Upon the issuance of bonds, the issuer and borrower have a significant number of post-issuance responsibilities with regards to monitoring a bond issue for compliance with federal tax rules for the duration that bonds are outstanding. After issuance, bonds may be outstanding for anywhere from a few years to up to a few decades, during which time it is critical to ensure all material documents and records are maintained. Further, the Internal Revenue Service (“IRS”) recommends that material tax records be retained for the life of a bond issue, plus three years.

  • A few examples of the many post-issuance compliance responsibilities a borrower may have include:
  • Tracking that proceeds of a bond issuance are spent on qualified tax-exempt bond purposes.
  • Keeping detailed records of all expenditures and investments related to bond funds.
  • Ensuring the project financed is used in a manner consistent with the legal requirements.
  • Providing necessary disclosure information regarding financial and operating status annually.

It is essential that borrowers develop and maintain a robust post-issuance compliance program to track their compliance with all applicable requirements. Borrowers that have effective post-issuance tax compliance programs in place are more likely to be able to respond to any possible IRS inquiry on a successful and cost-effective basis. In addition, borrowers with an established program will be well positioned to effectively judge the possible benefits of future refunding opportunities with this information close at hand.

In an effort to further assist borrowers with post-issuance compliance, CSCDA will send annual reminders and updates to relevant changes in post-issuance compliance requirements to all of its borrowers. Please note that the most important step in a compliance monitoring program is to consult with members of the finance team, including bond counsel, at the time of bond issuance to determine exactly what responsibilities a borrower has for the term of a particular bond issue.