WASHINGTON – The Internal Revenue Service may soon revoke the tax-exempt status of a Georgia housing corporation that for three consecutive years failed to file information returns on a $7.81 million bond issuance in 2013.
Legacy Community Housing Corp. a subsidiary of Legacy Shamrock Community, LLC, a Georgia-based organization that provides affordable housing for low-to-moderate income families, seniors and the disabled, did not file Forms 990 for three years. Failure to file the forms results in an automatic loss of tax-exempt status under federal tax code guidelines. However, the corporation has yet to receive any such notice from the IRS.
The nonprofit corporation made the announcement about its failure to file in an event notice recently posted on the Municipal Securities Rulemaking Board's EMMA system.
"The corporation expects to receive such a notice in due course and that the service will publicly identify it as an organization whose tax-exempt status….[is] revoked," wrote Brent Sobol, the executive director of Legacy Community Housing Corp., in the event notice.
In the June 7 event notice, Sobol said the organization has already begun its application for reinstatement of tax-exempt status.
He said the corporation expects to have both its delinquent returns and application for reinstatement of tax-exempt status completed by June 30.
Should the IRS approve the reinstatement request and determine there was reasonable cause for the failure of form returns, the corporation will never be listed as having lost its tax-exempt status . If reinstatement is approved without reasonable cause, the corporation will be marked as not tax-exempt from May 16 until the date it filed its reinstatement application.
The issue stems from the issuance of $7.81 million of Series 2013A Multifamily Housing Mortgage Revenue Bonds by Public Finance Authority, a Wisconsin-based national conduit issuer created by Wisconsin's state legislature as a political subdivision of the state in 2010. The issuance also included $720,000 in taxable bonds.
The bonds were issued to finance Legacy Community Housing Corp.'s acquisition and renovation of a multifamily housing project in the Atlanta area, according to the official statement. Proceeds from the sale of the bonds were used to fund certain reserves for the bonds and to pay issuance costs.
The corporation said it failed to a file a Form 990 in 2013, 2014 and 2015. The form is used to gather information about tax-exempt organizations and promote compliance. The IRS requires that tax-exempt 501(c)(3) organizations annually file Forms 990. Organizations automatically lose their tax-exempt status if they fail to do so for three consecutive years.
The corporation's loss of tax-exempt status would be effective May 16, the due date for the third of its annual Form 990 returns on the 2013 bonds. As of Monday, Legacy Community Housing Corp. was not listed on the IRS website under organizations whose exemption had been automatically revoked.
Speaking to The Bond Buyer Monday, Sobol said he had not received any notice from the IRS alerting him of a loss of tax-exempt status. He said the issue was a "clerical mistake" that he hoped could be resolved quickly. The corporation hired Carter & Co., a Florida-based public accounting firm, to help complete the form submission process, he added.
"We do have every confidence that it will be corrected," Sobol said. The corporation has modified its procedures for filing form 990 returns to avoid a "similar occurrence in the future," he said.
Legacy Community Housing Corp. provides "affordable housing, after school tutoring, entrepreneurship training and other activities that improve the quality of life for low to moderate income residents and communities," according to the bonds' official statement. The IRS recognized it as a tax-exempt 501(c)(3) organization in November 2011. Sobol said the housing development financed by the bonds is at 100%occupancy.
The Series 2013A bonds were underwritten by Merchant Capital L.L.C., and Jones Walker LLP in Cincinnati served as bond counsel.
The IRS announced last week it had modified its procedures for Form 990 to make certain data available in a new electronic format. The service also introduced an interactive feature alerting taxpayers to missing fields and other errors so they can complete the form without additional delay.