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McAllen ISD reports $444,215 IRS yield-reduction payment required for 2020 maintenance tax note
Summary
CFO Joel Garcia told trustees that the district earned $697,298 in interest on bond proceeds from Feb. 11, 2020 to Feb. 11, 2025; IRS limits allowed $253,083, requiring a $444,215 remittance. The payment will be made from bond interest, not operating funds.
Joel Garcia, chief financial officer for McAllen ISD, presented an informational report to trustees on Tuesday explaining that a yield-reduction (arbitrage) payment to the Internal Revenue Service is required for the district’s 2020 maintenance tax note.
Garcia said the applicable reporting period is Feb. 11, 2020, through Feb. 11, 2025. During that time the district earned $697,298 in interest from bond proceeds, but IRS rules allow earnings only up to a calculated limit of $253,083; the excess earnings of $444,215 must therefore be remitted to the IRS. Hilltop Securities prepared the arbitrage compliance report; the district’s financial advisor identified in the presentation reviewed the report and bond counsel Norton Rose Fulbright confirmed the payment is required.
Garcia told trustees the payment will be made from interest earnings generated by the bond proceeds so no budget amendment is needed and there will be no impact on the district’s operating budget. The item was presented as informational and no board action was recorded.
