The Internal Revenue Service has turned its attention to bond issues in three states, and although the examinations appear to be random, at least one stems from an ongoing IRS project on arbitrage rebate.

The Colorado Health Facilities Authority, the Cumberland Valley School District in Pennsylvania, and the Payne County Economic Development Authority in Oklahoma all disclosed this week that the IRS had sent them letters seeking information about their bonds to examine them for tax law compliance.

The IRS actions were disclosed in three separate material events notices that the authorities filed with nationally recognized municipal securities information repositories.

The COHFA notice, which was released yesterday, said that the IRS is examining $65 million of variable-rate hospital revenue bonds issued in 2003. The notice included a letter, dated April 8, from the IRS that announced the audit and said it is part of an ongoing project to measure compliance with arbitrage rebate requirements. The IRS said it has no reason currently to assume the debt is not in compliance with tax law.

The bonds, issued in two series, were loaned to the Community Hospital Association, which then used the proceeds to finance capital expenditures at Boulder Community Hospital, including for the construction of a new hospital campus, according to bond documents.

Merrill Lynch & Co. was underwriter on the deal. Kutak Rock LLP was bond counsel. Caplan and Earnest LLC was counsel for the association, Powers Phillips PC was the authority's counsel, and Jones Day was underwriter's counsel.

The Cumberland Valley School District in Cumberland County, Pa., disclosed yesterday that the IRS has initiated an audit of $55.1 million of general obligation bonds issued in 2005. The agency informed the district about the audit in an April 8 letter. But the district said in its notice that "the IRS letter appears to be a random audit and does not specify any particular concerns or violations." The notice does not state whether the audit is part of any IRS initiative.

The bonds were issued to advance refund $55 million of GO debt issued in 1998, as well as finance some capital expenditures, according to bond documents.

The bonds were underwritten by Lehman Brothers, now part of Barclays Capital. Stevens & Lee was bond counsel and Public Financial Management Inc. was financial adviser to the district.

The Payne County Economic Development Authority disclosed Monday that it has received two document requests from the IRS, which is seeking information regarding $161.3 million of variable-rate demand student housing revenue bonds it issued in 2002. The authority does not state in the notice whether the document requests were sent as part of an initiative, or even if the bonds are under audit. An attorney for the authority did not return calls for comment.

The bonds were issued to finance a number of student housing projects at Oklahoma State University.

Morgan Keegan & Co. was underwriter on the deal, while Floyd Law Firm PC and Phillips McFall McCaffrey McVay & Murrah PC were co-bond counsel.

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