IRS Notice of Proposed issue
 

For those of you that are interested the IRS has provided, and the developer has posted, the current Proposed Adverse Determination Examination of the Recreation Bonds. Village Community Development Districts

Looks like nothing's changed. IRS saying the VCCDD is not a government entity so the bonds should not be tax-free and the district keeps saying they are deemed a government entity per the FL law that established CDDs statewide.

I wonder how long this "Yes we are!" "No you're not!" can go on before it gets to tax court for, hopefully, a final disposition.

Don't forget the appeals after the tax court. This could drag on enough for our grandkids to retire here at this rate (and my grandson is five).

As long as residents provide enough amenity fee dollars to pay the developer's attorney and protect his bottom line. Already, close to one million dollars has been paid to Attorney Israel.

Do you know for sure that the attorney is being paid from the amenity fees?

Interestingly, from all of the publicly available documents I have reviewed, for the first time it appears the IRS is deemphasizing the original argument of whether the Issuer is a political subdivision and whether its debt is issued on behalf of a State or local governmental to the argument that under the 10% rule the bonds meet the private security or payment test. In other words, the argument is being moved from the subjective, i.e. is the issuer a government entity, to the objective, i.e. 10% rule. It's easier, in my opinion, to win an objective argument.

If you have been following this as deeply as I have, I would like much to hear from you and see your analysis. If you want to talk about your grandkids or dirty politicians not so much.

Yes, as I recall, initially the IRS was making such broad arguments that, if sustained, could have resulted in all bonds issued by Florida CDDs being taxable. That would have had major implications for the municipal bond market. Now, the IRS seems to be relying on a narrower rationale that would limit the taxability of CDD bonds to those issued by The Villages Center Districts.

That seems to be the case as the board of the VCDD is "elected" (appointed) by the Developer as the Developer is the only landowner of the District and, therefore, the only qualified voter.

What I don't understand is why tax free bonds were issued in the first place if they were not really tax free? It was done in the open. At the time everyone thought it was a great idea. I remember the first orientation I attended years ago (before IRS involvement) Pete Wahl (then District Manager) explained the process in great detail.

Those purchasing the bonds must have felt they were making a sound investment.

I have to admit I do not know what the 10% rule means and how it affects this case?

I am thankful we have residents like Mr. Kris following this issue deeply, who can explain it to the rest of us!

Thank you Mr Chris for your analysis.

I just have to wonder when this issue will be put to rest and what the end result will be? I am hoping the residents don't get hit with the bill, if the IRS ruling says issuing the bonds was an illegal act.

I too don't know what the 10% rule is.

I am sorry that I do not understand this bond issue as it has gone on so long and has been hard for me to follow. The question I have is, does this affect the bond we pay for our house?

I purchased a home in the Villages last December knowing that a court case concerning bonds was taking place. As it’s hard for non-attorney types to understand all of the implications, I would hope that this case is resolved in a manner that doesn’t negatively impact my investment and The Villages as a whole. That being said, I am interested in all comments about this issue except the deleted ones.

__________________________________________________ _________
Born Urbana, Il then Urbana, Ohio for over 60 years now-maybe Village of Lake Deaton

Hi,
All I care about but don't know is, ARE THE ANNUAL BOND AND MAINT NON ADVALOREM, items on my property tax deductible on the Federal Schedule A.
Thanks for any info. Bill

Not sure the attorneys fees of one million are coming out of amenity fees. Would have to see some black and white info.

Some say yes and deduct.............others say, clearly not and don't.

Your tax person will have to determine prior to "him" signing. If you do it yourself......it's your call on your aggressiveness.

No.

The comments that you read on TOTV are just opinions nothing more or nothing less.
Here are all the facts.........and you can form your own opinion.
Village Community Development Districts

And the IRS is fair and impartial

Potential impact of IRS decision on The Villages' tax-exempt bonds causing worries - Orlando Sentinel

In 2013, district officials said they have "spent $700,000 defending their position".

absolutely not!!!

No.

Wish I could explain it, but I'm a spectator like the rest of the residents and all I have is an opinion, not professional advice. And all I have been asking for is others informed opinion.

My personal opinion is: (1) The IRS has a compelling position and it does not appear the IRS will let this go. (2) If the IRS prevails, see opinion number 1, someone will have to pay and that someone, and amount, has not been determined yet, only the issue of taxable/tax exempt has been addressed so far. (3) Everyone is in the mix for liability regarding taxes on these bonds, i.e. the holders of the bonds, the issuer/developer, and the residents. It appears to be a spider web of responsibilities. (4) I will live long enough that the results may, see opinion number 3, affect me. Remember, I said this is my personal opinion. I'm along for the ride like everyone else. And "what a long strange trip it's been."

Did you know a meeting takes place every Wednesday called Welcome Wednesday it is held at the District Office located at 984 Old Mill Run at 8:00 a.m.? At that meeting you can ask any question you want and Janet Tutt, district manager for the Villages Center CDD, or one of her staff will answer your question.

Thanks. I did that in 2010. My questions were either discounted or dismissed out of hand. It wasn't an area the moderator was enthusiastic to discuss openly or in-depth. He was demonstrably uncomfortable with the subject when discussing the details. Since then my questions and research have turned into opinions. My opinions will either be validated or disproved as the IRS process runs its course. Either way I've learned a lot about the inner workings of The Villages through review of the publically available documents, and I hope to learn more. Very interesting.

I think the Welcome Wednesday program is new. Maybe 6 months old. Are you referring to the new villager welcome meeting that they put on for new residents?

I was referring to the CDD orientation.

Is there any sort of defined exit plan, where the developer will release control of those CDDs?

We, The Residents, Want an Answer!
 

It was actually the George W Bush IRS that started the investigation in January 2008.

With respect to your item 3, if you have not yet read it, you should take a look at the POA's explanation of how the IRS investigation could impact residents: http://poa4us.org/bulletins_files/bulletin200908.pdf Although the article was written over 5 years ago, I believe that the analysis remains valid. Subsequent POA Bulletins have given residents updates on major developments. The Daily Sun's reporting, or lack thereof, on the matter has been disgraceful.

What About The Disney Bonds?
 

I haven't followed the IRS case as closely as you have, and probably not enough. But one question I've had is..."what about the Disney CCD's and the bonds they've issued?"

My understanding has been that The Villages bond issuances for the construction of utilities, roads and common facilities in the districts were closely patterned after how Disney financed much of it's development in Orlando, particularly the City of Celebration and other residential developments they've done in and around the theme parks.

But I've never read about any IRS challenge of the Disney bonds. Or have I just missed that news?

Residents?
 

I can understand your opinion that the issuer and holders of the bonds might have an obligation were the tax court to rule in favor of the IRS. But the residents? Their only role is as obligors to repay the bonds. Why would they be at risk?

The other party that may be at the most significant risk is the law firm or law firms who issued the legal opinions at the time of each bond issuance that each specific issuance was tax exempt. Both the issuer (the Developer and the CCD's) and the buyers of the bonds relied on that legal opinion. The law firm almost certainly contracted with a bonding company to insure the risk created by their issuance of an opinion. Even if they didn't, most law firms are organized as partnerships or limited liability corporations for the specific purpose of limiting liabilities such as this. So even if a ruling favored the IRS, the first party in line to assume the costs of a reversal of the tax exemption would be the law firm and their bonding company, then the issuer, then the holder of the bonds. And like I said, I can't see how the residents are at risk at all.

But one thing is for certain--even if a ruling favors the IRS, there will be additional years of litigation over who will actually pay any resulting unpaid taxes.

This is very enlightning information. :bigbow:

I always took the position of not being too concerned over this issue as I always thought it would be many years before this would get resolved.

If I had to stay up nights worrying over this issue, I would have never moved here.

Why worry when you have no control over something. IMHO

Good question. I have often wondered that myself. However, I have not reviewed the operations of Celebration and The Villages side-by-side so I cannot address the similarities or differences. "The devil is in the details." There are also a number of CDD type communities in other states. But, it appears that the IRS' current use of the 10% rule concerning the private security or payment test pretty much singles out The Villages.

My opinion, and my opinion alone, is that the residents are liable precisely because of what you stated. "Obligors to repay the bonds." How this shakes out is anybody's guess.

I have never known a lawyer/firm to incur liability for giving bad advice unless there was personal gain involved. The recipient of that legal advice can either accept that advice or reject it. Once the recipient accepts that advice it becomes his/her position. But again, that's my personal understanding and opinion.

The first party is the bond holder and the second would be the party that issued the bonds. Remember here that technically the VCCDD issued the bonds on behalf of the village residents. In this case I believe there are facts that will alter that view. Again my personal opinion. My statements are only meant to stimulate thought and discussion. Please consider my caveats throughout this thread.

Underwriters and Bond Counsel must be very nervous.

While I agree they must be nervous, they rely upon the statements and information provided by the client. This could be an epic "he said" "they said" situation when it plays out.