South Miami Pays Up Debt to IRS


South Miami has recently agreed to pay up $276,000 it owes to the IRS being taxes, penalties and interests to settle an IRS investigation. At the same time, the city also agreed to pay back $6.6 million to investors who bought city bonds. These actions came arising from a US Securities and Exchanges Commission investigation. The SES investigation is still ongoing.

The city bonds were sold as a means to raise funds for the construction of a five-storey garage with retail units in downtown South Miami. When local governments sell bonds, they can either be taxable or tax-exempt. Taxable bonds would offer higher interest rates than non-taxable ones. The ones sold by South Miami to the investors were tax-exempt bonds. But local governments who sell tax-exempt bonds are bound by certain regulations according to the Inland Revenue Code.

According to the code, there is a limitation to the purposes for which the money raised by the bonds is to be used. Local governments may use them only for purposes that benefit the public. The tax law prohibits local governments from helping private firms access the bonds to get the low interest rate for projects that are not deemed for public benefit.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Darrin Mish, Tampa Tax Attorney, The Law Offices of Darrin Mish, P.A. | Attorney Advertising

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