Vermont’s largest city has until May 9, 2022 to respond to the Internal Revenue Service’s request to substantiate its use of project proceeds in relation to a 2010 bond issuance or lose out on the refundable tax credits associated with the Qualified School Construction Bonds program.
The City of Burlington received that notice related to its $9.7 million General Obligation Public Improvement Bonds, Series 2010A Qualified School Construction Bonds, according to a disclosure posted Wednesday on EMMA.
“On April 14, 2022, the City received a notice from the Internal Revenue Service that determined, unless the City provided substantiation of the use of 100% of available project proceeds of the referenced Bonds on the construction, rehabilitation or repair of public school buildings, the referenced bonds would not qualify as qualified school construction bonds and therefore the City would not be eligible to receive the refundable tax credits under Section 6431 of Internal Revenue Code with respect to such Bonds,” the disclosure said.
The city, awarded the Government Finance Officers Association’s Certificate of Achievement for Excellence in Financial Reporting for its annual comprehensive financial report for the fiscal year ending June 30, 2020, said the substantiating evidence is already being gathered.
“The City is preparing to submit the substantiation for use of the proceeds of the Bonds for school construction and rehabilitation purposes,” the disclosure said. “The current due date for such substantiation is May 9, 2022.”
Representatives for the City of Burlington did not immediately respond to requests for comment.
The Qualified School Construction Bonds (QSCBs) program was among several created by the 2009 American Recovery and Reinvestment Act. QSCBs are taxable, tax-credit bonds whose proceeds could finance the construction, rehabilitation or repair of public school facilities, as well as the acquisition of land where the facilities will be constructed. Like other ARRA programs, they were only authorized for two years.
The IRS was known to have been auditing QSCB issuances, with multiple disclosures along those lines in the past two to three years.