IRS Seeks Input From Attorneys on Compliance and Red Flag Issues

May 21, 2012
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The Internal Revenue Service has announced it plans to seek feedback from several groups on a document that outlines red flags and common compliance issues related to bonds and investments. The document has been drafted by the IRS’ compliance practice research team and is designed to help bond issuers understand issues that may arise and avoid some of the tax law problems that have arisen in recent decades over investment mispricing and abuses, according to public finance publication The Bond Buyer. The compliance team was created in response to several ongoing tax disputes and bad practices seen in the market, IRS tax-exempt bond office director Cliff Gannett said at a recent American Bar Association committee meeting. The guidance document will first be circulated internally, but then released to the American Bar Association, the National Association of Bond Lawyers, and other industry groups. The overarching goal of the document is to educate bond issuers on how to detect red flags and prevent abusive practices from occurring. Gannett said he is eager to see if the different law organizations agree with the issues raised in the guidance document or have any additional insight to add to the matter, the news source reports. “We really should be very serious about looking at these transactions as they have occurred and trying to identify where there are red flags that honest public officials could identify and could start to query … whether or not it is something they want to get involved in,” he told the news source. Gannett emphasized that the compliance team, which was created in February, is not attempting to write compliance rules for organizations or conduct examination work, but simply advise groups on best practices to avoid tax law disputes. “Our goal is to incorporate the practices that are already out there,” he told Bond Buyer. “I know a number of associations have best practices that they have developed. That’s very important for us to understand those.”