The Internal Revenue Service has closed its audit of $15 million of exempt-facilities bonds issued by the Arkansas Development Finance Authority in 2001 with no change to the tax-exempt status of the debt.
The borrower, Waste Management Inc., disclosed the IRS action in a material event notice filed late Thursday with the nationally recognized municipal securities information repositories.
The notices stated that Waste Management received a copy of a letter, dated Oct. 14, that the IRS sent the authority stating the audit had been closed "with no change to the position that interest received by bondholders is excludable from gross income." The exam was initiated in July 2005.
The notice also added that the bonds were redeemed in full on Aug. 1, 2008. The Series 2001 adjustable-mode exempt facilities revenue bonds were sold to finance several Waste Management projects in the state, including the construction of disposal cells and leachate and methane gas collection systems, the improvement of access roads near facilities, and the purchase of landfill and collection equipment, according to the bond documents.
The examination appears to have stemmed from a nationwide IRS initiative to examine solid-waste disposal facility revenue bonds, including $10 million of solid-waste disposal revenue bonds issued in 2003 by the Nevada Department of Business and Industry and two issues of solid-waste disposal bonds sold by Gilliam County, Ore. - $25 million in 2002 and $15 million in 2003.
The two most recent examinations initiated by the IRS involving Waste Management were $50 million of Series A variable-rate demand solid-waste disposal revenue bonds sold by the Regional Solid Waste Finance Commission of Franklin, Wis., and $10 million of Series A bonds issued by the Charles City County Economic Development Authority, formerly known as the Charles City County Industrial Development Authority. Both of those deals were done in 2003, and the examinations are still ongoing.
But when the IRS began the all of these audits, it noted that it had no reason to suspect the bonds violated the tax law.
Two to four examinations of Waste Management deals already have been closed with no change to the tax-exempt status of the bonds, David LaPaul, assistant treasurer at Waste Management, told The Bond Buyer in May. LaPaul could not be reached yesterday for comment.
Wright, Lindsey & Jennings LLP was bond counsel for the Arkansas transaction. SunTrust Capital Markets Inc. was underwriter and remarketing agent, and Bank of New York was trustee.
