The Hampton County School District in Varnville, South Carolina has won its dispute with the Internal Revenue Service over the tax exempt status of its Series 2010 $14 million general obligation bonds, preserving its tax-exempt status and incurring no fines.
The school district received a letter this month from the IRS, stating that the IRS Independent Office of Appeals has approved the settlement and that the agency will process and close the case.
The letter further stated that “as a result of its review, Appeals determined the tax advantaged status of the Bonds will remain in effect and because there is no further deficiency or overassessment, the Consolidated School District does not need to take any further action,” the school district’s disclosure on EMMA said. The disclosure also said that the issuer did not incur any financial penalty or other liability to the IRS.
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The school district
An issuer’s continuing disclosure agreement often cites this exact form as evidence that an IRS audit has become sufficiently serious and requires disclosure to the market.
The IRS will then typically respond with a set of questions, such as details about the use of proceeds, whether the issuance was new money or refunding and what was built with the money, among others.
There is no mention of those details in the disclosure but something didn’t jive right with the IRS, as on Feb. 17, 2023, the issuer received a Proposed Adverse Determination, an event which it disclosed.
“The Consolidated School District disagrees with the Proposed Adverse Determination and intends to file a protest with the Internal Revenue Service Appeals Office to challenge the Proposed Adverse Determination within the 30-day period as specified in the Proposed Adverse Determination,” the Feb. 2023 disclosure said.
Lawyers for the school district did not immediately respond to requests for comment for this story.