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IRS Launches Compliance Check on Governmental Bond Financings

The Tax Exempt Bonds office (TEB) of the IRS Tax Exempt and Government Entities division initiated a compliance project to evaluate the post-issuance and record retention policies, procedures and practices of governmental issuers of tax-exempt bonds. TEB sent compliance check questionnaires to 200 governmental entities that issued tax-exempt bonds in calendar year 2005, as indicated on their Form 8038-G, Information Return for Tax-Exempt Governmental Obligations. The questionnaires were sent out on Monday, January 26, 2009. Governmental entities selected for the project had 90 days to respond.  TEB granted up to 30 additional days to respond in individual cases based upon the facts and circumstances.

The governmental bond financings project is designed to measure several aspects of the post-issuance compliance knowledge and practices of governmental issuers of tax-exempt bonds.  The questionnaire covers:

  • record retention requirements;
  • qualified use of bond-financed property requirements;
  • arbitrage yield restriction and rebate requirements;
  • debt management policies and procedures; and
  • awareness of voluntary compliance and educational resources.

Copies of the questionnaire and cover letter are available at the links below:

Form 14002, Governmental Bond Financings Compliance Check Questionnaire
Letter 4408, Governmental Bond Post-Issuance and Record Retention Practices
Publication 4386, Compliance Checks:  Examination, Audit or Compliance Check?

“The governmental bond financings project is another example of the IRS’s commitment to promoting compliance throughout the tax-exempt and government entities community,” said Moises C. Medina, Director, Government Entities.  “The information we receive will help us better understand compliance issues and practices in the governmental bonds community and improve our educational resources and services to this market segment.”

This project is TEB’s second major use of the compliance check questionnaires to measure and promote tax compliance in the tax-exempt bond market.  In September, 2008, a TEB interim report presented the analysis and preliminary conclusions on data collected from 207 section 501(c)(3) organizations that identified themselves as beneficiaries of tax-exempt bonds.  The report concluded that, while a high percentage of the charitable financings market segment recognized the importance of post-issuance compliance and record retention procedures, there appeared to be significant gaps in the effective implementation of such procedures. 

“The soft-contact approach proved successful in promoting post-issuance compliance within the charitable financings market segment.  I am excited about the continued use of this approach with respect to governmental bonds, which allows us to obtain important information efficiently and at a reduced burden to the community when compared to examinations of the bond issues,” said Clifford J. Gannett, Director, Tax Exempt Bonds.

Governmental bonds are tax-exempt obligations issued by a state or local government, the proceeds of which are generally used to finance activities or facilities owned, operated, or used by that or another government for its own purposes, and which satisfy applicable federal tax law requirements.

The IRS issued a combined final report on the results of both the governmental and charitable financings questionnaires. 

Page Last Reviewed or Updated: 18-Apr-2014