- Port didn’t spend enough proceeds within 3 years, IRS Says
- Port says it complied with tax rules and will defend position
The U.S. Internal Revenue Service has concluded that interest on $55 million of municipal bonds issued by a Texas port in 2017 is taxable because the issuer was too slow to spend money it raised, according to a securities filing.
The Port of Port Arthur Navigation District didn’t comply with a section of the tax code that requires municipalities to spend 85% of tax-exempt bond proceeds within three years of the bonds being issued, according to the IRS, the filing said.
The port, which operates a shipping terminal on the Sabine Neches Waterway along the Gulf of Mexico, said it did comply with the federal tax code and intends to defend its position. After receiving a “proposed notice of adverse determination” an issuer has 30 days to request an administrative appeal of its case, according to the port’s filing.
The section of the tax code in question is aimed at preventing state and local governments from issuing bonds when interest rates are low without any immediate need to use the the funds, resulting in excess debt that isn’t subject to income tax.
Judy Bettis, Port of Port Arthur’s chief financial officer, didn’t immediately respond to a call and email seeking comment.
Bloomberg Markets
By Martin Z Braun
August 24, 2023