquires whether the
borrower has written procedures to timely identify and correct
federal tax compliance problems. It also asks whether those
responsible for monitoring compliance have been provided training
or education.
In a further development, Mr. Chamberlin also announced that
soon all Forms 8038 (the forms filed by governmental issuers
whenever bonds are issued) will require the issuers to check a box
indicating whether they have implemented reasonable written
compliance procedures to periodically monitor use of financed
property and investment of gross proceeds.
The foregoing developments clearly reflect an effort by the IRS
to persuade both issuers and borrowers to (1) adopt written
procedures to monitor post issuance compliance and (2) take
reasonable steps to implement them. The forthcoming Schedule K
reviews will certainly inform the IRS whether its efforts in the
area are indeed improving compliance.
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