IRS issues guidance on tax-exempt bond requirements

Enforcing compliance with rules governing facilities financed with tax-exempt bonds recently has become an IRS priority. Integrated delivery systems (IDSs) that include such facilities, therefore, should take steps to ensure that the private business use of those facilities does not exceed the legal threshold amount, thereby jeopardizing the tax-exempt status of the bonds. Management contracts, research agreements, and leases are arrangements with the greatest potential to result in noncompliance. Instituting a compliance program to monitor the use of bond proceeds and minimize the amount of private business use of facilities over the bond term can reduce an organization's risk of penalty.