Expanded Form 8038-G Highlights IRS Focus on Written Compliance Procedures

The new expanded Form 8038-G published by the IRS now asks governmental issuers whether written procedures have been put in place regarding post-issuance compliance with respect to tax-exempt bonds. The form requires an issuer to answer whether it has adopted written procedures to take a "remedial action" if it uses an excessive amount of the proceeds of the bonds for a private business use and whether it has written procedures to monitor compliance with the arbitrage requirements.

These new questions are similar to questions added to Form 8038 (filed for private activity bonds, including conduit bonds) in April 2011, and are part of the IRS effort to increase compliance by encouraging issuers to adopt written compliance procedures. As an additional incentive, the IRS recently announced that it will be more lenient in negotiating closing agreements with issuers that have adopted written procedures.

The new Form also requires additional information regarding hedges, pooled financing issues and the use of bond proceeds to reimburse pre-issuance expenditures. But the IRS likely revised the Form mainly because it wants issuers to have written procedures to monitor post-issuance compliance with tax law requirements.

For issuers that have not adopted compliance procedures, we can help develop procedures that are tailored to your staffing and the complexity of your bond issues. For further information about the expanded version of Form 8038-G, please contact your principal Squire Sanders lawyer, one of the individuals listed in this Alert or any of our public finance lawyers.