IRS Sends Tax Compliance Check Questionnaires To 200 Governmental Bond Issuers

On January 26, 2009, the Internal Revenue Service sent a "Governmental Bond Financings Compliance Check Questionnaire" to 200 governmental units throughout the United States that issued tax-exempt bonds in 2005. The tax exemption for interest on bonds issued by state and local governments depends on compliance with requirements of the Internal Revenue Code for so long as the bonds are outstanding. Examples of post-issuance requirements include compliance with limitations on the investment of bond proceeds, a requirement to rebate investment earnings on bond proceeds to the federal government, and restrictions on the private business use of bond-financed property.

About half of those selected for these compliance checks were "small issuers" who had issued less than $10 million of bonds in 2005. The other half had issued more than $10 million of bonds in that year. The IRS did not target particular subgroups of governmental bond issuers other than by size. A copy of the