WASHINGTON - The Internal Revenue Service closed an audit with no change to certificates of participation sold in 2003 to finance student housing at Western Carolina University, after resolving private use concerns.
The IRS told the university last month that the audit had been concluded, said Bill Studenc, director of the school's office of communications and public relations.
The $12.09 million of COPs were sold in 2003, and the proceeds were used to finance student housing known as the Village on the university's campus.
The university initially intended the complex to be exclusively used by Greek organizations, but fraternities and sororities never filled the entire complex and other student groups also had housing there, Studenc said.
In 2013, the university issued bonds to refund the COPs, according to bond documents. The IRS began its audit shortly after the COPs were refinanced, and in August 2014, the service issued a preliminary finding that raised concerns about how housing was assigned in the complex.
"The agency has questioned whether nationally affiliated Greek-letter organizations are receiving special privileges and benefits that constitute 'private use' and whether the opportunity to apply for space in the Village should be available to all student groups regardless of affiliation," Studenc said.
Under federal tax law, bonds are private-activity bonds if more than 10% of the proceeds are used for private business use and more than 10% of the debt service is paid for or secured by private parties.
The university responded to the IRS. After considering the response, the IRS decided to close the audit with no adverse findings. The university did not pay any money to the IRS and there was no settlement, Studenc said.
After the IRS' preliminary finding, the university changed its application process for student groups interested in the Village housing. Before the change, the university had agreements with national Greek organizations in addition to agreements with students in fraternities and sororities, but the school no longer has contractual agreements with the national organizations, Studenc said.
Wachovia Securities was underwriter of the COPs, and Parker Poe Adams and Bernstein LLP was special counsel.