Treasury Inspector General for Tax Administration
Office of Audit Recovery Act
THE DIRECT PAY BUILD AMERICA BOND
COMPLIANCE CHECK PROGRAM HAS YET TO RESULT IN WIDE-SCALE EXAMINATIONS
Issued on June 3, 2011
Highlights
Highlights of
Report Number: 2011-11-053 to the Internal
Revenue Service Acting Commissioner for the Tax Exempt and Government Entities
Division.
IMPACT ON TAXPAYERS
In February 2010, the Tax
Exempt Bonds (TEB) office mailed 375 compliance check questionnaires to issuers
of Build America Bonds, which resulted in concerns from the bond industry that
responses could result in wide-scale examinations and potential loss of a Federal
subsidy. TIGTA determined the initiation
and scope of compliance checks were appropriate and, as of the end of our
fieldwork, very few Build America Bond examinations had been initiated,
contrary to bond industry fears.
However, written procedures for developing and conducting compliance
checks had not been established.
Procedures would provide added assurance that the TEB office does
not exceed its authority when executing future compliance check programs and
could ease concerns within the bond community by improving the transparency of
future compliance checks.
WHY TIGTA DID THE AUDIT
The
overall objectives of this review were to evaluate the TEB office’s use of
compliance checks to identify indications of a high risk of noncompliance for Build
America Bonds and to evaluate the TEB office’s plans to address the
high-risk indicators.
WHAT
TIGTA FOUND
The compliance
check questionnaires issued by the TEB office were appropriate for
identifying indications of a high risk of potential noncompliance for Build
America Bonds and did not request information specific enough to start
examinations. In fact, as of the end of
our fieldwork, very few Build America Bond examinations had been initiated,
contrary to bond industry fears. According to TEB office management, these
examinations were started based on research and reviews of requests for subsidy
payments, rather than responses to compliance check questionnaires.
While the TEB
office questionnaires were appropriate for gathering information for use in
developing a longer term compliance strategy, the TEB office does not have
formal written procedures for developing and conducting compliance checks. Procedures would be beneficial to help TEB office
employees develop future compliance check programs, provide added assurance the
IRS does not exceed its authority when executing such programs, and ease
concerns by improving transparency so the bond community will have a better
understanding of the compliance check process.
In addition, TIGTA could not evaluate the TEB office’s plans to
address high-risk indicators because the TEB office has yet to complete an
in-depth review of the compliance check questionnaire responses and develop a
longer term compliance plan.
WHAT TIGTA RECOMMENDED
TIGTA recommended that the Director, TEB, Tax
Exempt and Government Entities Division, document formal guidelines for
planning and conducting compliance check programs.
In their response to the report, IRS
management agreed with the recommendation.
The TEB office plans to publish new procedures on 1) the roles and
responsibilities of TEB office managers and employees assigned to the
program, 2) the planning process for developing questionnaire projects, 3)
documenting the approval for questionnaire projects, 4) the process for
evaluating collected data, and 5) the decision points for proceeding with
follow-up compliance efforts, including examinations when appropriate.
READ THE
FULL REPORT
To view the report,
including the scope, methodology, and full IRS response, go
to:
http://www.treas.gov/tigta/auditreports/2011reports/201111053fr.html.
Email Address: TIGTACommunications@tigta.treas.gov
Phone
Number: 202-622-6500
Web Site: http://www.tigta.gov