News and Information on Tax-Exempt Bonds
April 2, 2013
The IRS has released its "FY 2013 Work Plan" for the Office of Tax-Exempt Bonds (TEB). The plan outlines the operating priorities for the division and maps out program guidance for TEB employees.
Areas of focus in the enforcement area include identifying arbitrage-motivated abusive transactions and post-issuance compliance. TEB plans to maintain a high priority on auditing, encouraging voluntary compliance, and developing education and outreach programs focused on governmental bonds and qualified 501(c)(3) bonds reflecting their prevalence in the municipal bond market. The work plan highlights:
- Continued examination presence focused on arrangements that increase noncompliance risk due to excessive private business use;
- Continued coordination and information-sharing with the IRS Exempt Organizations division, including the development and analysis of referral information.
Additionally, the IRS Office of Tax-Exempt Bonds has issued a report entitled, "Avoiding Troubled Tax-Advantaged Bonds," which identifies and examines potentially problematic situations seen during the phases of a bond transaction and provides some considerations to help issuers avoid significant difficulties.
According to the report, the majority of violations result from the failure of bond issuers to meet post-issuance compliance responsibilities. The report emphasizes that issuers should clearly establish who is responsible for: (1) accounting for how bond proceeds are used; (2) determining that the bonds are not arbitrage bonds; and (3) monitoring continuing compliance with all transaction requirements.
The Joint Committee on Taxation (JCT) has also issued a report, "Present Law and Background Information Related to Federal Taxation and State and Local Government Finance." The report analyzes a series of state and local tax issues, focusing chiefly on those associated with the tax-exempt bond provisions. The report was prepared by JCT for a March 19 Ways and Means hearing on "Tax Reform: What It Means for State and Local Tax and Fiscal Policy." The issue of qualified private activity bonds was discussed in-depth during the hearing, which can viewed online here.
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