SAN FRANCISCO - The Internal Revenue Service will not conduct enforcement audits on those charitable, nonprofit organizations that could not show how they were complying with the tax laws and rules pertaining to their tax-exempt bonds in an agency survey, an IRS official told bond lawyers meeting here late Friday.

"Our policy has not changed: there will be no examinations of bond issues from respondents to this survey," Steve Chamberlin, the head of the IRS bond branch's office of compliance and program management, said at the fall meeting of the American Bar Association's tax-exempt financing committee.

He said that while a surveyed organization could be tabbed for an audit at some point, "it will have absolutely nothing to do with their responses to this survey."

Chamberlin appeared on a panel to discuss an IRS report on the survey's results, which was released Thursday. The study found that, of nearly 200 tax-exempt, charitable 501(c)(3) organizations surveyed, less than half could definitively prove they had established procedures in place to ensure proper compliance with tax laws and record retention after bonds were issued.

During the meeting, Chamberlin was pressed about whether the survey would lead to enforcement audits because the report had stated: "Further testing through examinations or other field tests may be warranted to further assess compliance in these areas."

"I'm a little concerned, because my clients ... [were] told that this wouldn't lead to an audit or any follow-up," said Linda Schakel, a partner at Ballard Spahr Andrews & Ingersoll LLP. "I encouraged them to answer [the survey] ... and if they now are starting to get a follow-up from an agent, I'm going to have a hard time explaining to them that I thought I was being accurate."

Chamberlin said that the identities and individual responses of the nonprofit organizations surveyed have not been shared with the individuals in charge of selecting audit candidates, meaning that any new examinations will be entirely unrelated to the survey.

In calling for additional "field work," the report meant taking a closer look into the broad group of nonprofits as it pertains to post-issuance compliance, not extensive follow-ups with specific survey respondents, he said. The IRS could opt for additional surveys or other methods to obtain more information in this area.

"It could mean any number of things," Chamberlin said.

Cliff Gannett, director of the agency's tax-exempt bond office, told The Bond Buyer Friday that the IRS is considering conducting a larger second survey, as well as non-audit "compliance checks" that would be conducted by field agents as potential follow-ups to the survey.

In a separate panel, John J. Cross 3d, an attorney with the Treasury's office of tax policy, laid out the department's business plan for the rest of the year. Of the items on the agenda, he said that new proposed regulations on solid-waste disposal facilities, guidance on certain tax issues stemming from the new housing law passed this summer, and an update to the arbitrage regulations are the projects closest to completion.

Treasury is planning on re-proposing its solid-waste disposal regulations, which were first proposed in 2002. Widespread criticism by muni market participants of the first proposed rules prompted the new draft, he said.

Cross also discussed the recently released proposed regulations for municipal issuers who must obtain public approval for projects financed by private-activity bonds. While market participants have widely praised the attempt to modernize and streamline the 20-year-old rules, some have noted that since they do not become effective until they are finalized, it could still be months or even years before issuers can take advantage of them.

Cross said the proposed regulations are "a work in progress," were meant to show what direction Treasury is headed, and are aimed at encouraging flexibility and reducing uncertainty for issuers. He urged market participants to submit public comments.

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