The IRS confirmed that "some bond issuers were unable to establish that their bonds did not violate the provision [Section 148 of the tax code]." As a result, the IRS created these closing agreements to allow bond issuers to comply with the rule.
Details about the nature of Utah's accounting errors or the amount of the closing agreement have not been disclosed, but the IRS notes that the settlement amount will be "40 percent of the taxpayer exposure on each issue of the Bonds." In 2011, the Pennsylvania Higher Education Assistance Agency paid $12.3 million in such a settlement, as reported by The Bond Buyer, a newspaper that covers the municipal bond industry.
David Feitz, executive director of the Utah Higher Education Assistance Authority (UHEAA) and associate commissioner for student financial aid, said this issue has to do with financing student loans under the old Federal Family Education Loan Program (FFELP).
"[The closing agreement] has no consumer interest connection and has nothing to do with current student loans since UHEAA has not made student loans since June 2010 when the Federal Direct Student Loan program was initiated," Feitz said. "All public student loans are now made directly by the federal government."
After entering a closed session to discuss the settlement last Thursday, the UHEAA board of directors recommended that the State Board of Regents "execute a closing agreement in accordance with the Voluntary Closing Agreement Program." The matter now goes to the State Board of Regents for their consideration.
Feitz said all terms of the settlement will be made public once the regents vote on the issue, which, Feitz said, could be held in the next two to three months.