Pay off $355 million, IRS tells The VillagesBy Stephen Hudak | Sentinel Staff Writer
May 30, 2009
THE VILLAGES - The Internal Revenue Service wants the governments that run this massive retirement community to pay off $355 million in loans after an investigator concluded they improperly issued tax-free bonds to buy recreational facilities such as golf courses and swimming pools.
In addition, the IRS wants the two Villages governments to pay $2.8 million in back taxes and to cease issuing tax-exempt bonds. The demands resulted from a 20-month IRS investigation into tax-exempt bonds transactions involving the playground for 77,000 retirees about 60 miles northwest of Orlando.
Much of The Villages, including 24 executive golf courses, swimming pools, community centers and utility plants -- in fact, virtually everything but the 38,000 houses in "America's Friendliest Hometown" -- have been financed by various tax-free bonds.
As part of the potential deal, the IRS has offered to forgive another $14 million in taxes the agency says could be owed to the federal government. If a deal isn't reached, the IRS has threatened to look into eight similar loans obtained through bond sales. That could expose the governments to millions more in tax liability.
.....
The IRS insists the Village Center and Sumter Landing community development districts are not "valid issuers" of tax-exempt bonds, which are most commonly used by cities and counties to finance public projects.
(IRS Agent Dominick) Servadio (Jr.) contended that the districts that issued the bonds don't meet the test of a genuine "political subdivision." Its governing board isn't chosen by residents, it has no authority to exercise police power and its power to take private property for public projects is very limited.
The agent contends that the districts' governing boards are controlled by The Villages developer, Gary Morse, and their bond sales have benefited him, not residents.
.....
Servadio's probe focused on a 2003 tax-free bond issue that raised about $64ƒ|million to buy golf courses, swimming pools and other recreational facilities from the developer.
According to the IRS report, the proceeds should be taxed because only $7.5 million went to buy physical assets. Another $53.1 million bought the rights to collect residents' amenity fees. The sale prices were set by two appraisers using a complicated method that the IRS contends was incorrectly calculated.
Homeowners in The Villages pay up to $135 a month in amenity fees, which generated about $33 million in revenue last year. Servadio pointed out that about $16 million a year -- roughly half of the fees -- are used to repay a variety of bonds that the districts have issued.
"It (is) obvious that the residents' amenity fees could be much lower, or there would be a lot more of the fees available for maintenance of the facilities if these were arm's length transactions... " he wrote.
Hmmmmm. Gary Morse. Gary Morse.....
Oh, yeah.
We remember the sweetheart deal Jeb Bush gave his crony Gary Morse, a key GOP donor and developer of
The Villages retirement town in Central Florida several years ago:
The Villages
benefited from a controversial bill Bush signed into law three years ago that gave the development's hospital the ability to sidestep state regulations in order to triple its size. Last year, the governor helped The Villages secure a U.S. Customs office at tiny Leesburg Regional Airport, which makes it easier for the developer to fly potential international customers directly into Lake County.
Regulations are for the little people. Gifts are for Jeb Bush's friends.
And before some yahoo starts braying that President Obama is using the IRS to punish the GOP and its donors, this investigation commenced under George W. Bush, 20 months ago.
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