IRS Notice of Proposed issue

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  #1  
Old 01-27-2015, 10:12 AM
Mr.Kris Mr.Kris is offline
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Default 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
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Old 01-27-2015, 11:14 AM
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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.
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Old 01-27-2015, 11:23 AM
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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).
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Old 01-27-2015, 12:13 PM
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Originally Posted by Mikeod View Post
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.

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.
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Old 01-27-2015, 12:49 PM
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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?
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Old 01-27-2015, 02:48 PM
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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.
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Old 01-27-2015, 03:19 PM
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Originally Posted by Mr.Kris View Post
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.
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Old 01-27-2015, 03:51 PM
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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.
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Old 01-27-2015, 04:43 PM
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I have to admit I do not know what the 10% rule means and how it affects this case?
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Old 01-28-2015, 01:29 AM
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Quote:
Originally Posted by Mr.Kris View Post
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.
I am thankful we have residents like Mr. Kris following this issue deeply, who can explain it to the rest of us!
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  #11  
Old 01-28-2015, 05:15 AM
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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.
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Old 01-28-2015, 08:44 AM
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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?
  #13  
Old 01-28-2015, 09:26 AM
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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.

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  #14  
Old 01-28-2015, 10:40 AM
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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
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Old 01-28-2015, 10:41 AM
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Not sure the attorneys fees of one million are coming out of amenity fees. Would have to see some black and white info.
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