The National Association of Bond Lawyers has drafted a sample tax compliance checklist for bond counsel working on state or local bond deals, the association said yesterday.
The checklist was sent to Treasury Department and Internal Revenue Service officials as an example of one way bond lawyers could fulfill their obligation under Circular 230 to provide separate written advice in support of the traditional bond counsel opinion, NABL said.
The proposed set of Circular 230 regulations, which have not yet been finalized, govern the practice of issuing state or local bond opinions. In a formal comment letter sent to Treasury and the IRS in July, NABL suggested that the separate written advice required for state or local bond opinions in those regulations could be flexible in form.
A combination of tax certificates, questionnaires, checklists, and other appropriate documents could satisfy the requirement, and the associations most recent submission to Treasury and the IRS provides an example of how the process could work, NABL said yesterday.
The tax compliance checklist which contains 64 bond sale-related items is broken into 14 categories, such as debt obligations, use of proceeds, continuing compliance, and arbitrage requirements.
Five options are listed for each item, allowing bond counsel to affirm that each individual matter is either addressed in an issuer tax certificate, in transcript advice, in an external document, or in another document, or that the item is not relevant to the bond deal.
Checking off an item on the checklist would indicate that counsel has either reviewed the material as noted or discussed the matter with the issuer, NABL said.
The tax compliance checklist would be reviewed with an official responsible for issuing the bonds, signed by counsel, and made available to the issuer. If true and complete, it would provide support for the bond opinion that establishes the bonds interest as excludable from gross income, NABL said.
If it is necessary for a bond counsel to provide further documentation to meet due diligence requirements, that written advice would comprise a separate document, the association said.
The sample checklist was prepared by a 17-member taskforce of NABL and Government Finance Officers Association members and staff, according to a NABL press release.
Our goal was to demonstrate that market participants could work together to achieve compliance goals and hold down the costs to issuers associated with issuing bonds under the Circular 230 regime, said NABL president Monty Humble, a partner with Vinson & Elkins LLP in Dallas.
The groups had been working on the sample checklist since spring and are eagerly anticipating feedback from government officials, he said.
While Treasury does not have to approve the compliance checklist or specifically incorporate it into the finalized version of Circular 230 regulations, officials might give NABL and GFOA some clues as to its view of the checklists practicality, Humble said.
We are very interested to hear the IRS and Treasurys reaction to this, he said. Its important to us to be sure weve described a way of complying with Circular 230 that is workable and [with which] issuers feel somewhat comfortable.
