Post-Issuance Compliance Policy for Tax-Exempt Bond Obligations

Policy ID

024-0047

Effective Date

Friday, June 8, 2012

Division

Finance & Administration

Office of Primary Responsibility

Finance

Summary of Policy

This Policy sets forth specific policies designed to ensure Dartmouth complies with applicable provisions of the Internal Revenue Code of 1986, as amended and the regulations promulgated thereunder applicable to tax-exempt bonds issued to finance or refinance Dartmouth facilities.

Affected Parties

All Groups

Policy Statement

POST-ISSUANCE COMPLIANCE POLICY FOR TAX-EXEMPT BOND OBLIGATIONS

[Approved by the Board of Trustees June 8, 2012]
Updated May, 2017

PURPOSE OF THIS POLICY

This Post-Issuance Compliance Policy (Policy) sets forth specific policies of Dartmouth College ("Dartmouth") designed to ensure Dartmouth complies with applicable provisions of the Internal Revenue Code of 1986, as amended (the "Code")) and the regulations promulgated thereunder (the "Regulations") applicable to tax-exempt bonds ("Bonds") issued to finance or refinance Dartmouth facilities.

It is Dartmouth's policy to fulfill all requirements that must be satisfied subsequent to the issuance of Bonds in order that interest on such obligations will be excludable from gross income for federal income tax purposes. Dartmouth recognizes that compliance with the applicable provisions of the Code and the Regulations is an on-going process, necessary during the entire terms of Bonds and is an integral component of Dartmouth's debt management. Accordingly, the analysis of those facts and the implementation of this policy will require on-going monitoring and, in certain instances, consultation with bond counsel or counsel to Dartmouth with tax-exempt bond expertise beyond the scope of its initial engagement with respect to the issuance of the Bonds.

WHO NEEDS TO KNOW THIS POLICY

The individuals who should be familiar with the specific details of this policy are any Dartmouth staff involved in any aspect of any bond issue with respect to which Dartmouth is the borrower, including but not limited to those who manage, direct, or influence the following:

  1. The pre-issuance processes and decision-making including identification of eligible projects and due diligence on the timing and costs of project development;
  2. The use of Bond proceeds and the timing of the use of such proceeds;
  3. The investing of funds for Bonds and arbitrage processes;
  4. The use of property financed or refinanced by Bonds, including leases, management agreements, services agreements, and sponsored research agreements;
  5. The creation and retention of documentation relating to investment and expenditure of proceeds of Bonds, return filings, and private business use; and
  6. The recording and reporting of financial transactions related to the Bonds.
  7. The receipt or solicitation of donations to finance or refinance the projects financed or refinanced by the Bonds, or for the payment of debt service thereon.

DEFINITIONS

"Applicable Federal Law" – Includes the Code and the Regulations, including Sections 103 and 141 through 150 of the Code and the related Regulations (Note: IRS publication 4077: Tax-Exempt Bonds for 501(c)(3) Charitable Organizations Compliance Guide provides general guidance and explanation for most areas of tax-exempt financing).

"Arbitrage" – Investment earnings on Bond proceeds in excess of the Bond interest paid to bondholders, adjusted for certain expenses (i.e., investment yield higher than the yield on the Bonds).

"Private Business Use" (Private Use)– Examples of private use include: 1) the unrelated trade or business use of the Bond-financed property by Dartmouth and 2) the use of Bond-financed assets by parties other than Dartmouth or certain other charitable organizations, including use by third parties pursuant to leases, management or service contracts that do not meet IRS requirements, certain sponsored research arrangements, and any other arrangements that provide third parties with special legal entitlements to use or occupy Bond-financed property. Generally, no more than five percent (5%) of the proceeds of tax-exempt bonds may be used for private use. Included in private use is Bond issuance costs financed with Bond proceeds (limited to two percent 2% of the Bond proceeds).

POLICY

General
It is the policy of Dartmouth to comply with all applicable laws, regulations, contracts and tax covenants applicable to the Bonds, including Applicable Federal Law, the guidelines with respect to management contracts set forth in Revenue Procedure 2017-13, the guidelines with respect to research agreements set forth in Revenue Procedure 2007-47, as the same may be amended and supplemented from time to time, and the tax certificates and loan agreements executed in connection with the issuance of the Bonds. It is Dartmouth's policy to comply with the recommendations contained in IRS publication 4077: Tax-Exempt Bonds for 501(c)(3) Charitable Organizations and the report of the Advisory Committee on Tax Exempt and Government Entities: After the Bonds are Issued: Then What?

Application of this Policy
Dartmouth shall be responsible for the implementation of the following post-issuance compliance policies with respect to Bonds:

  • Use of Bond Proceeds. Proceeds shall be disbursed only for project costs, capitalized interest, bond issuance costs, and other purposes expressly allowed under the Bond documents. The property being financed must be owned or, under certain circumstances, leased by Dartmouth and the use of the Bond-financed projects must be substantially related to Dartmouth's 501(c)(3) exempt purposes.
  • Private Use of Tax-Exempt Bond Financed Property. Records will be maintained regarding the private use of Bond-financed (or refinanced) property, including copies of the pertinent leases, contracts or other documentation, and the related determination that any private use is within permissible limits under the Code and Regulations.
  • Covenant Compliance. Dartmouth will comply with all covenants in the Loan Agreement and tax certificate included in the official transcript.
  • Arbitrage Yield Restriction and Rebate (Arbitrage). Dartmouth must comply with the arbitrage requirements of Section 148(a) of the Code and the resale requirements of Section 148(f) of the Code, subject to applicable "temporary period" and spending exceptions.
  • Correction of Noncompliance. If noncompliance with Applicable Federal Law is identified, Dartmouth shall take necessary corrective action, which can include utilization of the remedial action provisions provided in the Regulations or the Voluntary Closing Agreement Program administered by the IRS.
  • Reissuance. Dartmouth shall comply with the rules and regulations regarding the reissuance of Bonds for federal income tax purposes (which may be deemed to occur as a result of modifications to Bond terms while the Bonds are outstanding).
  • Filing of Returns. Dartmouth will confirm with bond counsel that the information report required to be filed upon issuance of bonds (e.g., Form 8038) is filed with the IRS on a timely basis. Dartmouth will make other required filings on Form 8038-T in connection with its rebate obligations under the Code and Regulations. Dartmouth will file Schedule K to Form 990 by the due date, including all extensions.
  • Record retention. It is the policy of Dartmouth that, unless otherwise permitted by future IRS regulations or other guidance, written records (which may be in electronic form) will be maintained with respect to each Bond issue for as long as those Bonds remain outstanding, including all refinancings, plus three years, to readily demonstrate compliance with all federal tax requirements that must be satisfied after the issue date of the Bonds.

Procedures to facilitate compliance with this Post-Issuance Compliance Policy are documented in a separate Post Issuance Compliance Procedures Manual maintained by the Controller's Office.

Last Revised

Wednesday, May 31, 2017