IRS Advisory Group Finds Bond Reporting Burdensome

June 14, 2012

In its June 6 report (refer to page 229 of the pdf), the Advisory Committee on Tax-Exempt and Government Entities (ACT) recommends that IRS revisit the various forms required for completion by issuers of tax-exempt bonds, to ensure the forms are fulfilling original Congressional intent and not unduly burdensome.

The 21-member advisory committee comprises representatives from the regulated community who deal with employee plans; exempt organizations; tax-exempt bonds; and federal, state, local, and Indian tribal governments. The ACT regularly provides IRS with input on administrative policy and procedures of the Tax Exempt and Government Entities Division.

The ACT's recommendations follow its study of the history of information reporting for tax-exempt bonds and the purposes for reporting. The study included the 8038 series of forms filed by issuers of private-activity bonds, governmental bonds, direct-pay bonds (including Build America Bonds), and tax-credit bonds. The study also examined Schedule K for the Form 990, which requires detailed reporting on bonds issued by the nonprofit institution or organization.

According to the report, the ACT study focused on the comparative benefits and burdens of information reporting and identified six areas as legitimate purposes for collecting information:

Statistical reports
Classification
Recording elections
Education
Identification
Payment refund amount

The report outlines ACT's concern that collection of the required information reported on the 8038 series forms or in the instructions does not always have well-defined goals. Additionally, many questions on the form are not easily answered and call for a degree of accuracy that serve no legitimate IRS objectives.

As a result, the ACT report recommends that IRS consider the burden imposed on the issuer to report certain information, compared to the goals to be achieved from such reporting. It suggests that any information not falling within one of the six areas not be collected.

In response to the recommendations, Bob Henn, acting director of the IRS Tax Exempt Bonds division, stated that the IRS has included a complete review of all bond-related forms in its 2013 work plan.