The Internal Revenue Service is auditing $604.14 million of general obligation limited tax bond bank bonds that were issued by Clark County, Nev. in 2006.

The county disclosed the audit in an event notice filed with the Municipal Securities Rulemaking Board's EMMA system.

The IRS sent county officials a letter on Aug. 13 requesting bond information and documents.

In its letter, the IRS said that it "routinely examines municipal debt issuances to determine compliance with federal tax law requirements."

The bond proceeds were used to loan money to localities by purchasing local water revenue bonds used to finance the acquisition and construction of improvements for water projects for the Southern Nevada Water Authority. They also were used to refund some of the county's previously issued general obligation limited tax bond bank bonds, according to the official statement.

The SNWA was created in 1991 by Las Vegas, Boulder City, and other cities and water districts to secure additional supplies of water for southern Nevada and to address water resource management and conservation on a regional basis. In 1996, the SNWA assumed all rights, duties and liabilities of the state and the Colorado River Commission.

Municipal Water Users, including Las Vegas, Boulder City and the U.S. Air Force at Nellis Air Force Base, have contracted with the SNWA for the provision of potable water.

The bonds underwritten by Merrill Lynch & Co. and were insured by Ambac. The financial advisors were Hobbs, Ong & Associates, Inc., NSB Public Finance, and Public Financial Management, Inc. Bond counsel was Swendseid & Stern, a member in Sherman & Howard LLC.

Meanwhile, the Douglas County School District, #Re1 in Douglas and Elbert Counties, Colo., filed an event notice with EMMA disclosing that the IRS had closed an audit of $13.22 million of 2009 Certificates of Participation without any change to their tax-exempt status.

COPs generally entitle investors holding the certificates to receive a share, or participation, in the lease payments from a project. In this transaction, the proceeds of the COPs were used to purchase leased property from the district. The district used the proceeds from the sale of that property to finance the costs of constructing and equipping a new school facility for North Star Academy West, a district charter school, according to the official statement.

The underwriter was RBC Capital Markets. Sherman & Howard LLC was special counsel.

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