WASHINGTON – The Internal Revenue Service recently closed an audit of $98.5 million of tax-exempt student housing revenue bonds for dormitories at West Chester University in Pennsylvania with no change to the tax-exempt status of the bonds.
The results of the audit were disclosed in an event notice that the Chester County Industrial Development Agency in Pennsylvania filed with the Municipal Securities Rulemaking Board's EMMA system on Aug. 2.
The audit was initiated by the IRS is a letter dated Oct. 13, 2017 and the examination officially was closed in a letter dated Feb. 16.
The Chester County IDA served as the conduit issuer for the $98.5 million of variable rate tax-exempt student housing bonds in 2008 for the University Student Housing LLC, which is wholly owned by the West Chester University Foundation, to finance the construction of two student dormitories.
The two dorms, Allegheny Hall and Brandywine Hall, opened for use in August 2009 to provide housing for 1,250 students on the north campus of West Chester University. They are the newest of 12 on-campus residence halls at the university.
The buildings are located on land leased by the university to the foundation.
West Chester University, founded in 1871, is the second largest of the 14 colleges and universities that are part of the State System of Higher Education of Pennsylvania.
The bonds were redeemed in recent years, according to event notices filed with EMMA and Jennifer Coffey, chief financial officer of the West Chester University Foundation.
“There never was any remedial action,” Coffey said in a phone interview.
Coffey also released an official statement written by Marc Feller, a lawyer with Dilworth Paxson who was University Student Housing’s bond counsel.
“USH was asked to provide a significant amount of information regarding various aspects of the financing to the IRS and it fully complied with such requests,” Feller wrote. “The IRS did not indicate any particular area of focus of the examination nor was USH aware of one."
"The IRS issued a letter dated Feb. 16, 2018, advising USH that the IRS was closing the examination with no change to the position that interest received by the beneficial owners of the bonds is excludable from gross income under the Internal Revenue Code,” he added.
Chester County IDA Executive Director Gary W. Smith did not respond to a request for comment.