Advisory Committee on Tax Exempt and Government Entities (ACT ...

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The Streamlined Closing Agreement For Tax-Exempt Bonds: A Cure For Common ViolationsINTRODUCTION This ACT project grows out of the perceived need for a simple, predictable, low-costprocedure for issuers of tax-exempt bonds and conduit borrowers of tax-exempt bondproceeds to voluntarily correct violations of federal tax law. The Internal RevenueService (IRS) has stated its intention to focus its examination resources on abusivetransactions. It has also made a significant commitment to encouraging voluntarycompliance. However, the existing voluntary compliance program requires individualnegotiation and is therefore time-consuming and expensive for both the IRS and forissuers and conduit borrowers who discover instances of good faith non-compliancewith the tax law. The ACT therefore recommends creation of programs to provide forstreamlined treatment of certain tax law violations, including ones that are common andcan be easily identified, ones that are small in dollar amount, and ones that involverecordkeeping and document retention problems.ADVISORY COMMITTEE ON TAX EXEMPT AND GOVERNMENT ENTITIES (ACT) June 11, 2008 2
The Streamlined Closing Agreement For Tax-Exempt Bonds: A Cure For Common ViolationsTHE PROJECTThe ACT began this project by consulting with representatives of constituencies withinthe tax-exempt bond community which would be affected by this proposal. Our goalwas to confirm their views as to the worth of the project, to solicit ideas as to how aneffective program might work, and to identify substantive problems which might beappropriately included under such a program.The ACT spoke initially and on numerous later occasions with Clifford J. Gannett,Director of Tax-Exempt Bonds (TEB) and Steven A. Chamberlin, Manager, Tax-ExemptBonds, Compliance & Program Management, both of whom were extremely supportiveof this project. We subsequently spoke with John J. Cross III, Associate Tax LegislativeCounsel, Department of the Treasury, with the following members of the Office of ChiefCounsel: Johanna Som de Cerff, Senior Technician Reviewer (Financial Institutionsand Products), George Bowden, Special Counsel (Procedure and Administration), GlenMelcher, Chief, Branch 5 (Procedure and Administration), William Conroy, StaffAttorney, Branch 5 (Procedure and Administration), Timothy L. Jones, Senior Counsel(Financial Institutions and Products), and Carla Young, Staff Attorney (FinancialInstitutions and Products), and twice each with representatives of the NationalAssociation of Bond Lawyers (NABL), the Tax-Exempt Finance <strong>Committee</strong> of the TaxSection of the American Bar Association (ABA), the <strong>Committee</strong> on Governmental DebtManagement of the Government Finance Officers Association (GFOA), and theAdvocacy <strong>Committee</strong> of what is now the National Association of Health & EducationalFacilities Finance Authorities (NAHEFFA). There was broad consensus that theproposal as outlined was a useful one, although more than one person commented that“the devil is in the details.”The tax-exempt bond members of the ACT also met with the employee plans membersof the ACT to discuss voluntary compliance programs which have been implementedwith respect to qualified employee retirement plans.Finally, the ACT reviewed various documents reflecting previous consideration of someof the issues presented by the current proposal. We reviewed a discussion by RichardChirls in the President’s Column of The Quarterly Newsletter of the National Associationof Bond Lawyers, dated May 23, 1991, as to a possible “alternative penalty system” inlieu of bondholder taxation, and an unpublished partial draft of a paper describing sucha system. We reviewed the 2001 and 2004 reports of the NABL Alternative DisputeResolution Task Force, including draft legislation proposed in 2001. We reviewed draftamendments to the Internal Revenue Manual prepared by what is now the Tax-ExemptBond Compliance & Program Management group. We also reviewed the EmployeePlans Compliance Resolution System (EPCRS) program established with respect toemployee plans, as described in Revenue Procedure 2006-27, 2006-I C.B. 945.ADVISORY COMMITTEE ON TAX EXEMPT AND GOVERNMENT ENTITIES (ACT) June 11, 2008 3
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