There is a possibility that state tax credits recently sold by the Joplin Redevelopment Corp. could be taxable and cost $1.5 million in federal taxes.
But city officials and JRC board members are taking steps to try to keep from owing that money since the intent of the JRC is a focus on public projects for the city.
City Attorney Brian Head said a tax attorney has advised the city to apply for a ruling from the Internal Revenue Service and seek a declaration that the transaction is nontaxable.
JRC members authorized the filing of that request.
“The JRC is a for-profit corporation even though it is a wholly owned subsidiary of the city,” Head said. “We received an opinion from a tax attorney saying the JRC’s purpose is really the determining factor (as to whether transactions are taxable). So, based on that, the only way to find out for sure is to ask the IRS for a tax determination letter.”
The JRC has bought land for tornado redevelopment projects being assembled by the city’s contracted master developer, Wallace Bajjali Development Partners. It plans to sell that land to Wallace Bajjali as projects are prepared for the start of construction.
The chief executive officer of the firm, David Wallace, last year told the JRC about the availability of the state’s Distressed Areas Land Assemblage Tax Credit Program, which was due to expire but still had tax credits available. The JRC applied for some and now has sold them.
The state’s Department of Economic Development issued $4.2 million. The tax credits were advertised for sale and received multiple offers. They were sold to Lysart Capital of Chesterfield, which submitted the highest offer, for 92.25 cents on the dollar, according to the city’s finance director, Leslie Haase.
She said that netted the JRC $3,856,000.
It had been estimated that the tax credits would sell for 90 to 91 cents on the dollar, “so it’s actually a little higher than what we thought,” she said.
TO BOLSTER THE CITY’S CASE that the tax credit sale should not be taxed, the board of the Joplin Redevelopment Corp. on Friday approved a change to its bylaws clearly saying that the corporation serves a governmental purpose. City Attorney Brian Head said that bylaw change was recommended by the tax attorney.