A.G. Kalman wrote:

- quote -

I'm not so sure that I totally agree with the IRS Tax Topic
quoted above. Rev Ruling 79-201 appears to allow the
deduction of "front foot benefit charges" (a NON ad valorem
tax/assessment) in some narrow cases. However, applying this
ruling in actual practice might be a "facts and
circumstances" challenge.

MTW

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Drakem42 wrote:

- quote -

The second sentence of the paragraph where you obtained the
quote, states that the real estate taxes "must be charged
uniformly against all property in the jurisdiction and must
be based on the assessed value." This is the definition of
an ad-valorem tax. Therefore, the items identified as non-ad
valorem assessments do not meet the definition of local
benefits taxes that are deductible.

--
Alan
http://taxtopics.net

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Case: (question at the end) :-)
I will file a 1040 and itemize deductions on the Schedule A.
The property is my home (have only one), and it's not used
for business or rental. It is situated in a Community
Development District (CDD) in Florida.

My real estate tax bill is split into two sections. One is
for Ad Valorem Taxes ($6,500) and the other for Non Ad
Valorem assessments ($2,500).

One line of the second section reads "Community
Development". While the other line items in Section 2 (like
Solid Waste disposal and such) are clearly non deductible
(as per sec 164), I could not find any indication about the
CDD item.

According with the Florida law, the CDD is a local, special
purpose government authorized by Chapter 190, of the Florida
Statutes as amended, as an alternative method for planning,
financing, acquiring, operating and maintaining
community-wide infrastructure in planned communities. This
is a mechanism which provides the "solution" to the State's
needs for delivery of capital infrastructure to service
projected growth without overburdening other governments and
their taxpayers.

This allows the community to set a higher standard for
construction along with providing a long-term solution to
the operation and maintenance of community facilities as
well. The District only manages the common property that it
owns. A Homeowner Association is needed to enforce the HOA
Covenants and Restrictions that apply to individual lots.

And (again as per the FL law) this is how it works:
1. The community incorporates as a district.
2. The district sells bonds to investors to cover the cost
of building ponds, clubhouses, swimming pools or other
amenities, much as a municipality sells bonds to pay for
sewers or other infrastructure.
3. The district assesses fees to homeowners to pay off the
bond debt. Each resident and landowner in the District
pays a proportionate share of the CDD's budgeted
obligations. The annual assessments will appear on the
property tax bill, which is issued on November 1st of
each year. Once the bonds are repaid, usually in 20-30
years, the fee is removed. Now the key term (in my
opinion) is the "operation and maintenance of community
facilities" part.

According with Tax Topic 503
(http://www.irs.gov/taxtopics/tc503.html) "local benefits
taxes are deductible if they are for maintenance or repair,
or interest charges related to those benefits."

Speaking with two tax advisors one stated they are
(deductible), the other opinion is they are not.

So my questions is: "is the amount on the CDD line item on
the non-ad-valorem part of my real estate tax bill a valid
deduction or not?"

Thank you for your time,
Drake M.

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