Tax-Exempt Bonds: Post-Issuance Compliance


Does your district have outstanding tax-exempt bond obligations? If yes, the IRS is interested in:

  • Whether you have earned more investment earnings on the bond proceeds than is permitted
  • Whether you have spent or will spend the bond proceeds too slowly
  • Whether you have failed to make any rebate payments to the IRS (if required)
  • Whether you have used the bond proceeds and any property financed with bond proceeds improperly

In the last year, the IRS has taken a much more active role in post-issuance compliance enforcement and training activities. The IRS says:

“The on-going nature of post-issuance compliance requirements applicable to tax-advantaged bonds requires issuers to actively monitor compliance throughout the entire period the bonds remain outstanding. The due diligence will significantly improve the issuer’s ability to identify noncompliance and prevent violations from occurring, or timely correct identified violations (when prevention is not possible), to ensure the continued tax-advantaged status of the bonds.”

The IRS provides the following guidance for those with outstanding tax-exempt bond obligations. In order to preserve the tax-exempt status of a water district’s bond issues, the water district must:

  • Adopt written procedures reasonably expected to timely identify noncompliance
  • Adopt written procedures ensuring that the issuer will take steps to timely correct noncompliance
  • Identify the official or employee responsible for the due diligence reviews
  • Train the responsible official/employee
  • Retain adequate records to substantiate compliance (e.g. records relating to expenditure of proceeds)
  • Conduct due diligence reviews at regular intervals in order to determine compliance with arbitrage and rebate requirements as well as use restrictions on the bond proceeds and property financed with bond proceeds

To obtain a sample district policy, get more information on post-issuance compliance matters or get assistance developing a post-issuance compliance policy, please contact Lee Bragg.

Written by:

Published In:


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Bernstein Shur | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.