HomeMy WebLinkAboutR-2012-007 Tax-Exempt Financing Compliance Policy and Procedures - City as Conduit Issuer RESOLUTION NO. R-2012-007
A RESOLUTION APPROVING THE ADOPTION AND IMPLEMENTATION OF TAX-EXEMPT
FINANCING COMPLIANCE POLICY AND PROCEDURES FOR BOND TRANSACTIONS IN
WHICH THE CITY IS THE CONDUIT ISSUER
WHEREAS, the adoption and updating of various operating policies and procedures is
advisable within the Department of Finance for the City of Riverside from time to time; and
WHEREAS, adoption of the Tax-Exempt Financing Compliance Policy and
Procedures (Conduit Issuer) attached hereto as Exhibit "A" was reviewed and recommended
by the Director of Finance; and
WHEREAS, the Board of Aldermen find it in the best interest of the citizens of the City of
Riverside to approve the implementation of such policy;
NOW THEREFORE, BE IT RESOLVED BY THE BOARD OF ALDERMEN OF THE
CITY OF RIVERSIDE, MISSOURI, AS FOLLOWS:
THAT adoption and implementation of the Tax-Exempt Financing Compliance Policy
and Procedures (Conduit Issuer) attached hereto, marked Exhibit "A", and made a part hereof
by reference is hereby approved;
PASSED AND ADOPTED by the Board of Idermen and APPROVED by the Mayor of
the City of Riverside, Missouri, the L��.day of ����,�� 2012.
D
K hleen L. Rose, ayor
ATTEST:
i�` -- 1 •
1,� �/�,/�� �_ ///,
�_'',�`�4�C.� c�iLeJL.�C�
Robin Littrell, City Clerk
Approved as t orm:
.�
,�
a omps n, City Attorney
CITY OF RIVERSIDE, MISSOUffi
TAX-EXEMPT FINANCING COMPLIANCE POLICY AND PROCEDURE
(CONDUIT BONDS)
Dated as of January 17, 2012
January 17, 2012
TAX-EXEMPT FINANCING COMPLIANCE POLICY AND PROCEDURE
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section1.1. Definitions ........................................................................................................................ 1
ARTICLE [I
PURPOSE AND SCOPE
Section 2.1. Purpose of Compliance Procedure ................................................................................... 3
Section 2.2. Scope of Compliance Procedure; Conflicts ..................................................................... 3
Section 23. Amendments and Publication of Compliance Procedure ................................................. 4
ART[CLE III
BOND COMPLIANCE OFF[CER; TRAINING
Section 3.1. Bond Compliance Officer Duties ..................................................................................... 4
Section3.2. Training ............................................................................................................................ 4
ARTICLE N
TAX-EXEMPT BONDS CURRENTLY OUTSTANDING
Section 4.1. Tax-Exempt Bonds Covered by Article IV Procedures .................................................... 4
Section4.2. Tax-Exempt Bond File ..................................................................................................... 4
Section 43. Conduit User Contact ....................................................................................................... 4
Section 4.4. Annual Certification ......................................................................................................... 4
Section 4.5. Correcting Prior Deficiencies in Compliance .................................................................. 5
ARTICLE V
COMPLIANCE PROCEDURE FOR NEW TAX-EXEMPT BOND ISSUES
Section5.1. Application ....................................................................................................................... 5
Section 5.2. Prior to Issuance of Tax-Exempt Bonds .......................................................................... 5
Section 53. Accounting and Recordkeeping ....................................................................................... 6
Section 5.4. Final Allocation of Bond Proceeds .................................................................................. 6
ARTICLE VI
ONGOING MONITORING PROCEDURES
Section 6.1. Annual Compliance Checklist .......................................................................................... 7
Section 6.2. Arbitrage and Rebate Compliance ................................................................................... 7
Exhibit A— List of Tax-Exempt Bonds Covered by this Compliance Procedure
* * *
(i) January 17, 2012
TAX-EXEMPT FINANCING COMPLIANCE POLICY AND PROCEDURE
ARTICLE I
DEFINITIONS
Section 1.1. DeTinitions. Capitalized words and terms used in this Compliance Procedure
have the following meanings:
"Annual Compliance Checklist" means a questionnaire and/or checklist described in Section 6.1
that is completed each year by a Conduit User for a Tax-Exempt Bond issue.
"Bond Compliance Ofticer" means the Issuer's Finance Director or, if the position of Finance
Director is vacant, the person filling the responsibilities of the Finance Director for the Governing Body.
`Bond CounseP' means a law firm selected by the Issuer or the Conduit User to provide a legal
opinion regarding the tax status of interest on Tax-Exempt Bonds as of the issue date or the law firm
selected to advise regarding matters referenced in this Compliance Procedure.
`Bond Restricted Funds" means the funds, accounts, and investments that aze subject to
arbitrage rebate and/or yield restriction rules that have been identified in the Tax Compliance Agreement
for a Tax-Exempt Bond issue.
`Bond TranscripP' means the "transcript of proceedings" or other similaz titled set of documents
assembled by Bond Counsel following the issuance of Tax-Exempt Bonds.
"Code" means the Internal Revenue Code, as amended.
"Compliance Procedure" means this Tax-Exempt Financing Compliance Policy and Procedure.
"Conduit User" means the entity that receive proceeds and is required to pay principal and
interest on a Tax-Exempt Bond issue.
"Conduit User Bond Compliance Ofticer" means the individual officer or employee of the
Conduit User named as the primary individual responsible for post-issuance tas compliance by the
Conduit User in connection with a Tax-Exempt Bond issue.
"Cost" or "Costs" means ail costs and expenses paid for the acquisition, design, construction,
equipping or improvement of a Project Facility or costs of issuing Tax-Exempt Bonds.
"Final Written Albcation" means the Final Written Allocation of Bond proceeds prepared
pursuant to Section 5.4 of this Compliance Procedure.
"Financed Assets" means that part of a Project Facility treated as financed with Tax-Exempt
Bond proceeds as reflected in a Final Written Allocation or, if no Final Written Allocation was prepared,
the accounting records of the Trustee and the Conduit Issuer and the Tax Compliance Agreement for the
Tax-Exempt Bond issue.
"Governing Body" means the Board of Aldermen of the Issuer.
"Intent Resolution" means a resolution of the Goveming Body stating the intent of the Issuer to
finance all or a portion of the Project Facility, stating the expected maximum size of the financing and
stating the intent of the Issuer to reimburse the costs paid by the Conduit User from proceeds of the Tax-
Exempt Bonds.
"IRS" means the Internal Revenue Service.
"Issuer" means the C[TY OF RIVERSIDE, MISSOURI.
"Placed In Service" means that date (as determined by the Conduit User Bond Compliance
Officer) when the Project Facility is complete and is actually used at a Ievel substantially as originally
designed.
"Project Facility" means all tangible or intangible property financed in whole or in part with
Tax-Exempt Bonds that is functionally related or integrated in use, that is located on the same physical
site or proximate sites, and that is expected to be Placed In Service within a one-year period.
"Rebate AnalysY' means the Rebate Analys[ for the Tax-Exempt Bonds selected pursuant to the
Tax Compliance Agreement.
"Tax Compliance Agreement" means the Federal Tax CeRificate, Tax Compliance Agreement,
Arbitrage Agreement, or other written certification or agreement of the Issuer and the Conduit User
setting out representations and covenants for satisfying the post-issuance tax compliance requirements for
a Tax-Exempt Bond issue.
"Tax-Exempt Bond(s)" means any bond, note, installment sale agreement, lease or certificate
intended to be a debt obligation of the Issuer, the proceeds of the which are to be loaned or otherwise
made available to the Conduit User, and the interest on which is excludable from gross income for federal
income tax purposes. A list of all Tax-Exempt Bonds outstanding and subject to this Compliance
Procedure as of December 3 I, 2011, is attached as Exhibit A.
"Tax-Exempt Bond File" means documents and records which may consist of paper and
electronic medium, maintained for each Tax-Exempt Bond. Each Tax-Exempt Bond File will include the
following information if applicable:
(a) Intent Resolution. (Duplicate Copy Maintained by Bond Compliance Officer)
(b) Bond Transcript. (Duplicate Copy Maintained by Bond Compliance Officer)
(c) Final Written Allocation and/or all available accounting records related to the
Project Facility showing expenditures allocated to the proceeds of a Tax-Exempt
Bond and expenditures (if any) allocated to other sources of funds.
(d) AIl rebate and yield reduction payment calculations performed by the Rebate
Analyst and all investment records provided to the Rebate Analyst for purposes
of preparing the calculation.
(e) Forms 8038-T together with proof of filing and payment of rebate. (Duplicate
Copy Maintained by Bond Compliance Officer)
(fj Investment agreement bid documents (unless included in the Bond Transcript)
induding:
(1) Bid solicitation, bid responses, certificate of broker;
(2) Written summary of reasons for deviations from the terms of the
solicitation that are incorporated into the investment agreement; and
(3) Copies of the investment ageement and any amendments.
2 January 17, 2012
(g) Any item required to be maintained by the terms of the Tax Compliance
Agreement involving the use of the Project Facility or expenditures related to ta�c
compliance for the Tax-Exempt Bonds.
(h) Any opinion of Bond Counsel regarding the Tax-Exempt Bonds not included in
the Bond 7'ranscript. (Duplicate Copy Maintained by Bond Compliance Officer)
(i) Amendments, modifications or substitute agreements to any agreement
contained in the Bond Transcript. (Duplicate Copy Maintained by Bond
Compliance Officer)
Q) Any correspondence with the [RS relating to the Tax-Exempt Bonds including
all correspondence relating to an audit by the IRS of the Tas-Exempt Bonds or
any proceedings under the Tax-Exempt Bonds Voluntary Closing Agreement
Program (VCAP). (Duplicate Copy Maintained by Bond Compliance Officer)
(k) Any available questionnaires or correspondence substantiating the use of the
Project Facility in accordance wi[h the terms of the Tax Compliance Agreement
for the Tax-Exempt Bond issue.
(I) For refunding bond issues, the Tax-Exempt Bond File for the refunded Tax-
Exempt Bonds.
"Trustee" means the corporate trustee named in a trust indenture for a Tax-Exempt Bond issue.
ARTICLE II
PURPOSE AND SCOPE
Section 21. Purpose of Compliance Procedure. The Issuer issues Tax-Exempt Bonds and
loans or otherwise makes the proceeds available to Conduit Users to fund Costs of Project Facilities. The
Issuer understands that in exchange for the right to issue Tax-Exempt Bonds at favorable interest rates
and terms, the Code and related regulations impose ongoing requirements related to the proceeds of the
Tax-Exempt Bonds and the Project Facility financed by the Tax-Exempt Bonds. These requirements
focus on the investment, use and expenditure of proceeds of the Tax-Exempt Bonds and related funds as
well as restrictions on the use of the Project Facility.
The Issuer recognizes that the IRS has stated that all issuers of Tax-Exempt Bonds should have a
separate written policy and procedure regarding ongoing compliance with the federal tax requirements for
Tax-Exempt Bonds.
The [ssuer is committed to full compliance with the tax-exempt bond requirements for all of its
outstanding and future tax-exempt financings. This Compliance Procedure is adopted by the Governing
Body to comply with the IRS directive and to improve tax compliance and documentation. Since the
Conduit User for each Tax-Exempt Bond issue is primarily responsible for the expenditure and
investment of its Tax-Exempt Bonds and the use of the Financed Assets and the Project Facility, this
Compliance Policy provides that the Conduit User will assume substantially all obligations related to
post-issuance tax compliance for Tax-Exempt Bonds issued for its benefit.
Section 2.2. Scope of Compliance Procedure; Contlicts. This Compliance Procedure
applies to all Tax-Exempt Bonds currently outstanding and all Tax-Exempt Bonds issued in the future. If
the provisions of this Compliance Procedure conflict with a Tax Compliance Agreement or any other
specific written instructions of Bond Counsel, the terms of the Tax Compliance Agreement or specific
written instructions of Bond Counsel will supersede and govern in lieu of this Compliance Procedure.
Any exception to this Compliance Procedure required by Bond Counsel as part of a future issue of Tax-
3 January 17, 2012
Exempt Bonds will be incorporated in the Tax Compliance Agreement for the future issue. Any
requirements imposed on the Issuer in the Tax Compliance Agreement, will be noted by the Bond
Compliance Ofticer and incorporated into the Annual Compliance Checklist.
Section 2.3. Amendments and Publication oT Compliance Procedure. This Compliance
Procedure may be amended from time-to-time by the Governing Body. Copies of this Compliance
Procedure and any amendments will be included in the permanent records of the Issuer.
ARTICLE III
BOND COMPLIANCE OFFICER; TRAINING
Section 3.1. Bond Compliance OfTicer Duties. The Bond Compliance Officer is responsible
for implementing this Compliance Procedure. The Bond Compliance Officer will work with Conduit
User Bond Compliance Officers and the Trustee to assist in implementing this Compliance Procedure.
The Bond Compliance Officer will consult with Bond Counsel, legal counsel to the Issuer, accountants,
tax return preparers and other outside experts to the extent necessary to carry out the purposes of this
Compliance Procedure. The Bond Compliance Officer will report to the Governing Body as necessary,
and at least annually, regarding implementation of this Compliance Procedure and any recommended
changes or amendments to this Compliance Procedure.
Section 3.2. Training. When appropriate, the Bond Compliance Officer will attend training
programs offered by the IRS or other industry professionals regarding tax-exempt financing that are
relevant to the Issuer.
ARTICLE IV
TAX-EXEMPT BONDS CURRENTLY OUTSTANDING
Section 4.L Tax-Exempt Bonds Covered by Article IV Procedures. This Article [V
applies to all Tax-Exempt Bonds issued prior to December 31, 201 I that are currently outstanding as of
December 31, 201 1. These Tax-Exempt Bonds are listed on Exhibit A.
Section 4.2. Tax-Exempt Bond File. As soon as practical, the Bond Compliance Officer will
attempt to assemble as much of the Tax-Exempt Bond File as is available for each Tax-Exempt Bond that
is listed on Exhibit A.
Section 4.3. Conduit User Contact. As soon as practical the Bond Compliance Officer will
send to each Conduit User of an Tax-Exempt Bond listed on Exhibit A, a copy of the Tax Compliance
Agreement for the financing along with a letter reminding the Conduit User that under the agreement it is
responsible for post-issuance tax compliance related to the investment of Bond Restricted Funds, record
keeping, use of Tax-Exempt Bond proceeds, and use of the Project Facility. The letter will contain a list
of records comprising the Tax-Exempt Bond File that the Conduit User should retain.
Section 4.4. Annual Certification. As soon as practical following the adoption of this
Compliance Procedure, the Bond Compliance Officer will request each Conduit User to confirm annually
in writing its compliance �vith the terms of the Tax Compliance Agreement for the Tax-Exempt Bond
issue. Where possible, the Bond Compliance Officer will combine this certification request with other
4 January 17, 2012
disclosures the Conduit User regularly provides to the Trustee (such as ongoing continuing disclosure).
Certifications completed by the Conduit User will be retained by the Bond Compliance Officer.
Section 4.5. Correcting Prior Deficiencies in Compliance. In the event a Conduit User
informs the Bond Compliance Officer of a deficiency in compliance with a Tas Compliance Agreement
for an outstanding Tax-Exempt Bond listed on Exhibit A, the Bond Compliance Officer will direct the
Conduit User to follow the procedures described in Treasury Regulations or the Tax-Exempt Bonds
Voluntary Closing Agreement Program (VCAP) to remediate the noncompliance. If remediation of the
noncompliance requires the Issuer to submit a request under VCAP, the Bond Compliance Officer will
undertake this step only after reporting the violation to the Governing Body and obtaining its approval.
ARTICLE V
COMPLIANCE PROCEDURE FOR NEW TAX-EXEMPT BOND ISSUES
Section 5.1. Application. This Article V applies to Tax-Exempt Bond financings issued on
or after January l, 2012.
Section 5.2. Prior to Issuance of Tax-Exempt Bonds.
(a) Intent Resolution. The Governing Body will authorize and approve the issuance of Tax-
Exempt Bonds. Prior to or as a part of this authorizing resolution or ordinance, the Governing Body may
adopt an Intent Resolution. The Bond Compliance Officer will provide the Conduit User with a copy of
this Compliance Procedure prior to adoption of the Intent Resolution.
(b) Directions to Bond CounseL The Bond Compliance Officer wiil provide a copy of this
Compliance Procedure to Bond Coimsel with directions for Bond Counsel to structure the documentation
and procedural steps taken prior to issuing the Tax-Exempt Bonds so that they conform to the
requirements of this Compliance Procedure, except to the extent Bond Counsel determines that different
procedures are required. The Bond Compliance Officer will consult with Bond Counsel so that
appropriate provisions are made to fund or reimburse the Issuer's costs and expenses incurted to
implement this Compliance Procedure. To the extent the Issuer relies on or acts at the direction of the
Conduit User, the Tax Compliance Agreement will contain appropriate provision for Issuer
indemnification by the Conduit User.
(c) Tax Compliance Agreement. Each Tax-Exempt Bond issue will include a Tax
Compliance Agreement signed by the Conduit User Bond Compliance Officer. The Ta�c Compliance
Agreement will (1) describe the Project Facility and the anticipated Financed Assets, (2) identify all Bond
Restricted Funds and provide for arbihage and rebate compliance by the Conduit User, (3) for new money
financings — require the Conduit User to complete a Final Written Allocation, and (4) contain a form of
the Annual Compliance Checklist for the Tax-Exempt Bond issue. The Conduit User Bond Compliance
Officer will confer with Bond Counsel, the Bond Compliance Officer and the Issuer's counsel regarding
the meaning and scope of each representation and covenant contained in the Tax Compliance Agreement.
(d) Preliminary Cost Allocations. The Conduit User Bond Compliance Officer in
consultation with Bond Counsel, will prepare a preliminary cost allocation plan for the Project Facility.
The preliminary cost allocation plan will identify the assets and expected costs For the Project Facility,
and, when necessary, will break-out the portions of Costs that the Issuer expects to finance with Tax-
Exempt Bonds (the "Financed Assets") from the portions expected to be financed from other sources.
5 January 17, 2012
(e) Tax Review with Bond Counsel. Prior to the sale of the Tax-Exempt Bonds, the Bond
Compliance Officer, Conduit User Bond Compliance Officer and Bond Counsel will review this
Compliance Procedure together with the draft Tax Compliance Agreement to ensure that any tax
compliance issues in the new financing are adequately addressed by this Compliance Procedure and/or the
Tas Compliance Agreement. In the event Bond Counsel determines that this Compliance Procedure
conflicts with, or must be supplemented to account for special issues or requirements for the Tax-Exempt
Bonds, the Bond Compliance Officer will ask Bond Counsel to include the written modifications or
additions in the final Tax Compliance Agreement. The Bond Compliance Officer will request Bond
Counsel to prepare a form of Annual Compliance Checklist for use in monitoring the ongoing compliance
requirements for the Tax-Exempt Bond issue.
Section 5.3. Accounting and Recordkeeping.
(a) Accountingfor New Money Projects. The Conduit User Bond Compliance Offtcer will
be responsible for accounting for the investment and allocation of proceeds of the Tax-Exempt Bonds.
The Conduit User Bond Compliance Officer will establish separate accounts or subaccounts to record
expenditures for Costs of the Project Facility. The Conduit User Bond Compliance Officer may use
accounts es[ablished pursuant to a trust indenture for the Tax-Exempt Bonds to assist it in accounting For
the investmen[ and expenditure of Tax-Exempt Bonds. In recording Costs for the Project Facility, the
Conduit User Bond Compliance Officer will insure that the accounting system will include the following
information: (1) identity of person or business paid, along with any other available narrative description
of the purpose for the payment, (2) date of payment, (3) amount paid, and (4) invoice number or other
identifying reference.
(b) Accounting for Refunded Bonds and Related Refunded Bond Accounts. For Tax-Exempt
Bonds that refund prior issues, the Tax Compliance Agreement will set out special accounting and
allocation procedures for the proceeds of the financing, and if necessary proceeds of the refinanced debt.
(c) Tax-Exem�t Bond File. The Conduit User Bond Compliance Officer will be responsible
for assembling and maintaining the Tax-Exempt Bond File. The Conduit User Bond Compliance Officer
will provide copies to the [ssuer of items contained in the Tax-Exempt Bond File.
Section 5.4. Final Allocation of Bond Proceeds.
(a) Bond Compliance Officer Responsible for Preparation of Final Written Allocation;
Timine. The Conduit User Bond Compliance Officer is responsible for making a written allocation of
proceeds to expenditures and the identification of Financed Assets. This process will be memorialized in
the Final Written Allocation. For a new money financing, the Conduit User Bond Compliance Officer
will commence this process as of the earliest of (1) the requisition of all Tax-Exempt Bond proceeds from
any segregated Tax-Exempt Bond funded account, (2) the date the Project Facility has been substantially
completed or (3) four and one/half years following the issue date of the Tax-Exempt Bonds. For Tax-
Exempt Bonds issued only to refund a prior issue of Tax-Exempt Bonds, the Conduit User Bond
Compliance Officer will prepare and/or document the Final Written Allocation for the Project Facility
financed by the refunded Tax-Exempt Bonds in accordance with the advice of Bond Counsel and include
it in the Tax Compliance Agreement.
(b) Contents and Procedure. The Conduit User Bond Compliance Officer will consult the
Tax Compliance Agreement and, if necessary, contact Bond Counsel to seek advice regarding any special
allocation of Tax-Exempt Bond proceeds and other money of the Issuer to the Costs of the Project
Facility. If no special allocation is required or recommended, the Bond Compliance Officer will allocate
Costs of the Project Facility to the proceeds of the Tax-Exempt Bonds in accordance with the Conduit
6 January 17, 2012
User's accounting records. Each Final Written Allocation will contain the following: (l) a reconciliation
of the actual sources and uses to Costs of the Project Facility, (2) the percentage of the cost of the Project
Facility financed with proceeds of the Tax-Exempt Bonds (sale proceeds plus any investment earnings on
those sale proceeds), (3) the Project Facility's Placed in Service date, (4) the estimated economic useful
life of the Project Facility, and (5) any special procedures to be followed in completing the Annual
Compliance Checklist (e.g., limiting the Annual Compliance Checklist to specific areas of the Project
Facility that the Final Written Allocation or the Tax Compliance Agreement treats as having been
financed by Tax-Exempt Bonds).
(c) Finalize Annual Compliance Checklist. As part of the preparation of the Final Written
Allocation, the Conduit User Bond Compliance Officer will update the draft Annual Compliance
Checklist contained in the Tax Compliance Agreement. The Conduit User Bond Compliance Officer will
include reminders for all subsequent arbitrage rebate computations required for the Tax-Exempt Bonds in
the Annual Compliance Checklist.
(d) Review of Final Written Allocation and Annual Compliance Checklist. Each Final
Written Allocation and Annual Compliance Checklist will be reviewed by legal counsel to the Conduit
User or Bond Counsel for sufficiency and compliance with the TaY Compliance Agreement and this
Compliance Procedure. Following the completion of the review, the Bond Compliance Officer will
execute the Final Written Allocation.
(e) Conduit User Certification of Compliance. The Conduit User Bond Compliance Officer
will certify in writing to the "Trustee completion of its responsibilities under this Section 5.4.
ARTICLE VI
ONGOING MONITORING PROCEDURES
Section 61. Annual Compliance Checklist. An Annual Compliance Checklist will be
completed by the Conduit User Bond Compliance Officer each year following completion of the Final
Written Allocation. Each Annual Compliance Checklist will be designed and completed for the purpose
of identifying potential noncompliance with the terms of the Tax Compliance Agreement or this
Compliance Procedure and obtaining documents (such as investment records, arbitrage calculations, or
other documentation for the Project Facility) that are required to be incorporated in the Tax-Exempt Bond
File. The Conduit User Bond Compliance Officer will refer any responses indicating a violation of the
terms of the Tax Compliance Agreement to legal counsel to the Conduit User or Bond Counsel and, if
recommended by counsel, will follow the procedure set out in Section 4.4 to remediate the non-
compliance.
Section 6.2. Arbitrage and Rebate Compliance. The Conduit User Bond Compliance
Officer will monitor the investment of Bond Restricted Funds and provide investment records to the
Rebate Analyst on a timely basis. The Bond Compliance Officer will follow the directions of the Rebate
Analyst with respect to the preparation of and the timing of rebate or yield reduction computations.
ADOPTED BY THE
,2011
7 January 17, 2012
EXHIBIT A
LIST OF TAX-EXEMPT BONDS COVERED BY THIS COl1�LIANCE PROCEDURE
Amount Balance at
Issuance Maturi Date Issued 12/31/2011
Hoover Universal Cha ter l00 Bonds 6/01/2013 to 12/O1/2020 $2Q000,000 $20,000,000
Total _ $2Q000,000 $20,OOQ000
A-1 January 17, 2012
Page 1 of 2
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� �
IRS Recommends Bond
Issuers Adopt
Tax Compliance
Procedures
r ■
For several years IRS officials have expressed concern that
state and local governments do not have adequate written �
procedures to ensure that ongoing federal tax requirements are
met after the closing of a bond issue. If bond proceeds are not
invested or if financed facilities are not used in a manner
permitted by tax law, interest on the bonds is not tax-exempt,
and the investor could incur a significant federal income tax
liability.
The IRS recently published an article that clarifes its �
expectations and describes minimum post-issuance tax
compliance standards for all issuers of tax-exempt debt. The
full article appears on the IRS website at
h�//www.irs.qoWtaxexemolbond/article/0. itl=24350300.html. �
in the article, the IRS strongly suggests that issuers adopt a
comprehensive set of tax compliance procedures that will
govern all of the issuer's tax-exempt debt, rather than �
attempting to follow the tax compliance procedures mandated
by the federal tax certificate or tax compliance agreement
relating to each specific bond issue.
The article also outlines key characteristics that should be �
included in a bond issuer's written tax compliance procedures:
• Due diligence review at regular intervals; �
• Identifying the offcial or employee responsible for review;
www.oilmorebell.com
• Training of the responsible official/employee;
• Retention of adequate records to substantiate compliance
(e.g., records relating to expenditure of proceeds);
• Procedures reasonably expscted to timely identify
noncompliance; and
• Procedures ensuring that the issuer will take steps to timely
correct noncompliance
http://emailer.emfluence.com/viewaswebpage/EE8DFBF0-9DD7-4A8D-AA32-A3BC51... O 1 /11/20 ] 2
Page 2 of 2
Gilmore 8 Bell recommends that all issuers adopt and follow
written procedures that cover each of the "key characteristics"
described by the IRS in its article. Gilmore & Bell has developed
several model tax compliance procedures that may be helpful
for issuers that wish to draft and adopt a written tax compliance
procedure. These examples are located at
httoi/www.ailmorebell.com/memorendashtml. TFIB website also contains
links to other articles related to post-issuance compliance. While
issuers are welcome to use these forms in developing their own
set of written procedures, keep in mind that any "model"
document may not be appropriate for every issuer.
For more information about tax compliance procedures or
assistance with establishing written tax compliance procedures,
please contact one of the Gilmore & Bell tax lawyers listed in
the margin or your Gilmore 8 Bell bond lawyer.
2405 Grend Blvd., Suite � 100 211 N Broadway. Suite 2350 i00 North Main, Suite 800 t248 O Siree�, Suite 710
Kansas City, Missouri 64108-252� SL Louis Missoun 63102-2741 Wchita, Kansas 67202-1311 Lincolq Nebraska 68508-142a
816 221 1000 314 436 1000 316 267 2051 402 474 5000
Gilmore & 8ell, P.C. I Unsubscribe
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