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How to Appeal Adverse Determinations from the IRS for Tax-Advantaged Bonds: New Guidance

The IRS has had a busy start to 2021! Guidance continues to pour forth as the change in Administration approaches. On January 4, the IRS released Revenue Procedure 2021-10, which provides issuers with updated procedures for obtaining review from the IRS Office of Appeals of proposed adverse determinations and rebate refund rejections by the IRS … Continue Reading

A Weekend Brain Teaser

Here’s a little puzzle for you, from that eternal font of delight, the Internal Revenue Manual. The Internal Revenue Manual illustrates how an issuer should present-value or future-value penalty amounts in a VCAP or in an audit:   [A] closing agreement expected to be executed on January 15, 2016 includes amounts corresponding to future tax … Continue Reading

IRS Revises Rate for “Taxpayer Exposure” Penalty Calculations

When you enter into a closing agreement with the IRS to fix a problem with a tax-exempt bond issue, the IRS will often require a penalty payment in an amount relating to the “taxpayer exposure” on some or all of the bond issue. Taxpayer exposure “represents the estimated amount of tax liability the United States … Continue Reading

New Information Document Request (IDR) – What’s the Point?

On November 21, as most of us were preparing for a relaxing Thanksgiving holiday, the IRS publicly released two internal guidance memoranda (both available at TEGE-04-116-0028) addressed to “All TE/GE Examiners,” the first of which describes new procedures for the preparation and issuance of IDRs in connection with tax-favored bond audits and procedures for the enforcement … Continue Reading

“No Negotiation Necessary!” – IRS Releases Model Closing Agreements for Tax-Exempt Bonds

When an issuer of tax-advantaged bonds discovers a problem with the bonds, the issuer can resolve the problem by requesting a closing agreement through the IRS Voluntary Closing Agreement Program (VCAP). Similarly, where the IRS discovers a problem in the course of an audit of a tax-advantaged bond issue, and the issuer agrees that there … Continue Reading

As the Fake London Fog Ad Might Have Said – Let’s Talk about Exposure

Remedial actions, the IRS Voluntary Closing Agreement Program, and IRS audits – these are the three venues in which most problems with tax-exempt bonds are aired. We’ll ignore remedial actions in this post (as well as most rebate/yield reduction payment problems). We’ll focus instead on the IRS Voluntary Closing Agreement Program (usually abbreviated as “VCAP”) … Continue Reading

The Death Star and Taxes (or, how a Taxpayer win shows path to successfully challenging validity of IRS regulations)

While the specific legal issue presented in Altera Corp. v. Commissioner, 145 T.C. No. 3 (July 27, 2015) has nothing to do with tax-exempt bonds, it is nonetheless instructive to many readers of this blog because it shows how a taxpayer may successfully challenge an IRS regulation in court. Want to know how? It’s all … Continue Reading

Random Musings on Reasonable Expectations and on the Big Ten Conference

We’ve previously reported that the Internal Revenue Service (IRS) has issued eight private letter rulings under Internal Revenue Code (Code) Section 54A(d)(2)(B)(iii) that grant an extension of the three-year expenditure period that applies to an issue of qualified tax credit bonds (QTCBs).  An issuer of QTCBs must reasonably expect on the issuance date of the … Continue Reading

Similarly Situated

Like most organizations, the IRS Tax-Exempt Bond Division (TEB) is facing a shrinking budget and a shrinking workforce. In response, the magic word at TEB these days is “efficiency.” As part of that effort, TEB has established policies that seek to maintain uniformity in the settlement amounts that arise from examinations (audits) or within the … Continue Reading

IRS Audits and Hindsight: Do Unspent Proceeds Mean No Reasonable Expectations?

A recent article in The Bond Buyer ($) reported that IRS agents have been raising concerns during audits about bond proceeds that remain unspent or that haven’t been spent in a timely manner.  The article reports further that IRS agents are not “buying the argument” that those transactions were originally sized reasonably even though changed … Continue Reading