WASHINGTON — The Internal Revenue Service’s new compliance practice research team next month will begin circulating a document internally for feedback that will identify red flags for issuers that are likely to occur over the life of a bond issue from the planning stages through the final redemption.

Speaking at the American Bar Association’s tax-exempt financing committee meeting here on Friday, Cliff Gannett, director of the IRS’ tax-exempt bond office, said the draft document is a result of the research the team has been collecting over the past few months. Gannett envisioned the team and officially launched it in February.

Once the document has circulated internally, Gannett said he would like to seek input and reaction from the ABA, the National Association of Bond Lawyers and other industry organizations to see if they agree with the issues raised by the document.

For example, the IRS has been concerned with ongoing mispricing of investments and bonds in the muni market and wants to detect them and even prevent them from happening, Gannett said. The team was created in part because of these and other abuses, as well as its involvement in several global settlements of tax disputes during the past 20 years, he said.

“We really should be very serious about looking at these transactions as they have occurred and trying to identify where there are red flags that honest public officials could identify and could start to query … whether or not it is something they want to get involved in,” Gannett said. He said his staff has gone well beyond the “very limited idea” of their original goals.

Carl Scott, technical advisor for field operations, and Isabel Guerra, senior tax law specialist, who are leading the team, have conducted internal interviews and research corresponding to the date of inception of a transaction all the way through the last date of maturity and beyond.

Gannett stressed that this team is not involved in examination work or creating criteria for compliance activity. “Our goal is to incorporate the practices that are already out there,” he said. “I know a number of associations have best practices that they have developed. That’s very important for us to understand those.”

Meanwhile, the TEB office has already entered into 17 voluntary closing agreements thus far in 2012, and 16 from their field operations. By comparison, in all of 2011, there were 16 closing agreements from the field and 19 from compliance and program management. “There might be a trend there,” Gannett said. “I hope it is.”

Separately, John Cross 3d, the Treasury Department’s associate tax legislative counsel, said that the agency will issue “some kind of guidance” in the next month or two on qualified energy conservation bonds.

The guidance will clarify what constitutes a “green community” and how to determine whether a public building has reduced energy by 20%. QECBs must be issued for “qualified conservation purposes,” including reducing energy consumption in publicly owned buildings by at least 20%.

“There has been a lot of activity and encouragement to do something on those things,” Cross said at the ABA committee meeting. “The legislative history suggests that green community programs are extraordinarily broad and I expect that our guidance will concur with that.”

Clean energy bond experts and environmental advocates say the QECB program has been underutilized because the federal statute defining a green community is too broad and has created challenges for state and local issuers.

A QECB is taxable and can be issued either as a tax-credit bond, for which an investor would get a tax credit, or as a direct-pay bond in which the issuer would receive subsidy payments from the federal government equal to 70% of interest costs.

Cross’ comments come three months after 12 House Democrats sent a letter to President Obama requesting guidance on qualified energy conservation bonds.

He also said arbitrage guidance, including on issue price, is in the process of being cleared for release.

Officials have finished working on the draft of the proposed regulations and it will now be reviewed by the IRS chief counsel and commissioner’s office, Cross said.

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