The Villages Voice - May 2011

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The Villages Fact Finder

by Staff

Villages Fact Finder

There are 600 Community Development Districts in Florida, 438 of which were begun in 2003 through 2008. They have issued $6.5 billion in municipal bonds to finance their infrastructure. Since the collapse of the housing market, numbers of these districts are in default on bonds and the project developer is in financial distress as well.  So why is the Internal Revenue Service reviewing such a well established and accepted program in The Villages where neither the bonds nor the Developer are at risk? 

The Voice cannot answer that question, but Tallahassee and hundreds of other developers and Community Development Districts have been waiting for the IRS’s answer also.  A similar IRS review of The Villages and bond issues in 2003 resulted in “no finding”. 

Our own District Government has been keeping Villagers updated on the IRS review on the districtgov.org website.  Seven District Manager updates starting in March, 2009 include status reports and a comprehensive Statement of Facts to the IRS.  A Technical Support Request to the IRS in January 2010 was expected to bring the review to a conclusion.

After 39 months, three IRS agents (including two changes for “promotion” and “transfer” assignment), multiple visits to The Villages by the IRS, and the District giving the IRS essentially a primer in Florida CDD statutes and operation – the IRS apparently just doesn’t get it. 

In the April, 2010 Village Center Community Development District’s Request for Technical Advice to the IRS addressed the two issues under review were: Whether the Issuer is a political subdivision within the meaning of…Income Tax Regulations; and If the Issuer is not a political subdivision, whether its debt is issued on behalf of a State or local governmental unit with the meaning of Treasury Regulations.

The IRS took 14 months to reply.  The IRS March 16, 2011, statement of facts, in the view of District’s counsel review of the Service’s draft demonstrated: “The Service has a clear and deep misunderstanding of the nature of the creation, development and governance of the Center District and the powers, responsibilities and functions of the Center District”.  The IRS apparently doesn’t understand the nature of the relationship of the District and Developer, the benefit functions of the District, relevant public findings, or the normal progression of events in CDD’s from creation to a fully functioning special district of government.

The District’s reply to the IRS included corrections to the Service’s inaccuracies and suggested that “On the basis of these facts and the proper application of the clearly established legal principles, a continuation of the examination is entirely unwarranted and would result in a wholly unnecessary and inappropriate waste of the time, personnel resources and funds of both the Center District and the Service”.

Details will be available in the District’s next IRS update.

The Internal Revenue Service has been reviewing ….since ….. The IRS has made multiple visits to The Villages and requests for information