WASHINGTON — The Internal Revenue Service has closed an audit of variable rate demand bonds issued in 2004 by the board of regents of the University of Houston System with no change to the bonds’ tax-exempt status.
The university system disclosed the completion of the audit on the Municipal Securities Rulemaking Boards’ EMMA system Wednesday, after receiving a letter from the IRS about the examination’s end the day before.
The issuer was informed in February that the IRS had chosen the bonds for examination as part of an initiative involving form 8038-T, which issuers use to make arbitrage rebate and related payments.
As part of a market segment approach to examinations that the IRS started in fiscal 2013, the agency is examining some 8038-T forms every year. The purpose of audits of the 8038-Ts is to determine the accuracy of the filed forms, Allyson Belsome, the IRS’ manager of tax-exempt bond field operations, told bond lawyers meeting in Chicago last month.
Other market segments that the IRS’ tax-exempt bond office are examining every year include advance refundings, tax and revenue anticipation notes, 501(c)(3) bonds and solid waste bonds.
The university system issued $25 million of consolidated revenue variable rate demand bonds with the CUSIP to which the audit related to repair damage to its system from Tropical Storm Allison and to make improvements. About $9.27 million of the bonds were outstanding at the end of 2012, and some of those bonds have since been redeemed, according to issuer documents and information on EMMA. An official statement was unavailable for the bonds.