May 23, 2013 TAX EXEMPT BONDS. Enforcement and Outreach. Christopher C. Woodin Lead Tax Law Specialist Washington, D.C.

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1 May 23, 2013 TAX EXEMPT BONDS Enfrcement and Outreach Christpher C. Wdin Lead Tax Law Specialist Washingtn, D.C.

2 Office f Tax Exempt Bnds Internal Revenue Service Tax Exempt/Gvernment Entities Divisin (TE/GE) Gvernment Entities (FSLG, ITG and TEB) Office f Tax Exempt Bnds Office f Directr Field Operatins Cmpliance and Prgram Management 2 TEB

3 Office f Tax Exempt Bnds Field Operatins Enfrcement Divisin Examinatins and Cmpliance Checks General Classificatin (verify brad cmpliance) Prject Classificatin (targeted issues fr cmpliance review) Identify Abusive Transactins and Prmters Gal f enfrcing the law t assure the tax subsidy is used prperly and fairly 3 TEB

4 Office f Tax Exempt Bnds Cmpliance and Prgram Management Administrative Divisin Administers VCAP Risk Analysis and Crrespndence Examinatins Questinnaires and Research Studies Technical Supprt fr Field Operatins Outreach and Educatin Gal f prviding guidance and supprt t fster and achieve maximum cmpliance 4 TEB

5 Office f Tax Exempt Bnds 5 TEB Market Segment Examinatins Gvernmental bnds Qualified 501(c)(3) bnds Qualified small issue bnds Varius exempt facility bnds, including: Airprts Slid waste Sewage Varius disaster relief bnds Build America bnds Qualified schl cnstructin bnds

6 Office f Tax Exempt Bnds Arbitrage Fcused Examinatins Advance refunding bnds Student lan bnds Frm 8038-T (rebate payment verificatin, etc.) Cmpliance Check Questinnaires Evaluating the pst-issuance cmpliance mnitring plicies and prcedures f issuers f gvernmental bnds 6 TEB

7 Office f Tax Exempt Bnds Pst-Issuance Cmpliance 7 TEB Tax-advantaged bnds are subject t applicable federal tax requirements at the time f issuance, but als while the bnds remain utstanding. This requires n-ging mnitring after issuance f the bnds. Pst-issuance tax requirements general categries: 1) Qualified use f prceeds and financed prperty. This requires mnitring the varius direct and indirect uses f bnd-financed prperty ver the life f the bnds and calculating the percentage f nnqualified uses. 2) Arbitrage yield restrictin and rebate. This requires mnitring the yield n investments acquired with bnd prceeds is prperly restricted and whether the issuer must pay a yield reductin and/r rebate payment.

8 Office f Tax Exempt Bnds Pst-Issuance Cmpliance Written Prcedures fr Mnitring Cmpliance Due diligence review at regular intervals; Identifying fficial r emplyee respnsible fr review; Training f the respnsible fficial/emplyee; Retentin f adequate recrds t substantiate cmpliance (e.g., recrds relating t expenditure f prceeds); Prcedures reasnably expected t timely identify nncmpliance; and Prcedures ensuring that the issuer will take steps t timely crrect nncmpliance. 8 TEB

9 Office f Tax Exempt Bnds Recrd Retentin Tax-advantaged bnd transactins require recrds be retained t demnstrate initial and n-ging cmpliance with applicable federal tax law. Sectin 6001 f the Internal Revenue Cde prvides the general rule fr the prper retentin f recrds fr federal tax purpses. 9 TEB Issuers and cnduit brrwers shuld retain sufficient recrds t shw that all tax-exempt bnd related returns submitted t the IRS are crrect. Such returns include, fr example, IRS Frms 8038, 8038-G, 8038-GC, 8038-T, and 8038-R.

10 Office f Tax Exempt Bnds The recrds mst cmmnly required fr tax-exempt bnd transactins include: Basic bnd transactin dcuments (e.g., trust indenture, lan agreement, bnd pinin and tax certificate) Dcumentatin evidencing all surces f payment r security fr the bnds Dcumentatin evidencing use f bnd-financed prperty by public and private surces (i.e., cpies f management cntracts and research agreements) Dcumentatin evidencing expenditure f bnd prceeds Dcumentatin pertaining t investment f bnd prceeds 10 TEB The freging items are very general and nly highlight basic recrds that are typically part f a tax-exempt bnd financing. Other recrds may be necessary.

11 Office f Tax Exempt Bnds All recrds shuld be kept in a manner that allws the IRS access fr as lng as they are material. Usually this is accmplished thrugh the maintenance f hard cpies. Rev. Prc , C.B. 652 prvides guidance t taxpayers that maintain bks and recrds by using an electrnic strage system, in lieu f keeping hard cpies. Sectin (e) f the Regulatins prvides that recrds shuld be retained fr s lng as the cntents theref are material in the administratin f any internal revenue law. Material recrds shuld generally be kept fr as lng as the bnds are utstanding, plus 3 years after the final redemptin date f the bnds r the refunding bnds. 11 TEB

12 Office f Tax Exempt Bnds Vluntary Clsing Agreement Prgram (when remedial actin is nt available) General VCAP Streamline VCAP (Identified Vilatins in IRM) Ntice and IRM prvide guidance n the VCAP prgram, including hw t submit a request New Frm 14429, Tax Exempt Bnds Vluntary Clsing Agreement Prgram Request IRM prcedures include a settlement break if issuer identified vilatin in accrdance with its prcedures 12 TEB

13 Department f the Treasury Internal Revenue Service Tax Exempt Bnds 13 TEB