2002 US Bank & IRS - Tax Allocation BondsCLOSING AGREEMENT ON FINAL DETERMINATION
COVERING SPECIFIC MATTERS
Under section 7121 of the Internal Revenue Code of 1986, as amended
(the "Code"), La Quinta Redevelopment Agency (the "Issuer"), U.S. Bank
National Association, survivor by merger of U.S. Bank Trust National Association
(the "Escrow Agent"), and the Commissioner of Internal Revenue (the
"Commissioner" or "IRS") make this closing agreement (the "Agreement").
WHEREAS, the parties have determined the following facts and made the
following legal conclusions and representations:
A. This Agreement is in settlement of issues raised by certain trans-
actions involving the Issuer in a request for a closing agreement
pertaining to La Quinta Redevelopment Agency La Quinta Redevelop-
ment Project Tax Allocation Refunding Bonds, Series 1994 (Project
Area No. 1) (the "Bonds") issued by the Issuer in the principal amount
of $26,665,000 on June 21, 1994 (the "Issue Date").
B. This Agreement is not based upon an examination of the Bonds by the
IRS and does not preclude or impede an examination of the Issuer,
any holders of the Bonds, or the Bonds by the IRS with respect to
matters not addressed in this Agreement.
C. The IRS has not formally asserted any claims against the Issuer, or
sought to tax any holders of the Bonds on interest income on the
Bonds.
D. The terms of this Agreement were reached following negotiations and
may differ from the terms of settlement of other bond issues examined
or to be examined by the IRS.
E. This Agreement is for the benefit of the past, present, and future
registered and beneficial owners of the Bonds (collectively, the
"Bondholders").
F. The Escrow Agent failed, contrary to the requirements of the Escrow
Agreement dated as of May 1, 1994 by and between the Issuer and
the Escrow Agent (the "Escrow Agreement"), to reinvest proceeds of
the Bonds deposited into the escrow account (the "Escrow Fund")
created with respect to the Bonds in certain U.S. Treasury Obligations -
State and Local Government Series. Proceeds of the Bonds were,
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Closing Agreement with La Quinta Redevelopment Agency and U.S. Bank
National Association
during certain periods of time, left uninvested. As a result, the
proceeds of the Bonds may have been invested in the Escrow Fund at
yields in excess of the permissible yields under section 1.148-2(d)(2)(ii)
of the Income Tax Regulations. The Escrow Agent has agreed to pay
to the U.S. Treasury on behalf of the Issuer the excess earnings
resulting from such failure, in the amount stated below. The Escrow
Agent has computed the excess earnings on the Bonds to be
$212,833.28 for the period beginning on the Issue Date and ending on
February 11, 2000.
NOW IT IS HEREBY DETERMINED AND AGREED PURSUANT TO
THIS AGREEMENT EXECUTED BY THE PARTIES HERETO UNDER
SECTION 7121 OF THE CODE THAT FOR FEDERAL INCOME TAX
PURPOSES.
1. The Escrow Agent shall, simultaneously with mutual execution and
delivery of this Agreement by the parties hereto, pay $212,833.28 to the U.S.
Treasury (the "Settlement Amount") on behalf of the Issuer. Payment of this
amount shall be transferred electronically to the U.S. Treasury or its designees
pursuant to instructions previously provided, in writing, to counsel for the Escrow
Agent by the IRS. Delivery of this Agreement shall be accomplished, and the
Agreement shall be entered into, upon, but not before, both (1) receipt by each
party, confirmed by telephone or e-mail, of an original or facsimile fully -executed
copy of this Agreement, and (2) completion of the wire transfer contemplated by
this Agreement. The date on which this Agreement so takes effect shall be
inserted as the date of the Agreement on each counterpart.
2. In executing this Agreement the IRS does not expressly or impliedly
accept the assumptions, allocations, or methodology used by the Escrow Agent
in computing the excess earnings stated in Paragraph F.
3. The Bondholders are not required to include in their gross income any
interest on the Bonds because of the violations set forth herein.
4. Notwithstanding anything to the contrary contained herein, the IRS may
take any appropriate action with respect to the Bonds, including taxing the
Bondholders on interest earned on the Bonds for violations other than those set
forth herein; provided, however, for all purposes of sections 103 and 141 through
150 of the Code, (a) the amounts the Escrow Agent, prior to the date of this
Agreement, failed to reinvest in U.S. Treasury Obligations -State and Local
Government Series ("SLGS") as specified in the Escrow Agreement shall be
treated as having been invested in zero coupon SLGS as specified in the Escrow
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Closing Agreement with La Quinta Redevelopment Agency and U.S. Bank
National Association
Agreement, and (b) the Settlement Amount paid by the Escrow Agent to the U.S.
Treasury shall not be treated as an amount earned by the Issuer on investments.
5. No income shall be recognized by any Bondholder as a result of this
Agreement or any payments made pursuant to this Agreement.
6. The amount paid on behalf of the Issuer pursuant to this Agreement is
not refundable, or subject to credit or offset under any circumstances.
7. No party to this Agreement shall endeavor by litigation or other means
to attack the validity of this Agreement.
8. This Agreement shall not be cited or relied upon by any person or entity
whatsoever as precedent in the disposition of any other case.
9. The Issuer hereby consents to disclosure by the IRS of information
concerning the existence and subject matter of this Agreement to Members of
Congress, the press and the general public:
a. in the event of a default by the Issuer on any term in the
Agreement; or
b. to the extent the IRS deems necessary to correct any material
misstatement with respect to this Agreement in response to a
public statement by the Issuer or an agent of the Issuer.
10. This Agreement is final and conclusive except that ---
a. The matter it relates to may be reopened in the event of fraud,
malfeasance, or misrepresentation of a material fact.
b. It is subject to the sections of the Code that expressly provide
that effect be given to their provisions (including any stated
exceptions for section 7122) notwithstanding any other law or
rule of law; and
c. If it relates to tax periods ending after the effective date of this
Agreement, it is subject to any law, enacted after this
Agreement date, that applies to that tax period.
By signing, the above parties certify that they have read and agreed to the
terms of this Agreement.
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Closing Agreement with La Quinta Redevelopment Agency and U.S. Bank
National Association
Dated: April , 2002
LA QUINTA R DEVELOPMENT ENCY
Title:
TIN#:
Date: April , 2002
U.S. BANK NATIONAL ASSOCIATION
By:
Title:
Date
Senior Vice President
April , 2002
COMMISSIONER OF INTERNAL REVENUE
By:
Title:
Date: April , 2002