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POLICY

General Compliance Guidelines for Tax Exempt Bonds

General Compliance Guidelines for Tax Exempt Bonds

PURPOSE OF POLICY
NYU finances certain capital projects through the issuance of qualified 501(c)(3) taxexempt bonds. “Tax-exempt” means that the interest paid to bondholders is not subject to federal tax. Tax-exempt status remains throughout the life of the bonds, but this status can be lost if certain applicable federal laws do not remain satisfied. Other consequences can result from failure to comply with restrictions relating to arbitrage, timing and use of bond proceeds, and other aspects of a bond issue. This document identifies the compliance areas of tax-exempt bond financing and NYU’s policy of fulfilling all requirements in these areas during both pre- and post-issuance processes.

POLICY
It is the University’s policy to comply with all applicable laws, regulations and contracts
applicable to its tax-exempt bonds. The Office of the Senior Vice President for Finance and Budget shall create and maintain a written manual of guidelines and procedures to document the processes used to ensure compliance with applicable law, regulation and contracts, and shall designate the positions and individuals responsible for these processes.

NYU also complies 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? Highlights of NYU’s application of certain rules, recommendations and guidelines contained in these resources are:

• Use of bond proceeds and project eligibility
Bond proceeds shall be disbursed for:

- Project costs
- Capitalized interest (i.e. initial obligations to bondholders)
- Bond issuance costs

To be an eligible project, the property being financed must be owned or, under certain circumstances, leased by NYU and the intended use must be consistent with the University’s 501(c)(3) exempt purposes. In addition, the project’s address must be listed in the TEFRA notice and must have received environmental approval under State Environmental Quality Review (SEQR). The University’s Treasurer’s Office will apply additional technical criteria to determine eligibility of projects (e.g. the useful life of projects).

• Timing of the use of bond proceeds
At the time that bonds are issued it must be intended and expected that the project will be completed within three years of issuance.

• Private business use of tax-exempt financed property
Five percent or less of bond issue proceeds may be used for private business purposes, and such use may only occur if in accordance with tax certificate provisions and in compliance with applicable federal law. Costs of issuance are counted against the 5% limit.

• Change of use
Change of a project’s use or contemplated change of use must be reported to the Treasurer’s Office and the Controller’s Department prior to the implementation of the proposed change in use to ensure compliance with applicable regulations.

• Arbitrage yield restriction and rebate
The University must comply with the yield restriction requirements of section 148(a) and rebate requirements of section 148(f), subject to spending exceptions.

• Filing of Returns
The University’s Treasurer’s Office works with DASNY to prepare and file returns with the IRS relating to arbitrage.

• Record retention
The University has adopted a record retention policy relating to tax-exempt bonds, pursuant to which records relating to tax-exempt bonds shall be maintained for the entire term of the bond issue plus three years, or, in the case of an issue refunded by one or more subsequent issues, for the combined term of the issues plus three years.

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About This Policy

Effective Date: October 01, 2007
Issuing Authority: Martin Dorph, Senior Vice President for Finance and Budget
Responsible Officer: Martin Dorph, Senior Vice President for Finance and Budget
Office Name: Office of Finance and Budget

NYU finances certain capital projects through the issuance of qualified 501(c)(3) taxexemptbonds. “Tax-exempt” means that the interest paid to bondholders is not subjectto federal tax. Tax-exempt status remains throughout the life of the bonds, but this statuscan be lost if certain applicable federal laws do not remain satisfied. Other consequencescan result from failure to comply with restrictions relating to arbitrage, timing and use ofbond proceeds, and other aspects of a bond issue. This document identifies thecompliance areas of tax-exempt bond financing and NYU’s policy of fulfilling allrequirements in these areas during both pre- and post-issuance processes.

• Pre-issuance processes and decision-making including identification of eligible
projects and due diligence on environmental and tax aspects of projects
• The use of bond proceeds and timing of use
• Investing of bond funds and arbitrage processes
• Private use of property financed by tax-exempt bonds, including leases, and
management and services agreements
• The creation and retention of documentation relating to use of proceeds,
arbitrage, return filings, and private usage
• Recording and reporting of financial transactions related to tax-exempt bonds

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