Pa. college-loan agency pays $12M to IRS
HARRISBURG, Pa.—The quasi-state agency that provides low-interest tuition loans and grants to Pennsylvania college students is paying more than $12 million to settle an IRS investigation into the proceeds from its tax-exempt bonds.
The Pennsylvania Higher Education Assistance Agency made the disclosure Nov. 17 in a quarterly report and a filing with the federal Municipal Securities Rulemaking Board in what accountants and others say involves federal laws meant to prevent tax-exempt borrowers from profiting from bond proceeds.
Tax-exempt organizations are typically supposed to pay any such profits to the IRS.
PHEAA is the first student-loan agency to settle with the IRS in what appears to be wider IRS scrutiny of the industry's practices.
The IRS investigation encompassed $205.3 million of PHEAA's outstanding tax-exempt bonds. As part of the settlement, PHEAA said there is no change to the treatment of interest paid on the bonds.
An IRS spokesman said he could not comment on matters that involve individual taxpayers, such as PHEAA.
The IRS review of student loan-backed bonds does not appear to be limited to Pennsylvania.
The Vermont Student Assistance Corp. said in a July 14 disclosure that some of its bonds were being investigated as part of an IRS program announced in 2008 to begin randomly examining tax-exempt student loan bond transactions.
The IRS, it said, has questioned its accounting treatment for student loans and a certain "federal consolidation loan rebate fee." The agency said it was contesting the IRS' assertions.