IRS Auditing $529.1M of Alaska Bonds

The Internal Revenue Service is auditing $529.1 million of education loan revenue bonds issued by the Alaska Student Loan Corporation from 2003 through 2012. 

The ASLC disclosed the event notice filed with the Municipal Securities Rulemaking Board’s EMMA system. It received a letter dated March 11 from the IRS notifying it of the audit.

“The corporation cannot predict the outcome of the examination at this time,” the ASLC said in the notice.

Earlier this year, the IRS notified the ASLC that it was auditing $62.5 million of Series 2002A and 2002B education loan revenue bonds, which were auction rate security certificates. 

The IRS has been targeting student loan bonds due to its concern that issuers were tying student loans to bonds others than the ones used to finance them.

Approximately 16 student loan issuers entered into the IRS’ voluntary closing agreement program since it was first announced last year.

The ASLC did not enter into the VCAP for the previous audit or this latest one, according to officials there.

The proceeds of the bonds refunded certain student loan revenue bonds previously issued by the corporation, finance education loans for eligible borrowers to fund a portion of their postsecondary education costs whether in or out of state and make a capital reserve fund deposit, according to 2003 bond documents.

The proceeds of the 2012A bonds were primarily used to refund certain obligations and certain loans originated under the Federal Family Education Loan Program, according to the 2012 bond documents.

In 2003 Wohlforth, Vassar, Johnson & Brecht, P.C. was bond counsel. RBC Dain Rauscher was underwriter. In 2012, Ballard Spahr LLP was bond counsel and RBC Capital Markets was underwriter.

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