The Internal Revenue Service is auditing $19 million of tax-increment refunding revenue bonds that were issued by Missouri’s Florissant Industrial Development Authority in 2003.
The IDA disclosed the audit, which began on May 18, 2010, in a notice filed Tuesday with the Municipal Securities Rulemaking Board’s EMMA system.
The authority said the audit was part of a project initiated by the IRS to measure the compliance of tax laws with respect to tax increment and similar financings.
In its notice, the IDA said it has responded to several requests for information from the IRS and that it has hired Gilmore & Bell PC as special tax counsel in connection with the audit. The firm was also bond counsel for the 2003 transaction.
“The bonds are payable in part from the proceeds of a sales tax collected within a transportation development district,” the IDA said. “At this time, the IRS examiner’s inquiry is primarily focused on the status of that transportation development district sales tax as a 'generally applicable tax’ as that term is defined in federal income tax regulations.”
The IDA said it “is continuing to respond to the factual and legal inquiries of the IRS” and that it “cannot predict the outcome of the audit.”
Some bond lawyers — who are not involved in the transaction but are familiar with state law — said they did not understand why the transportation development district sales taxes would not qualify as “generally applicable taxes.”
The bonds were issued to refund some tax increment notes the city had previously issued to help finance the Cross Keys Redevelopment Project, which was trying to alleviate some of the “blighting” conditions, according to the official statement.
The redevelopment area covers about 46 acres and the project involved the reconstruction of a 335,000-square-foot retail development, which included shops and parking.
The underwriter in the transaction was Stifel, Nicolaus & Co. Lewis, Rice, Fingersh LC in St. Louis served as counsel to the authority.