The Montana Facility Finance Authority is appealing an Internal Revenue Service proposed adverse determination that concluded the interest earned from $14.15 million of variable-rate demand revenue bonds it issued to finance an expansion of a nursing home would be taxable.

The appeal, which the authority announced Thursday will be made to the IRS Office of Appeals, is of particular interest to continuing care retirement facilities nationwide, because the IRS is alleging that its refundable entrance fees, which are common in the industry, constitute "replacement proceeds" whose investment should have been yield-restricted for arbitrage purposes.

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