Last week, the Internal Revenue Service sent compliance questionnaires to 200 governmental bond issuers in order to evaluate the post-issuance and record retention policies, procedures and practices of governmental issuers of tax-exempt bonds. The project is intended to measure the post-issuance compliance knowledge and practices of governmental issuers and covers the following:

  • record retention policies and procedures;
  • private use of bond-financed property;
  • arbitrage yield restriction and rebate;
  • debt management policies and procedures; and
  • awareness of voluntary compliance and educational resources.  

Copies of the questionnaire and cover letter are available at the links below:

Form 14002, Governmental Bond Financings Compliance Check Questionnaire

Letter 4408, Governmental Bond Post-Issuance and Record Retention Practices

Publication 4386, Compliance Checks: Examination, Audit or Compliance Check?

These compliance checks are not audits, they are reviews conducted by the IRS to determine if an organization is adhering to the requirements of the Internal Revenue Code and the Regulations. There is no formal penalty for refusing to submit to a compliance check, however, the IRS may open a formal examination (audit) in instances where an issuer chooses not to participate or if issuer responses indicate that proper due diligence is not being undertaken. The questionnaire is specifically directed at determining whether issuers have written compliance procedures and whether responsibility for post-issuance compliance has been delegated to specified individuals. As the questionnaire may be a source for further inquiry by the IRS, we suggest you contact bond counsel if you have received a questionnaire.