NEW ORLEANS -- Roughly 300 tax-exempt bond issues have been referred to Internal Revenue Service field agents for investigation or audit. an IRS official said Friday.
"The total number of referrals we have made in the last fiscal year is just under 300 in the bond area." Marcus Owens, the director of the IRS' exempt organizations' technical division told lawyers at an American Bar Association' meeting here.
Owens later stressed that not all of these cases will result in audits. Some are issuer requests for refunds of arbitrage rebate payments, which may only need to be reviewed and approved by field agents. he said.
But Owens said that of the 300 cases referred to agents, a significant number involve bond issues that may have violated tax laws and need to be audited.
These cases were targeted either by market participants, the press, or IRS officials who announced in January that they would recommend audits of bond issues with certain structures. such as backqoaded debt service designed to produce arbitrage profits.
Owens told a reporter that the IRS will publish guidance in the next couple of weeks that advises field agents on how to process arbitrage rebate refund claims.
He said at the American Bar Association meeting that an annual educational publication for agents that is due out in September will contain an article on tax-exempt bond issues.
Turning to a bond-related issue. Owens said that the IRS will probably issue final audit guidelines for taxexempt colleges and universities later this month.
The IRS, he said, is now auditing 34 hospital and health care organizations, 18 colleges and universities, and 27 other tax-exempt orgamzalions as part of its large coordinated audit program. In that program. the IRS sends out teams of auditors to coordinate audits of large, complex tax-exempt organizations.
Settlement agreements have been reached in about 11 cases under this program, Owens said. but he noted that the IRS recently revoked the taxexempt status of one health care orgamzation when n was unable to reach a settlement. He refused to name the organization. but a source familiar with the case said later that the case does not involve and should not affect any tax-exempt bonds.