The Internal Revenue Service is auditing $11.04 million of educational facilities revenue bonds that Sarasota County, Fla. issued in 2010, the proceeds of which were lent to the nonprofit Sarasota School of Arts and Sciences, Inc. to finance charter school facilities.

The Sarasota School of Arts and Sciences, disclosed the audit in an event notice filed with the Municipal Securities Rulemaking Board’s EMMA system.

The nonprofit said the IRS informed it of the audit in a notice that stated the Service routinely examines municipal debt issuances to determine compliance with federal tax requirements.

“Sarasota School of Arts and Sciences has no reason to believe that the series 2010 bonds are not in compliance with federal tax requirements and intends to cooperate fully with the IRS in its examination,” the nonprofit said in the event filing.

The school was incorporated under state laws in 1997 to establish a charter school and obtained tax-exempt status under Section 501(c)(3) of the Internal Revenue Code. 

It began operating in the 1997-1998 school year with about 50 students in the sixth grade, according to bond documents. It added grades seven and eight beginning in 1998 and began the 2009-2010 school year with 665 students in grades six through eight. It’s students reside primarily in Sarasota and Manatee Counties.

At the time of the 2010 borrowing, the school had a main building and a cluster of nearby buildings. It had financed the acquisition of those facilities with $2.55 million of industrial development bonds sold in 2004. It also had an outstanding promissory note that was used to finance a visual art studio and additional classrooms.

About $6.7 million of the 2010 bonds were used to finance the demolishment of a portion of the existing facilities, the construction of a new 39,000 square foot three-story educational building, and a 10,750 square foot gymnasium and community center facility, according to the official statement and charter school officials.

Another $2.9 million was used to refund some of the 2004 bonds and to make a swap termination payment, according to the official statement.

PNC Capital Markets LLC underwrote the $11.04 million deal, which closed June 30, 2010. Holland & Knight LLP was bond counsel. Quarles & Brady LLP was underwriters’ counsel.

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