“Particularly, the team is looking for initiatives that might suggest bid-rigging and price-fixing,”
“It doesn’t look like any of our other teams where six or eight people are working together on projects,” said
The team, which officially got off the ground in February, is in its early stages of information gathering. Both Scott and Guerra are looking at internal
“What we’re going to come up with regarding scope is a bit premature,” Scott said. “We’re still trying to get our head around the charge Cliff has put to us. We don’t have any preconceived notion of what this thing needs to look like or what it should include or how we are going to do this.”
“The concerns we have about this evasive practice has been identified and confessed by a number of major banks, like the yield burning back in the 1990s,” said Scott, referring to pricing of investments.
“These are things that the TEB has been keenly aware of and deeply involved with. To the extent that there is something that might come of this that would help folks avoid those situations, I think that’s probably something that Cliff would like to be able to provide to the industry.”
The TEB team’s goal is to put together a public resource product that would allow issuers to identify red flags as they track the life of a bond issue from the planning stages through the final redemption. It would outline the areas to which issuers should pay particular attention to make sure that they don’t wind up with problems, Chamberlin said.
He emphasized that the project would serve as a tool to prevent problems for issuers as opposed to providing a best-practices guide. It’s unclear at this early stage if it will yield a publication or an online interactive tool, Chamberlin said, adding that the
There is no specific deadline for the project’s completion, which Chamberlin described as something that is evolving and could be long term. Scott and Guerra will spend the spring and summer gathering information and developing a proposal for what product could be developed.
“We receive a lot of questions from our members about issue price and other tax rules related to their bonds, and the debt committee has added a new compliance best practices to their 2012 work plan,” said
“We’ve been making a more deliberate effort to establish open lines of communication with key state officials in the bond area,” Chamberlin said.
Starting in the fall of 2010 and continuing through
The goals of the meetings were threefold: introduce TEB to the primary state contacts, explain the functions of the TEB exam program and how it’s organized, and answer questions regarding the work of TEB.
The newsletter summarized IRS’ revisions to its form 8038-G for governmental bond issues, updates to its voluntary closing agreement program, and the basic concepts of reissuance of debt obligations. When bonds are modified, they may be considered reissued and have to meet the latest tax-law requirements and face other tax challenges.
The newsletter also described the recent memorandum of understanding with the Municipal Securities Rulemaking Board to look at trading data as part of a compliance effort to identify pricing irregularities and other potential compliance issues.
In addition, it outlined TEB’s fiscal 2012 work plan. The group will continue to focus on “identifying abusive tax-exempt bond transactions and their promoters,” the letter said. It will direct “substantial resources toward examining arbitrage motivated and-or abusive transactions with a continuing emphasis on addressing abuses involving swaps and other derivative contracts, or long investment periods or large investment amounts.”
For fiscal 2012, TEB will allocate resources to 11 examination areas including advance refunding bonds, governmental bonds, student loan bonds, tax promoter penalties and other specialty bonds and tax-credit bonds. TEB also expects to complete projects relating to working capital financings, small governmental lease financings, and various types of governmental and charitable financings involving management contracts, research agreements, naming rights, and other public-private partnership efforts. The
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