[Jakel]

I really enjoy this forum, and I have read thousands of posts, although I almost never post myself, because I can usually find the answers through other posts...I've read the same questions about many topics, I know what not to spill on my Granite countertops and whether I should seal my tile floors....I know about the lawn ornaments, and which is the best Village to move into...(Thanks to Gracie) I know that Brownwood was the name of the Developers holdings up North, and I know that more people in the Villages like Verizon than like ATT. What I don't know is the answers to my previous post...a few simple questions...I am not looking for the party poopers or the head in the sand opinions, I was hoping for a few direct and educated answers from someone who understands the issue....Hello are you out there??

[Jakel]

I had a very informative talk with Janet Tutt, who called me back this evening. She spent a very patient half hour plus, trying to educate me about the Bonds sold to purchase the Amenities. This is a different Bond than the one you all have who have purchased new homes in The Villages. The Amenity fees paid by the homeowners in the affected areas,(North of 466) pay down the cost of those Bonds, and pay for the services you receive at the facilities. Since the Developer has not transferred all the Amenities over (South of 466), those fees are still collected by the Developer, and he pays the amount necessary to provide the services, and pockets any profits.

The amount raised by the Bonds paid to the Developer to cover the Amenities, is somehow calculated by the revenue stream. I sort of understand this, although it is a financial thing, it seems to me to be a little backwards. As a non financial person, I would think the value would be based on the actual tangible properties, like pools, and Rec Halls and Golf Courses, but evidently it is based on your $135 fee times all the homes in the affected areas, times 12 times however many years they factor in.

The whole thing seems to be run so well, that there is actually a surplus.

As for the IRS thing possibly going badly...I received some assurance that it would not be charged back to the Homeowners.

I hope I made an acurate accounting of our conversation, but I must report that I continue to be amazed at how nice eveyone is who has anything to do with The Villages, and now for me that extends to the Village Government.

[graciegirl]

Originally Posted by Jakel

I had a very informative talk with Janet Tutt, who called me back this evening. She spent a very patient half hour plus, trying to educate me about the Bonds sold to purchase the Amenities. This is a different Bond than the one you all have who have purchased new homes in The Villages. The Amenity fees paid by the homeowners in the affected areas,(North of 466) pay down the cost of those Bonds, and pay for the services you receive at the facilities. Since the Developer has not transferred all the Amenities over (South of 466), those fees are still collected by the Developer, and he pays the amount necessary to provide the services, and pockets any profits.

The amount raised by the Bonds paid to the Developer to cover the Amenities, is somehow calculated by the revenue stream. I sort of understand this, although it is a financial thing, it seems to me to be a little backwards. As a non financial person, I would think the value would be based on the actual tangible properties, like pools, and Rec Halls and Golf Courses, but evidently it is based on your $135 fee times all the homes in the affected areas, times 12 times however many years they factor in.

The whole thing seems to be run so well, that there is actually a surplus.

As for the IRS thing possibly going badly...I received some assurance that it would not be charged back to the Homeowners.

I hope I made an acurate accounting of our conversation, but I must report that I continue to be amazed at how nice eveyone is who has anything to do with The Villages, and now for me that extends to the Village Government.

Thank you Jakel.

Beautifully presented. Calming. Believable. Sensible. Non inflammatory.

I guess I don't worry about this IRS issue only because of the overwhelming evidence that this is not a fly by night, pull the wool over your eyes group who is running our town. The attention to minute details and the evidence of more than enough money to continue to float this boat can be seen in the cleanliness of every space, the well run everything, and the overdone rec centers. lol.

[The Shadow]

Originally Posted by graciegirl

Thank you Jakel.

Beautifully presented. Calming. Believable. Sensible. Non inflammatory.

I guess I don't worry about this IRS issue only because of the overwhelming evidence that this is not a fly by night, pull the wool over your eyes group who is running our town. The attention to minute details and the evidence of more than enough money to continue to float this boat can be seen in the cleanliness of every space, the well run everything, and the overdone rec centers. lol.

Ok, TV is everything you say it is. You are correct. You get a cookie. Question, why is the IRS involved?? Does the IRS not understand the rules they police?? The gorilla/elephant/IRS is still in the room.

[graciegirl]

Originally Posted by The Shadow

Ok, TV is everything you say it is. You are correct. You get a cookie. Question, why is the IRS involved?? Does the IRS not understand the rules they police?? The gorilla/elephant/IRS is still in the room.

Thank you for the cookie.

I am appointing YOU to worry about it. I have some sand activities I gotta do.

And....don't let this blonde hair fool ya.

And...I own the worrying title of the western world.

[bkcunningham1]

Very basically, the Village Community Development Districts has asked the IRS for technical advice on whether the VCDD is a political subdivision for purposes of the IRS tax code on revenue.

Based on the IRS' own "laws" and codes, the VCDD is allowed to do this. That is where the issue stands now. The VCDD is waiting for a reply.

The question you asked, does the IRS understands the rules they police, doesn't take into account that people in the United States can appeal or petition decisions by the IRS. They may do many things to petition or contest the IRS decision. One of the things they may do is ask for a TAM. Have you ever heard of the United States Tax Court?

This is from the IRS: A technical advice memorandum, or TAM, is guidance furnished by the Office of Chief Counsel upon the request of an IRS director or an area director, appeals, in response to technical or procedural questions that develop during a proceeding. A request for a TAM generally stems from an examination of a taxpayer's return, a consideration of a taxpayer's claim for a refund or credit, or any other matter involving a specific taxpayer under the jurisdiction of the territory manager or the area director, appeals. Technical Advice Memoranda are issued only on closed transactions and provide the interpretation of proper application of tax laws, tax treaties, regulations, revenue rulings or other precedents. The advice rendered represents a final determination of the position of the IRS, but only with respect to the specific issue in the specific case in which the advice is issued. Technical Advice Memoranda are generally made public after all information has been removed that could identify the taxpayer whose circumstances triggered a specific memorandum.

http://www.irs.gov/irs/article/0,,id=101102,00.html

[The Shadow]

Originally Posted by graciegirl

Thank you for the cookie.

I am appointing YOU to worry about it. I have some sand activities I gotta do.

And....don't let this blonde hair fool ya.

And...I own the worrying title of the western world.

You get the cookie and I worry about it, you drive a hard bargain.

[The Shadow]

Originally Posted by bkcunningham1

Very basically, the Village Community Development Districts has asked the IRS for technical advice on whether the VCDD is a political subdivision for purposes of the IRS tax code on revenue.

Based on the IRS' own "laws" and codes, the VCDD is allowed to do this. That is where the issue stands now. The VCDD is waiting for a reply.

Could I trouble you to reword that? Are you saying maybe the VCDD is not of the status required for the IRS review? What about a time table?

It is my understanding you can fight the IRS right to the top and if you win that does not set precedence for the next year or another person or that you can do the same thing south of 466. I may be wrong.

[bkcunningham1]

From my understanding, that is what the entire dispute is about. To determine if the VCDD falls into the legal category of political subdivision or special purpose local governments in order to issue tax exempt bonds.

The Villages Community Development Districts' website, Janet Tutt, district manager, wrote this in a previous column:

It should be noted that a
similar inquiry by the IRS in
2003 resulted in “no change”
to the District’s operation. Of
course, we cannot predict how
this examination will end...
Keep in mind,
the VCCDD is one of about
600 CDD’s in the State of
Florida. The issues raised in
these 5701 forms would apply
to the vast majority of those
600 districts as they issue
bonds, just like the VCCDD
issues bonds. As part of the
bond process, each one of
those bond issues is reviewed
by bond counsel — attorneys
who are schooled in the law as
it relates to tax exempt bonds.
The VCCDD used a bond
counsel firm for the issuance
of our bonds. Other CDD’s
around the State used a variety
of bond counsels to review
their transactions. All of the
firms found that the District
was a government and had
the authority to issue bonds.
In addition, the VCCDD
bonds were approved by the
local circuit court, as all CDD
bonds are, but one of our
bond issues was appealed to
the Supreme Court of the
State of Florida. The Supreme
Court of the State of Florida
found the VCCDD’s actions
were appropriate.
We are going to
work with them; we’re going
to review Chapter 190 and
explain that community development
districts are specialpurpose
government under
Florida law and, as such, can
issue tax-exempt bonds...
The recreational
facilities were purchased based
on both the value of the facilities
themselves, plus the value
of the cash flow derived from
operating those facilities. Cities
and counties buy utility companies
all the time on such a
“cash flow” approach and issue
tax-free municipal bonds to do
so. There is nothing unusual
about the way the District valued
the assets that were
acquired by the VCCDD...
The
District believes that the recreational
amenities have been
valued and sold in a normal
and appropriate manner to the
VCCDD, so as to benefit the
residents and perpetuate the
lifestyle being enjoyed.

[EdV]

The makeup of the two ‘special’ CDDs that contain all the amenity facilities is that The Developer still controls them via appointed membership on their board of trustees since he still owns a majority of the land that makes up those two CDDs.

Initially, the developer leased the amenities to those CDDs and was paid out of the funds collected from your contractual amenity fees. But over time, the developer has been selling those amenity facilities to the two respective CDDs. I know, I know, sounds like he’s selling them to himself, but that’s what’s been happening and so far it’s legal.

When the developer sold each facility to the CDD, the price was not based on the asset value plus some appropriate value for good will. Instead, the accounting team for the developer based the price on the asset value plus the expected lease revenue that the developer would be expected to receive over a decade or two into the future. But before you jump on this and say ‘that’s outrageous’, remember that those executive golf courses are contractually tied into your amenity fees. In other words, you will be paying for them whether you use them or not. That’s how a 2 million dollar executive course becomes a 20 or 30 million dollar course. The accountants said, ‘you can pays me now or pays me later but either way you pays’.

Why didn’t the developer submit a request to the IRS for approval to issue the tax free bonds? Well, I don’t know all of the possible details of what could or could not have been done but I do know that all of the bonds were posted to the Municipal Securities Rulemaking Board and you can search for them under the names of the two CDDs if you wish: http://emma.msrb.org/Search/Search.aspx

Who will the IRS go after for settlement? That’s actually an easy one in my mind. It won’t be the buyers of those tax free bonds (John Q Public) because the IRS has almost never done that. How about The Developer? Nope, can’t do that either because The Developer merely sold assets that he owned to the CDDs. So the only logical choice would be the two CDDs that issued the bonds as ‘federally tax free’ when they shouldn’t have, according to the IRS agent making the accusations. OK, so now we’re finally getting to the bottom of this. But wait, isn’t The Developer effectively the two special CDDs because it has total control over them? Yes, but remember that I pointed out in an earlier post that no homeowner in TV has nor ever will have any title to or ownership of any part of the amenities including golf courses, recreation centers, etc. Given that, it shouldn’t be a major concern but the press loves a story that involves millions of dollars and they ran with it.

Does this IRS audit threaten the numbered CDDs in TV as well as the 500 or so other CDDs that have been established in Florida? I would like to say that that’s a crock of you know what. But I can’t because I couldn’t possibly know every detail of those entities. What I can tell you is that as far as I’ve seen, the 10 numbered districts in TV that are essentially private homes and that have or will be governed by election of officers to The Board of their respective CDDs is evolving in accordance with the intent of the Florida CDD law and should also be recognized by the IRS as being able to issue tax free bonds.