IRS Provides Reminder on Tax-Exempt Bond Compliance
The IRS recently conducted a webcast presentation regarding qualified Section 501(c)(3) bonds and maintaining tax exemption after issuance. You may view the IRS webcast here. Of note, the IRS presenters stressed the need to retain records and provide an on-going/periodic compliance assessment with respect to any “private business use” of bond-financed property, which is limited to 5% of the proceeds of a qualified 501(c)(3) bond.
Specifically, “private business use” often arises in the context of management agreements, research agreements, leases or other incentive/service arrangements involving bond-financed property. Accordingly, the attached presentation provides a helpful outline of the private business use safe harbors for management agreements (many taking the form of service agreements) under IRS Revenue Procedure 97-13, which safe harbors vary by contract length and form of reimbursement. The attached presentation also briefly summarizes the private business use safe harbors for research agreements under IRS Revenue Procedure 2007-47, applicable to certain corporate-sponsored research and certain agreements with industry or federal sponsors.
Finally, the IRS presenters provided recommendations for ongoing compliance monitoring and recordkeeping procedures, noting that records must be maintained for three years longer than the life of the bonds.
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This News Alert has been prepared for informational purposes only and should not be construed as, and does not constitute, legal advice on any specific matter. For more information, please see the disclaimer.