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.
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. Four broad actions are vital to on-going tax-compliance:
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:
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.