WASHINGTON - An issuer in Virginia recently disclosed an Internal Revenue Service audit of bonds it issued in 2006. The IRS closed audits of the bonds of a borrower in Indiana and an issuer in Pennsylvania with no change to the tax-exempt status of their bonds. The audit disclosures were made in event notices posted this week on the Municipal Securities Rulemaking Board's EMMA system.
The Economic Development Authority of Henrico County, Va., disclosed an audit of its residential care facility mortgage revenue refunding bonds, which were issued in 2006 for Westminster-Canterbury of Richmond, a residential and health care center for the elderly. The bonds were originally issued in the amount of $63.15 million.
The IRS notice to the authority stated that the "IRS routinely examines municipal debt issuances to determine compliance with federal tax requirements," the authority said in its event notice.
Russell Gardner, chief financial officer for Westminster-Canterbury Richmond, said the audit began in October and the IRS agent conducting it has given a verbal commitment that the examination will be closed with no change to the bonds' tax-exemption. A manager still must sign off on the audit.
Some of the bonds were refinanced in August, and $30.58 million of them remain outstanding. The borrower is in the process of refinancing the outstanding bonds, but no refunding date has been set, Gardner said.
The 2006 bonds were issued to refund bonds issued in 1999 and 2003. BB&T Capital Markets and Davenport & Company LLC were underwriters and Hunton & Williams LLP was bond counsel, according to the official statement for the bonds.
The IRS recently closed its audit of bonds issued by St. Joseph County, Ind. in 2007 for Saint Mary's College. The Service did not change the tax-exempt status of the bonds, according to the college's event notice.
The audit had started in October, and its primary purpose was to determine if the bonds complied with federal tax requirements for 501(c)(3) bonds.
St. Joseph County issued roughly $37.95 million of bonds in 2007 for Saint Mary's College, a Catholic women's college located near the University of Notre Dame. Some of the bonds have matured.
Proceeds of the bonds were to be used to finance the construction of, and improvements to, several economic development facilities on the college's campus. They were also to be used to advance refund some bonds previously issued in 1998 and 2002 as well as to current refund the April 2007 interest payment on the portion of the 1998 bonds that were not to be advance refunded, according to the official statement.
Piper Jaffray and City Securities Corp. underwrote the bonds, and Barnes & Thornburg LLP served as bond counsel as well as counsel to the borrower. The issuer's counsel was Zappia, Zappia & Stipp.
The IRS also closed two routine audits of single-family mortgage bonds issued by the Pennsylvania Housing Finance Agency in 2003 and 2004. An official with the agency said the audits were closed without any change to the bonds' tax exemption.
One of the audits pertained to $59.9 million of series 2003-77B bonds, and the other audit pertained to roughly $62.74 million of the 2004-81C bonds. The bonds were originally issued as period auction reset securities, and were converted to variable rate demand obligations bearing interest at weekly rates in 2008. They were issued to provide funds for a single family mortgage loan program, according to a remarketing circular for the bonds dated April 1, 2014. RBC Capital Markets was the remarketing agent, and Ballard Spahr LLP served as bond counsel.
