Post-Issuance Tax Compliance

Such efforts include: (i) the distribution of tax questionnaires to 501(c)(3) borrowers and governmental issuers of tax-exempt bonds inquiring as to the scope and extent of post-issuance compliance practices and the date of adoption of written post-issuance tax policies; (ii) annual reporting requirements for 501(c)(3) borrowers of tax-exempt bonds in the form of IRS Schedule K (IRS Form 990), which requires detailed information regarding outstanding tax-exempt bonds and private business use calculations; (iii) audits of tax-exempt bonds (including physical examination of the bond financed facilities); and (iv) enhanced information gathering through the IRS Form 8038.

The IRS has indicated that it plans to audit Schedule K returns provided by 501(c)(3) organizations in the near future. In the event of an IRS bond audit or a Schedule K audit, it will be necessary for borrowers to provide detailed information to support their Schedule K reporting and calculations.

Given the enhanced federal regulatory oversight, governmental issuers and conduit borrowers of tax-exempt bonds need to implement and maintain rigorous post-issuance tax compliance programs. The nature of such a program will vary depending on the facts and circumstances.

What Should Your Organization Do To Be Prepared?

Issuers and conduit borrowers of tax-exempt debt that implement a comprehensive post-issuance tax compliance program will be in a good position to defend the tax-exempt status of the bonds in the event of IRS scrutiny or an audit in a cost-effective manner. Five broad actions are vital to on-going tax-compliance:

1. Establish written policies and procedures relating to post-issuance tax compliance matters.
2. Calculate private business use with respect to the use of bond financed property in an accurate manner.
3. Review outside management and service contacts for bond financed property on a regular basis.
4. Maintain adequate records regarding the use of bond proceeds, investment of such amounts and related matters for all tax-exempt bond issues.
5. Obtain outside tax expertise to assist with various post-issuance tax compliance matters and to provide requisite training.

How We Can Help

To assist issuers and borrowers of tax-exempt debt in meeting ongoing post-issuance compliance responsibilities, BLX Group LLC, an independent SEC registered advisory firm wholly owned by us, offers a wide range of post-issuance services, including:

• Assistance with and completion of IRS Schedule K, applicable to nonprofit corporations
• Comprehensive review of the expenditure and use of bond proceeds
• Periodic review of all contracts, leases and arrangements with private or unrelated parties relating to the use of bond financed facilities
• Annual private business use review and calculation
• Development and review of written post-issuance tax compliance policies and procedures

With more than 40 finance professionals dedicated to financial and consultative services in five offices nationwide, BLX is well-qualified to assist and guide issuers and borrowers with all elements of post issuance compliance.