WASHINGTON — The Vermont Student Assistance Corp. entered into a closing agreement with the Internal Revenue Service to resolve a tax dispute over $165 million of student loan bonds it issued in 1998.
The corporation disclosed the event notice on the Municipal Securities Rulemaking Board’s EMMA system on Tuesday.
“The corporation believes that the terms of the closing agreement will not have a material adverse effect on [its] operations, its short or long-term financial condition and its ability to perform its obligations under its outstanding debt instruments,” the issuer said in the notice.
The corporation entered into the closing agreement with the IRS on Nov. 28, the notice said.
When the Series 1998 bonds were audited, the IRS requested information about the corporation’s treatment of the federal consolidation loan rebate fee that is required to be paid under the Higher Education Act, according to the notice.
On June 28, 2011 the IRS notified the corporation that additional bond issues had been selected for examination as a result of information developed in the course of the audit. The IRS then notified the corporation that its treatment of the federal consolidation loan rebate fee was no longer an issue in the audit.
The bonds, which were sold as auction rate certificates, were issued to finance the origination or purchase of student loans, the bond documents said.
Kutak Rock was bond counsel. The now defunct Lehman Brothers and Paine Webber Inc., which merged with UBS in 2000, were underwriters.
Separately, the IRS closed an audit without changing the tax-exempt status of $147.18 million of revenue refunding bonds issued by the Houston Higher Education Finance Corporation in 2006 for William Marsh Rice University.
The city had received a Form 5701-TEB notice of proposed issue from the IRS in June that stated the IRS was concerned that there was a violation of qualified hedge with the bonds. Qualified hedge rules determine whether an issuer can take payments on a swap into account when calculating its bond yield.
