WASHINGTON -- The SEC is supplying the Internal Revenue Service with useful case information and helping to train IRS field agents as part of the agencies' efforts to coordinate their enforcement of tax-exempt bond rules, an IRS official said yesterday.
"Both agencies are working together as closely as possible, so we are seeing now the beginnings of a nice flow of information from the Securities and Exchange Commission field offices to the IRS field offices, which should help us better direct our audit program," said Marcus Owens, the director of the IRS' exempt organizations division.
"We have been conducting training for our exempt organization agents in tax-exempt bond matters and using SEC folks to help out with that task as well," Owens told a meeting of the D.C. Institute of Certified Public Accountants.
"I would look for more joint efforts with the SEC in the coming months," Owens said. "I think this is proving to be a profitable way for both agencies to do business."
The cooperation between the two agencies was first suggested by James J. McGovern, the IRS assistant commissioner for employee plants and exempt organizations. McGovern raised the idea in a November 1993 letter to William R. McLucas, director of the SEC's enforcement division. Officials from the two agencies held their first meeting last January.
Since then, IRS officials "have had a series of meetings with the staff of the SEC, both in their national office and in their field offices, and have [developed] several mechanisms for each of our key districts to work with their respective field offices in the SEC's hierarchy," Owens said.
Owens noted that income tax disclosure laws prevent the IRS from sharing information about specific cases with the SEC, but that there is no similar prohibition on the SEC.
Although they don't get case information in return, SEC officials are willing to share their case information with the IRS because they feel "that there is a multiplier effect on the improvement in the overall regulation of the securities/bond industry" that indirectly aids the SEC's enforcement efforts as well, Owens said.
The IRS launched its fledgling bond audit program earlier this year. and to date about 296 issues have been referred to the service for audit. Most of those issues involve four areas of potentially abusive deals targeted by the service in January.
Yesterday Owens told the accountants' group that the service would probably issue general guidelines for tax-exempt bond audits in the near future, but did not give a specific date for their release.
Bonds are also figuring prominently in the IRS's Coordinated Examination Program. IRS officials have said that problems with tax-exempt bond issues are cropping up in most of the 79 audits of private, nonprofit organizations that are currently underway.