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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

Hot Topics from the Tax and Securities Law Institute’s Annual Meeting

                Every year, the National Association of Bond Lawyers (“NABL”) hosts the Tax and Securities Law Institute (“TSLI”), which is an advanced conference with various workshops related to pressing issues confronting tax and securities lawyers in the public finance arena.  Essentially, the annual TSLI is like Chrismukkah for tax and securities lawyers.  This year’s meeting … 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

A New Hampshire Tale (Part 1)

The IRS Appeals office has dropped the examination of nine student loan bond issues of the New Hampshire Health and Education Facilities Authority. The examination had begun after the Authority entered but then withdrew from the IRS specialized “voluntary closing agreement program” for student loan bonds. The IRS created this targeted VCAP in 2012 as a standalone … 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

Run, Run As Fast as You Can Into the Arms of the Tax Man[1]

The IRS recently announced that it will devote 50% of the Tax-Exempt Bond office’s (“TEB’s”) budget for its 2016 fiscal year (beginning  October 1, 2015) to examinations.  Accordingly, issuers and conduit borrowers of tax-advantaged bonds should be very interested in the newly revised Internal Revenue Manual (“IRM”) procedures addressing the Voluntary Closing Agreement Program (“VCAP”), … Continue Reading

It’s the Thought that Counts – IRS Provides Relief to Narrow Class of Troubled 501(c)(3) Bonds

The IRS has issued Announcement 2015-02, which allows issuers of qualified 501(c)(3) bonds to pay a small penalty to protect the tax status of the bonds where the conduit borrower lost its 501(c)(3) status because it failed to file returns with the IRS for three straight years. It’s welcome relief from a particularly nasty rule, but … 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