WASHINGTON - The tax-exempt bond financings of nonprofit colleges and universities would be subject to much greater scrutiny under new audit guidelines that have been proposed by the Internal Revenue Service.

The proposed guidelines, which the IRS issued Monday in Announcement 93-2. are designed to ensure that 501(c)(3) colleges and universities are not providing undue benefits to private individuals or entities that would undermine the tax-exempt status of these institutions and their bonds, an IRS official said in an interview yesterday.

The IRS issued similar audit guidelines for nonprofit hospitals and nursing homes several months ago and now appears to be applying the same level of scrutiny to nonprofit colleges and universities.

In the announcement, the IRS asked for public comments on the proposed guidelines by March 23, 1993. The IRS did not say when the guidelines would be finalized and put into effect.

"We've sent copies to the regional and district offices but have said they should not be implemented in their present form," the IRS official said.

The IRS said that virtually all private universities incur debt as part of their normal operations. It said that IRS agents should closely scrutinize both the short- and long-term debt of such institutions when auditing them.

In the announcement, the IRS told agents, "Examine contracts for unsecured and secured credit lines, compare the interest rate under each contract to rates available at the time of contracting, and the relationship between the institution and the lender."

The agents should try to determine if lenders are operating at "other than arm's length" in dealing with these institutions, the IRS said.

An example of a possible abuse along these lines is when a university director who helps make decisions on bond financings is also an underwriter and helps steer the university's bond business to his firm, the IRS official said.

The agents should also determine the extent to which a college or university has short- and long-term debt, the IRS said. They should look at why the debt was incurred and whether it is "reasonable" given the financial situation of the institution. The agents also should examine whether the debt is being prudently managed, the IRS said.

In the case of short-term debt, the proposed guidelines direct the agents to look for evidence of "churning," in which a college or university continually borrows short-term and pays big fees or commissions to bond firms for each borrowing.

The IRS said that agents should determine if fees or commissions are reasonable and examine any "unusual features" of a loan. These could include partial principal retention, a prepayment penalty, or call provision. A partial principal retention occurs when the lender retains a portion of the principal of the loan, an IRS spokesman said. Under a prepayment penalty, he said, the college would have to pay a penalty to redeem a bond issue before maturity.

In the case of long-term debt involving real estate loans, IRS agents should examine the loan agreement, mortgage or deed of trust financing statement and note, assignment, guarantee, and other documents, including Housing and Urban Development forms if they were used, the IRS said. Documents should also be examined for secured loans, the announcement said.

The IRS said its agents should very closely scrutinize all the documents, information, and tax law issues related to any tax-exempt private-activity bond issues that the college or university used to finance new facilities.

The information and documents to be obtained would include complete descriptions of the project and financing structure, financial feasibility studies, appraisals, development agreements, management contracts, offering statements, underwriters' agreements, bond counsel opinions, and all closing material, the agency said.

The IRS also said the agents should examine the relationship between the university and the underwriter, and the relationship of the trustee to all other parties in such transactions. It said fees and commissions should be scrutinized to determine if they were reasonable. The manner in which the bonds were marketed should also be determined.

The agency said the field agents should examine whether the proceeds were used for private purposes, unrelated business activities, arbitrage purposes, or for any other purpose that would violate the tax law provisions governing tax-exempt private-activity bonds.

The IRS official said the proposed guidelines "get into much more detail than in the past." If adopted, he said, they would apply to any IRS audits of colleges and universities and not just to the agency's so-called coordination examination program. In that program, the IRS is trying to audit at least one or two such institutions on a periodic basis.

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