IRS closes bond audit of Dallas senior living facility

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The nonprofit C.C. Young Foundation in Texas reported in a public filing Tuesday that the Internal Revenue Service closed an audit examination by taking no action involving the tax exempt status of bonds issued in 2009 for the construction of a senior living facility in Dallas.

“The No-Change Letter indicates that the Service has closed its examination of the bonds with no change to its position that the interest paid to the owners of such bonds is excludable from gross income,” the foundation said in a letter it posted on the EMMA database of the Municipal Securities Rulemaking Board.

The IRS began the audit Oct. 22 with a notification letter.

“Based on the information and documents requested, C.C. Young management believes the bonds were randomly selected in connection with a routine examination,” foundation said in an earlier public filing. “Management has no reason to believe that the examination was targeted to the bonds.”

The audit involved four CUSIPs for $53.995 million in bonds issued in 2009.

The Official Statement for the $53.995 million issuance said it consisted of $26.995 million in Series 2009A fixed rate bonds, $10.6 million in Series 2009B-1 tax-exempt mandatory pay-down securities, and $16.4 million in Series 2009B-2 tax-exempt mandatory pay down securities.

The proceeds of the bonds were used for the construction of a 232,100 square foot residential facility with 108 living units located on the main campus of an existing facility in Dallas known as The Overlook.

The $58 million project, according to the Official Statement, was to be financed with $53.995 million in bonds, $703,699 in obligor contributions and $4 million in resident entrance fees.redemption date. They also have been subject to optional redemption since February 2015.

The Tarrant County Cultural Education Facilities Finance Corp. served as the conduit issuer for the Retirement Facility Revenue bonds.

The bonds were issued for the development of a new senior living facility for low-income seniors on Umphress Road in southeast Dallas by the nonprofit C.C. Young Foundation.

The IRS audit did not appear to fit within the parameters of the service’s 2020 fiscal year compliance strategy which includes focusing on whether jail bonds used to build local facilities have exceeded the private use limit; whether sinking fund over-funding causes tax credit bonds to be arbitrage bonds; or whether variable rate bonds comply with the rebate and yield restriction rules under Internal Revenue Code Section 148.

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