Regulation for Tax-Exempt Obligations
1. Role of Compliance Coordinator/Board Treasurer
The board treasurer shall:
a. Be responsible for monitoring post-issuance compliance;
b. Maintain a copy of the transcript of proceedings or minutes in connection with
the issuance of any tax-exempt obligations and obtain records that are
necessary to meet the requirements of this regulation;
c. Consult with bond counsel, a rebate consultant, financial advisor, IRS
publications and such other resources as are necessary to understand and
meet the requirements of this regulation;
d. Seek out training and education to be implemented upon the occurrence of
new developments in the area and upon the hiring of new personnel to
implement this regulation.
2. Financing Transcripts’ Filing and Retention
The board treasurer shall confirm the proper filing of an IRS 8038 Series return and
maintain a transcript of proceedings and minutes for all tax-exempt obligations
issued by the school district including, but not limited to, all tax-exempt bonds, notes
and lease-purchase contracts. Each transcript shall be maintained until 11 years
after the tax-exempt obligation documents have been retired. The transcript shall
include, at a minimum:
a. Form 8038;
b. Minutes, resolutions and certificates;
c. Certifications of issue price from the underwriter;
d. Formal elections required by the IRS;
e. Trustee statements;
f. Records of refunded bonds, if applicable;
g. Correspondence relating to bond financings; and
h. Reports of any IRS examinations for bond financings.
3. Proper Use of Proceeds
The board treasurer shall review the resolution authorizing issuance for each tax-
exempt obligation issued by the school district and the school district shall:
a. Obtain a computation of the yield on such issue from the school district's
financial advisor;
b. Create a separate Project Fund (with as many sub-funds as shall be
necessary to allocate proceeds among the projects being funded by the
issue) into which the proceeds of issue shall be deposited;
c. Review all requisitions, draw schedules, draw requests, invoices and bills
requesting payment from the Project Fund;
d. Determine whether payment from the Project Fund is appropriate and, if so,
make payment from the Project Fund (and appropriate sub-fund, if
applicable);
e. Maintain records of the payment requests and corresponding records
showing payment;
f. Maintain records showing the earnings on, and investment of, the Project
Fund;
g. Ensure that all investments acquired with proceeds are purchased at fair
market value;
h. Identify bond proceeds or applicable debt service allocations that must be
invested with a yield-restriction and monitor the investments of any yield-
restricted funds to ensure that the yield on such investments do not exceed
the yield to which such investments are restricted;
i. Maintain records related to any investment contracts, credit enhancement
transactions and the bidding of financial products related to the proceeds.
4. Timely Expenditure and Arbitrage/Rebate Compliance
The board treasurer shall review the Tax-Exemption Certificate (or equivalent) for
each tax-exempt obligation issued by the school district and the expenditure records
provided in Section 2 of this regulation, above and shall:
a. Monitor and ensure that proceeds of each such issue are spent within the
temporary period set forth in such certificate;
b. Monitor and ensure that the proceeds are spent in accordance with one or
more of the applicable exceptions to rebate as set forth in such certificate if
the school district does not meet the "small issuer" exception for said
obligation;
c. Not less than 60 days prior to a required expenditure date, confer with bond
counsel and a rebate consultant, if the school district will fail to meet the
applicable temporary period or rebate exception expenditure requirements of
the Tax-Exemption Certificate. In the event the school district fails to meet a
temporary period or rebate exception:
1. Procure a timely computation of any rebate liability and, if rebate is
due, file a Form 8038-T and arrange for payment of such rebate
liability;
2. Arrange for timely computation and payment of yield reduction
payments (as such term is defined in the Code and Treasury
Regulations), if applicable.
5. Proper Use of Bond Financed Assets
The board treasurer shall:
a. Maintain appropriate records and a list of all bond financed assets. Such
records shall include the actual amount of proceeds (including investment
earnings) spent on each of the bond financed assets;
b. Monitor and confer with bond counsel with respect to all proposed bond
financed assets;
1. management contracts;
2. service agreements;
3. research contracts;
4. naming rights contracts;
5. leases or sub-leases;
6. joint venture, limited liability or partnership arrangements;
7. sale of property; or
8. any other change in use of such assets.
c. Maintain a copy of the proposed agreement, contract, lease or arrangement,
together with the response by bond counsel with respect to said proposal for
at least three years after retirement of all tax-exempt obligations issued to
fund all or any portion of bond financed assets; and
d. Contact bond counsel and ensure timely remedial action under IRS
Regulation Sections 1.141-12 in the event the school district takes an action
with respect to a bond financed asset, which causes the private business
tests or private loan financing test to be met.
6. General Project Records
For each project financed with tax-exempt obligations, the board treasurer shall
maintain, until three years after retirement of the tax-exempt obligations or
obligations issued to refund those obligations, the following:
a. Appraisals, demand surveys or feasibility studies;
b. Applications, approvals and other documentation of grants;
c. Depreciation schedules;
d. Contracts respecting the project.
7. Advance Refundings
The board treasurer shall be responsible for the following current, post issuance and
record retention procedures with respect to advance refunding bonds. The board
treasurer shall:
a. Identify and select bonds to be advance refunded with advice from internal
financial personnel and a financial advisor;
b. Identify, with advice from the financial advisor and bond counsel, any possible
federal tax compliance issues prior to structuring any advance refunding;
c. Review the structure with the input of the financial advisor and bond counsel,
of advance refunding issues prior to the issuance to ensure;
1. that the proposed refunding is permitted pursuant to applicable federal
tax requirements if there has been a prior refunding of the original
bond issue;
2. that the proposed issuance complies with federal income tax
requirements which might impose restrictions on the redemption date
of the refunded bonds;
3. that the proposed issuance complies with federal income tax
requirements which allow for the proceeds and replacement proceeds
of an issue to be invested temporarily in higher yielding investments
without causing the advance refunding bonds to become "arbitrage
bonds"; and
4. that the proposed issuance will not result in the issuer's exploitation of
the difference between tax exempt and taxable interest rates to obtain
an financial advantage nor overburden the tax exempt market in a way
that might be considered an abusive transaction for federal tax
purposes;
d. Collect and review data related to arbitrage yield restriction and rebate
requirements for advance refunding bonds. To ensure such compliance, the
board treasurer shall engage a rebate consultant to prepare a verification
report in connection with the advance refunding issuance. Said report shall
ensure said requirements are satisfied;
e. Whenever possible, purchase State and Local Government Series (SLGS) to
size each advance refunding escrow. The financial advisor shall be included
in the process of subscribing to SLGS. To the extent SLGS are not available
for purchase, the Board treasurer shall, in consultation with bond counsel and
the financial advisor, comply with IRS regulations;
f. Ensure, after input from bond counsel, compliance with any bidding
requirements set forth by the IRS regulations to the extent as issuer elects to
the purchase of a guaranteed investment contract;
g. In determining the issue price for any advance refunding issuance, obtain and
retain issue price certification by the purchasing underwriter at closing;
h. After the issuance of an advance refunding issue, ensure timely identification
of violations of any federal tax requirements and engage bond counsel in an
attempt to remediate the same in accordance with IRS regulations.
8. Continuing Disclosure
The board treasurer shall assure compliance with each continuing disclosure
certificate and annually, per continuing disclosure agreements, file audited annual
financial statements and other information required by each continuing disclosure agreement.
The board treasurer will monitor material events as described in each
continuing disclosure agreement and assure compliance with material event
disclosure. Events to be reported shall be reported promptly, but in no event not later
than 10 business days after the day of the occurrence of the event. Currently, such
notice shall be given in the event of:
a. Principal and interest payment delinquencies;
b. Non-payment related defaults, if material;
c. Unscheduled draws on debt service reserves reflecting financial difficulties;
d. Unscheduled draws on credit enhancements relating to the bonds reflecting
financial difficulties;
e. Substitution of credit or liquidity providers, or their failure to perform;
f. Adverse tax opinions, the issuance by the Internal Revenue Service of
proposed or final determinations of taxability, Notices of Proposed Issue (IRS
Form 5701-TEB), or other material notices, or determinations with respect to
the tax-exempt status of the bonds, or material events affecting the tax-
exempt status of the bonds;
g. Modifications to rights of Holders of the Bonds, if material;
h. Bond calls (excluding sinking fund mandatory redemptions), if material and
tender offers;
i. Defeasances of the bonds;
j. Release, substitution, or sale of property securing repayment of the bonds, if
material;
k. Rating changes on the bonds;
l. Bankruptcy, insolvency, receivership or similar event of the Issuer;
m. The consummation of a merger, consolidation, or acquisition involving the
Issuer or the sale of all or substantially all of the assets of the Issuer, other
than in the ordinary course of business, the entry into a definitive agreement
to undertake such an action or the termination of a definitive agreement
relating to any such actions, other than pursuant to its terms, if material; and
n. Appointment of a successor or additional trustee or the change of name of a
trustee, if material.
I.C. Iowa Code Description
Iowa Code § 278.1 Power of Electors
Iowa Code § 298 School Taxes and Bonds
Iowa Code § 298A School District Fund Structure
Iowa Code § 74 Public Obligation Warrants
Iowa Code § 75 Sale of Public Bonds
Iowa Code § 76 Public Bonds and Debt Obligations
Cross References
Code Description
701.02 Transfer of Funds
Approved: 08/17/2022 Reviewed Revised
