Post Issuance Compliance Purpose

CSU is considered a state instrumentality that is tax exempt under the doctrine of implied governmental immunity and is therefore authorized to enter into debt agreements at tax-exempt interest rates for which the purchaser does not have to pay income tax. Since these bonds are tax advantaged, the IRS has certain rules on how the money is spent, and how CSU manages the facilities or projects financed by the bonds.

Post Issuance Compliance is the regular detailed monitoring of the use of the facility. Any use by a non-CSU person or entity is considered private business use and is limited to no more than 10% of the bond, (including any refundings), over the life of the bonds plus 3 years.

• The university’s average debt issuances have about a 30-year life

Why is this important?

Failure to comply with the rules jeopardizes the tax-exempt status of the bonds including the following:

• Immediate payoff of the bonds
• “Event of default” under all the university’s debt
• Retroactive declaration by the IRS that the bond interest is “taxable” to the buyers
• University liable for associated tax and penalties
• Public disclosures, causing reputational issues
• Rating agencies could reduce the university’s debt ratings
• Agencies funding research hesitant to contract with CSU