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IRS Issues Report on Tax-Exempt Bonds Compliance Program

September 25, 2008

IRS has released a report summarizing data, analysis, and preliminary findings of the tax-exempt bonds compliance check questionnaire initiative launched last year.  The objective of the project was to assess overall knowledge of post-issuance compliance and record retention requirements across a wide array of 501(c)(3) organizations, including colleges and universities. The project was the first major initiative in the IRS' use of the "soft contact" approach to compliance---the use of informal, non-audit contacts with the regulated community to promote compliance in the exempt bond market.
 
While respondents to the bonds questionnaire seemed to recognize the importance of post-issuance compliance procedures, the IRS report notes that there remain significant gaps in the effective implementation of such procedures throughout the charitable financings market segment. According to the report, most respondents reported that they maintained written policies and practices in three key areas of compliance; however about half of the respondents failed to describe their written procedures (which they were instructed to do).  Citing an interest in "data inconsistencies", IRS plans to follow up with a number of respondents to assess the veracity of data received, including additional field compliance checks.
 
The next project the Tax Exempt Bonds division plans to launch in a continuation of the "soft contact" compliance check program will be a survey focusing on post-issuance compliance and record retention processes of governmental issuers.