As a former internal auditor for a major steel company (who is now unfortunately bankrupt and out of business), I have read many documents such as those written by both parties in this dispute. There were many times that I uncovered significant issues that I believed should be corrected BUT when the issue was brought to someone further up the food chain, the finding was deleted from the final audit report, sometimes without any discussion among the auditors. Good old politics was alive and well in corporate America also, which is probably why Bethlehem Steel is now bankrupt. So, what is my point?
The same type of thing can happen here. My take on the original finding is that the agent was presented a good case, though the subsequent response to the district's explanations was not necessarily written in a professional manner. In any event, the final determination will probably be made by someone else higher up in the IRS's bureaucracy and some politician. When the original review was done in 2003, there was a different party in charge than there is now. Should this make a difference, legally no, but in actual practice - don't kid yourself.
What will eventually happen? Here is what I think:
If the developer believes that the District Government, which is legally separated from him but is so intertwined that any reasonable person will conclude that he calls the shots, has a poor case, he will step up and reimburse the District Government to make them whole. If not, he has a terrible public relations matter on his hands while he tries to develop the remaining land in the Villages. He is probably looking at lawsuits down the road that would cost him significantly more than the penalties being proposed. The IRS settlement does not appear to impact the tremendous profit that he has made on the facilities that were sold or on any potential future sales on facilities south of 466.
How would the District government handle an adverse ruling without the developer's help? They legally can't raise the amenity fees but they can and will have to decrease the expenses related to the amenities, such as maintenance, hours of operation, staffing, etc.
Only time will tell what the final outcome will be.
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