Governmental/(c)(3) Questionnaires

    October 2012

    The IRS has announced that it will again send questionnaires to issuers of governmental use and qualified 501(c)(3) bonds. The questionnaires will ask issuers about their post-issuance compliance practices.

    The IRS continues to emphasize post-issuance compliance practices. Some issuers will remember that the IRS sent a first round of post-issuance compliance questionnaires a few years ago. Although the IRS has not yet fully analyzed the responses to that first round of questionnaires, it has decided that the time has come for a second salvo. IRS officials have publicly commented that they intend this second round as a “check-up,” to determine whether issuers have responded by enhancing their post-issuance compliance practices.

    One new feature of this second round of questionnaires is that issuers must now submit their responses online. The IRS tried online questionnaires for the first time earlier this year and liked the results. One potential drawback of the online format is that issuers may not have an opportunity to explain their responses.

    In advance of these questionnaires, we would suggest that issuers confirm that they have adopted post-issuance compliance procedures, review those procedures and confirm that they are implementing those procedures. (Recently, Squire Sanders has been providing such procedures to be attached to the tax compliance certificate for many transactions where we have served as bond counsel.) Following these suggestions will increase the likelihood that an issuer will be able to provide responses to the questionnaire that will not ultimately result in a full IRS audit. If we can help in the drafting or implementation of your procedures, or in responding to this questionnaire should you receive it, please call or email your Squire Sanders contact.