I - IRS
B. Mid Years (1996- 2004) - See below.
C. Current Years (2005-2015)
The POA has continuously kept residents updated about the VCCDD's ongoing dispute with the IRS. A short summary follows:
- In January of 2008, the Village Center Community Development District (VCCDD) received an inquiry and a request for documents from the Internal Revenue Service (IRS) pertaining to the VCCDD's (and later SLCDD's) bonds issued for the purchase of Amenity Contracts/facilities. The IRS challenged their tax exempt status and had three areas of concern regarding the VCCDD's bonds.
- First, since 2008, the IRS has taken the position that the VCCDD was not a political subdivision eligible to issue tax exempt bonds. Is the Village Center Community Development District, the Issuer of the Bonds under investigation, a qualified issuer of tax exempt bonds? The VCCDD's position has been clear since the beginning - "If the IRS wants to change how a political subdivision is determined, the new definition should be applied prospectively and not retrospectively." The VCCDD won this challenge as the IRS agreed to not apply their new "definition" retroactively.
- Second, the IRS took the position that the District paid an amount in excess of the value of what was purchased. Did the Series 2003 Facilities acquisition price reflect the fair market value of the assets? Was the Bond Issue properly sized to carry out the government purpose of the Bonds? How does the Developer's control over the District's governing board and the related party aspects of this relationship impact the use and/or allocation of Bond proceeds to a governmental purpose or an essential government function? After years of analysis and review of this issue, the VCCDD attorneys claimed that the IRS analysis was flawed and that when errors were corrected, the price paid was actually in the best interest of the District. (The IRS has not made any further claims regarding this issue.)
- Lastly, the IRS took the position that the bonds were private activity bonds and there- fore did not qualify to be tax-exempt. Were the Bond proceeds used for an essential governmental function or do the nature of the Facilities acquired with the Bonds result in private business use, and hence the Bonds are Private Activity Bonds? The IRS has never responded to the VCCDD response to this allegation which was submitted last March until the current settlement offer.
- At the November 12 VCCDD Board meeting, Supervisor Moyer (the District's "liaison" on the IRS challenges) advised the Board that legal research suggested that it could prevail if it wanted to reject the IRS $1.5M settlement offer and fight to the end. He advised that even though the VCCDD attorneys believe they have a strong case, it would then likely go through the IRS appeal process, another costly process estimated to be about $300,000.
- The VCCDD Board voted unanimously to make a $300,000 counter offer (the approximate cost of an appeal). Supervisor Moyer will present the VCCDD results to the Sumter Landing CDD as it has a potential impact on that board.