IRS Questionnaire Highlights Compliance Issues

More than half of the 192 nonprofit organizations with tax-exempt 501(c)(3) bonds outstanding that responded to an Internal Revenue Service questionnaire were unable to describe their procedures for complying with the tax laws and rules pertaining to their bond issues, the IRS said in a report issued yesterday.

"Ineffective post-issuance compliance and record-retention programs may result in qualified 501(c)(3) bonds forfeiting their tax-exempt status," the IRS warned in a summary of the report's findings.

"It is critical to the service's taxpayer education commitment that we help governmental issuers and borrowers of tax-exempt bonds to understand their federal tax responsibilities, including those that apply well after the bonds have been issued," said Steven A. Chamberlin, senior manager of compliance and program management in the IRS' tax-exempt bond office.

The survey focused on the organization's post-issuance compliance knowledge and practices associated with record retention requirements, qualified use of bond-financed property, arbitrage yield restriction and rebate requirements, debt management policies and procedures, and awareness of voluntary compliance and educational resources.

 

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