WASHINGTON – The Indianapolis Airport Authority has reached a settlement agreement with the Internal Revenue Service over rebate liability in connection with $347 million of tax-exempt bonds issued in 2006.
Airport authority officials disclosed the settlement agreement in an event notice posted on the Municipal Securities Rulemaking Board's EMMA website on May 23. They did not disclose the settlement amount.
"The settlement agreement provides that the examination will be closed with no change to the tax exempt status of the bonds," authority officials wrote in the event notice.
The IRS opened the random examination of the bonds in 2013, and the authority announced on May 6 that it and the agency had agreed to settle the dispute.
Robert Thomson, the senior finance director for the Indianapolis Airport Authority, told The Bond Buyer earlier this month the dispute centered around a disagreement over the federal tax law related to "replacement proceeds." The tax law states that if certain terms of bonds are changed, the bonds can be considered newly issued to replace the earlier bonds so they become subject to the latest tax laws.
The IRS requires issuers to pay a rebate at least every five years and after the final maturity of the bonds. Failure to comply with federal rebate requirements can lead to the loss of tax-exempt status of bonds.
The $347 million of tax-exempt Series 2006F were issued by the Indianapolis Local Public Improvement Bond Bank, which loaned the proceeds to the airport authority. The proceeds were used to purchase airport revenue bonds issued by the authority, pay for the cost of issuance of the 2006F bonds and series 2006A Authority bonds, and pay for certain program expenses of the bond bank.
The bond bank is independent of the city of Indianapolis and the airport authority, and regularly serves as the conduit issuer for the airport's bond deals.
The proceeds of the Series 2006A authority bonds were used to fund the airport authority's 2001-2010 capital improvement program for the airport system, which included a 1.2 million-square-foot midfield passenger terminal.
The airport authority owns and operates the Indianapolis International Airport. The Series 2006F bonds were underwritten by City Securities, Inc., and Ice Miller LLP and Coleman Graham & Stevenson, LLC served as co-bond counsel. First Albany Capital Inc. was financial advisor for the issue.
