The Orange County, Fla., Health Facilities Authority has disclosed that the Internal Revenue Service has closed an arbitrage rebate-related examination of $109.6 million of hospital revenue bonds it issued in 2002 without changing their tax-exempt status.

The closure of the audit was disclosed yesterday in a material event notice that the issuer sent to the nationally recognized municipal securities information repositories.

The notice stated that on April 28, the authority received a letter from the IRS indicating that it had been selected for examination as part of the IRS' arbitrage rebate compliance initiative. The IRS announced earlier this year that it planned to audit roughly 200 bond issues under the initiative.

The authority also stated that it has received a second letter from the IRS announcing it is closing the examination with no change to the tax-exempt status of the bonds.

"This examination is now complete," the notice stated.

The bonds were issued at the request of Orlando Regional Healthcare System Inc., a nonprofit corporation, to finance or reimburse the costs of acquisition, construction, renovation, and equipping at Orlando Regional Medical Center, Sand Lake Hospital, and South Seminole Hospital.

Morgan Stanley was the underwriter on the deal.

Chapman and Cutler LLP of Chicago was bond counsel. Lowndes, Drosdick, Doster, Kantor & Reed PA of Orlando was the authority's counsel, Mateer Harbert PA of Orlando was the corporation's counsel, and Long Law Firm LLP of Baton Rouge was underwriter's counsel.

Earlier this month, the Maryland Health and Higher Educational Facilities Authority disclosed that the IRS had closed an examination of $39.3 million of revenue bonds issued in 2002 with no change. It stated in the notice that the examination stemmed from the arbitrage compliance initiative.

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