Chapter 22 - § 22.8 • POST-ISSUANCE COMPLIANCE AND RECORDKEEPING

• Jurisdiction: Colorado

§ 22.8 • POST-ISSUANCE COMPLIANCE AND RECORDKEEPING

Rules governing issuances of tax-exempt bonds, including qualified § 501(c)(3) bonds, must be satisfied not only at the time that the bonds are issued, but must continue to be satisfied generally over the life of the bond issue. See, e.g., Treas. Reg. § 1.148-2(c) ("[t]he taking of any deliberate, intentional action by the issuer or person acting on its behalf after the issue date in order to earn arbitrage causes the bonds of the issue to be arbitrage bonds if that action, had it been expected on the issue date, would have caused the bonds to be arbitrage bonds."); I.R.C. § 148(f) (relating to rebate requirements); Treas. Reg. § 1.141-2(d)(1) ("[a]n issue is also an issue of private activity bonds if the issuer takes a deliberate action, subsequent to the issue date, that causes the conditions of either the private business tests or the private loan financing test to be met"). In addition, the IRS maintains an active enforcement program that includes auditing issues of tax-exempt obligations in an effort to determine whether the issue complies with applicable provisions of the Code and the Treasury Regulations.

Due to the actual issuer's often relatively limited role in issues of qualified § 501(c)(3) bonds, the bond documents (usually the loan agreement) will ordinarily place the burden of post-issuance compliance on the § 501(c)(3) organization borrower. Therefore, it is important that § 501(c)(3) organizations and their counsel have procedures in place for ensuring that tax-exempt bonds benefitting the organization remain compliant with applicable provisions of the Code and the Treasury Regulations. Internal Revenue Service, Advisory Committee on Tax Exempt and Government Entities, "General Report of the Advisory Committee on Tax Exempt and Government Entities" (June 13, 2007), available at www.irs.gov/pub/irs-tege/tege_act_rpt6.pdf (hereinafter, "General Report of the Advisory Committee on Tax Exempt and Government Entities"). Such procedures can also make defending potential audits as efficient as possible. Any correspondence received by the issuer or the § 501(c)(3) organization borrower from the IRS with respect to the bonds should be addressed promptly, and bond counsel should be consulted. Cf. Post Issuance Compliance Checklist.

At and subsequent to the issuance of an issue of qualified § 501(c)(3) bonds, the § 501(c)(3) organization borrower should have procedures in place addressing two...