WASHINGTON — The Internal Revenue Service has closed an audit of $21.13 million of tax-exempt contract revenue refunding bonds issued by the Canyon Regional Water Authority in Texas in 2006 with no change to the bonds' tax-exempt status. However, it advised the authority that it had not completely filled out an IRS form.
The issuer disclosed the result of the examination in an event notice posted on the Municipal Securities Rulemaking Board's EMMA system on Friday. It enclosed the IRS' letter to the authority, which was dated Dec. 20.
While the authority's bonds remain tax-exempt, the IRS determined that Form 8038-G, an information return for tax-exempt governmental obligations, had not been completely filled out. The IRS reminded the issuer about information reporting requirements under the Internal Revenue Code.
"Future noncompliance could result in penalties and/or the taxability of interest received by the beneficial owners of the bonds," the IRS said in its letter. "If the need arises to open another examination on the bonds, any change resulting from the future examination may affect all open years of the beneficial owners of the bonds."
The authority is made up of retail water suppliers in the San Antonio and San Marcos, Tex. metropolitan areas. It owns and operates a few special projects, including the Lake Dunlap Water Treatment Plant, according to the official statement.
The authority's bonds that were audited were issued to refund bonds issued in 1999 and 2003 for the Lake Dunlap project, the official statement said. Roughly $18.94 million of the 2006 bonds remain outstanding, the event notice said.
Fulbright & Jaworski LLP served as bond counsel and a syndicate led by First Southwest Company served as underwriter for the 2006 refunding bonds.
