Are your tax-free munis legit? The IRS wants to know

Are your tax-free munis legit? The IRS wants to know
Agency to begin collecting data on municipal bonds from MSRB; has authority to nix tax break
SEP 23, 2011
The U.S. municipal-bond market's regulator said it will provide data to the Internal Revenue Service to assist with efforts to ensure that securities offerings comply with federal tax laws. The Municipal Securities Rulemaking Board, a self- regulator, collects and disseminates data on trading prices as well as initial offering statements and other documents tied to bond deals. The Alexandria, Virginia-based board said today that the agreement extends to the IRS an arrangement it has with other agencies that enforce its rules. The IRS oversees whether bond sales by state and local government agencies comply with the rules of their exemption, which allows investors to collect tax-free interest. It has the power to strip bonds of the tax break. The IRS also monitors Build America Bonds, securities sold in 2009 and 2010 that provide direct interest subsidies to local governments. “Industry compliance with federal tax laws is fundamental to a fair and efficient municipal market,” Lynnette Hotchkiss, the executive director of the rulemaking board, said in a statement. “Investments in technology have enabled the MSRB to make municipal market data more readily available to regulators and our agreement with the IRS will ensure that MSRB data and other support are readily available to the IRS for its enforcement activities.” --Bloomberg News--

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