Scottsdale to pay IRS $750,000 in taxable bond dispute

The city of Scottsdale has agreed to pay the Internal Revenue Service more than $750,000 to settle a dispute regarding interest on a portion of Scottsdale’s bonds.

In 2013 the IRS issued a notice to the city and municipal property corp. that the allocation of a portion of the proceeds of the bonds to refinance the initial lease term of the existing municipal Scottsdale Fashion Square Partnership Parking Garage Lease Agreement causes interest on the bonds to be taxable.

The city disagrees.

“The city and MPC disagree with the position of the IRS, believing that the bonds comply fully with the applicable federal tax law requirements for interest on the bonds to be excludable from the gross income for federal tax purposes,” city documents state.

The city attorney’s office recommends that the city approve this settlement in order to eliminate the expense and risk of continuing the dispute with the IRS, and to protect the city’s bond rating, an Aug. 31 city staff report states.

The settlement to be paid by the city to the IRS is in the approximate amount of $750,853.39.

The resolution also authorizes and directs a transfer in that amount from the adopted fiscal year 2016-17 General Fund operating contingency to the city attorney’s operating budget to fund payment of the settlement.

The resolution passed on consent at the Aug. 31 regular council meeting.

The Scottsdale Independent publishes a free daily newsletter. A print edition is mailed to 75,000 homes and businesses each month. If you value our journalistic mission, please consider showing us your support.

You are encouraged to leave relevant comments but engaging in personal attacks, threats, online bullying or commercial spam will not be allowed. All comments should remain within the bounds of fair play and civility. You can disagree with others courteously, without being disagreeable. Feel free to express yourself but keep an open mind toward finding value in what others say. To report abuse or spam, click the arrow in the upper right corner of the comment box.

Facebook Comment