A city that is in need of a new police station, library, community center, or administration building will often issue a bond to pay for construction of the project. Money that is raised through a onetime tax is allocated to fund the building project. Paid for by the constituents who live in the community, the bond is monitored and administered by the city manager. The construction is paid for at key benchmarks in the development of the project from the money that is collected by the bond. Because the project is paid for ahead of the groundbreaking there are times when a surplus remains in the account after all the construction expenses have been accounted for. A city that issues a bond does not automatically absorb any money that is left over once the project is completed. Before the municipality can claim any remaining funds an accounting firm must complete an arbitrage rebate calculation. The IRS Monitors Tax Exempt Cities Any project that is being managed has to be audited to ensure that the funds collected from the bond have been used correctly. An independent accounting firm is required to submit an audit to the IRS to determine the amount of money that will be received by the city. Non-profit or tax exempt municipalities cannot transfer money from a bond into their treasury without submitting the proper arbitrage forms to the IRS. If a city fore goes the accounting practice, the money that is taken is considered a profit and is subject to taxation. A city that is accountable for paying taxes would lose its exempt status and be forced to pay taxes on all revenue that is brought in. Property assessments, utility payments, parking and traffic violations, and even late fines for library books would all be considered taxable income for a city if an arbitrage rebate calculation is not provided to the IRS after a bond has been issued for a construction or development project. Arbitrage Compliance Specialists, Inc. was founded in 1994 and has grown to be one of the largest arbitrage rebate provider in the nation. The Managing Directors of ACS average over 26 years of arbitrage rebate calculation experience and can offer clients a historical knowledge and comprehensive understanding of the arbitrage rebate regulations. (http://www.rebatebyacs.com)
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