New TAM May Curtail Ability of Community Development Districts to Issue Tax-Exempt Bonds

Please note:  This Tax Tip column will be published in the September–October 2013 issue of The Journal of Passthrough Entities, a publication of Wolters Kluwer Tax and Accounting.

Introduction:

On May 9, 2013, a Technical Advice Memorandum1 (the “TAM”) was issued with respect to a community development district (“CDD”) in Florida. Although the CDD and the developer that was instrumental in its formation were not identified in the TAM, it is widely known that it was a community development district created under Florida law by the developer of a very large retirement community in the Central Florida area known as “The Villages.”2 The TAM challenges the tax-exempt status of bonds issued by the CDD by taking the position that the CDD was not a “political subdivision,” as such term is used in Code Sec. 103(c). The TAM has raised major concerns regarding the status of CDDs in Florida, where approximately 600 CDDs currently exist. A number of other states have similar statutes, and any special districts formed thereunder would presumably also be vulnerable to challenge under the analysis set forth in the TAM. To read the full article, please click here: Egerton-Weingart_JPTE_16-05