WASHINGTON – The Internal Revenue Service is auditing $473.05 million of general obligation refunding bonds issued by Nevada’s Clark County School District in 2007.
The district disclosed the audit in an event notice posted on the Municipal Securities Rulemaking Board’s EMMA system on Wednesday.
In a letter dated Sept. 22 that was included in the district’s posting, the IRS said that it routinely examines debt issuances and chose the district’s bonds as part of a project involving the advance refunding market segment. The main purpose of the audit will be to determine if the bonds comply with federal tax requirements applicable to advance refundings, the IRS said.
The IRS said that at this time it has no reason to believe the district’s bonds do not comply with applicable tax requirements. The district said in the event notice that it “intends to cooperate with the IRS in this examination.”
The district, which serves the county that includes Las Vegas, issued its series 2007A bonds to advance refund bonds issued in 2003, 2004 and 2005. Some of the 2007 bonds have matured, according to the official statement.
Merrill Lynch was underwriter, NSB Public Finance was financial advisor, and Swendseid & Stern, a member of Sherman & Howard, was bond counsel.
Advance refunding bonds are one of the types of bonds the IRS is looking at under its market segment program. In this program, the IRS conducts audits of certain types of bonds while working to identify sub-segments with the greatest risk of non-compliance. There are several sub-segments in the advance refunding segment, the IRS has said.
Rebecca Harrigal, director of the IRS tax-exempt bond office, has said that in order for the IRS to test its hypotheses about where there might be the greatest risk of non-compliance, frequent issuers may see multiple audits. In May, the Clark County School District disclosed an audit of refunding bonds it issued in 2006.
For fiscal 2016, which began Oct. 1, the IRS tax-exempt bond office expects to allocate half of its resources to examinations, and most of those resources will be devoted to the market segment program.