IRS Audit Services
We understand the concerns. It is impossible to prevent an audit, and indeed many audits are so-called "random" or type of issue audits. We understand the concerns that both issuers and conduit borrowers face with an Internal Revenue Service ("IRS") audit. They fear that the bonds will be declared taxable. They fear that the costs of the audit, in terms of the effect on interest costs, both of the bonds being audited and of other bonds of the issuer or the conduit borrower, legal costs and payments to the IRS will be excessive in relation to the benefits of tax-exempt financing.
We understand the confusing nature of the audit process. Issuers and conduit borrowers face judgment from the IRS without the practical ability to present a defense in a neutral forum, such as Tax Court or federal District Court. The IRS takes the position that it can audit bond issues so long as bondholders' have open tax years with respect to interest paid, rather than being confined to normal statutes of limitations. Not uncommonly, the IRS audits bonds issued more than a decade before the start of the audit.
We offer seasoned judgment. We can provide informed counsel to clients who are facing audits. We have served as bond counsel in tens of thousands of transactions and have represented many issuers and conduit borrowers before the IRS in audits. We have a dedicated tax department with four partners who have a deep knowledge of the Internal Revenue Code, especially Section 103, and indeed only practice in areas directly and indirectly related to tax-exempt bonds and the controversies that can arise from IRS audits of bond issues.
We address concerns and help clients navigate through the process. We take a three-part approach to assisting our clients. First, we analyze what the IRS is looking for and why the bonds were selected for audit. Second, we help the client gather the factual information about the bonds, which has been requested by the IRS. Third, we interface with the IRS so that the client does not have to spend time answering the IRS queries. We can deal with what the IRS has asked for in the most expeditious manner possible.
