As a good faith measure and to avoid a lien on city properties, the Blytheville City Council agreed to pay the Internal Revenue Service $33,427 for a 2004-2005 tax debt that the city is no longer able to appeal.
Late Friday afternoon, four of the six Council members spoke with the city's tax attorney, William Fones of Baker Donelson, who along with the Taxpayer Advocate recommended the move. Council members Shirley Overman, Stan Parks, Monte Hodges and Missy Langston voted to pay the bill by Tuesday.
Mayor James Sanders said the city will move water revenue to the General Fund to pay the $33,427, part of a $3.8 million debt to the IRS.
Sanders also told the Council he and city attorney Mike Bearden have been researching possible city farmland it could sell to pay another portion of the back payroll taxes.
"We're taking every step necessary to try to abate as much as we can without having to go to the public," Sanders said.
The city's IRS issues apparently date back to at least 2004.
Parks asked if the $33,427 was withholding taxes or Social Security?
"These would be a combination of the balance due," Fones said. "Some this is also interest. These are leftover matters. It would appear that they had been addressed to some extent back then and not totally neglected. There were balances due and it wasn't fully paid at the time. The remaining balances have never been fully discharged."
Since the appeal rights have expired, the Memphis-based attorney advised the Council to pay the debt as soon as possible.
"There are some matters that are pending now in appeals and the IRS is not able to take any action on them, but the matter of immediate concern is some very old taxes," Fones said. "These go back to 2004 and 2005 and have been pending for quite a while. All appeal rights have been expired long ago, back, I believe in 2006. The IRS is pressing on these matters, which are not a large amount. It's a little over $33,000 in tax penalties and interest at this point for these four old quarters for 2004 and 2005. But because there are no appeal rights left anymore and because the IRS is fully within its rights to file a tax lien and begin collection action on those matters, the only way to prevent the filing of a tax lien is to pay those off in full."
He added the action shows "the city is moving in good faith to resolve its other tax issues, including the ones that are still under appeal at this point in time."
Sanders said: "We're trying to not have liens placed on us right now."
Fones explained tax liens are different than, say, mortgage liens.
"It is a general lien," he said. "It's not on specific property owned by the city, but it attaches to every item of property that the city owns in the county where the tax lien is filed. It doesn't have to describe any specific property. It attaches to everything that the city would own in that county. It would tie up any type of future borrowing transactions, we also have some concerns if it would create some problems with the city pursing Act 9 types of incentives for businesses and all of those ramifications of a tax lien filing cannot be fully predicted at this point in time. Certainly there are some bad ramifications that we already know about that could occur if a tax lien is filed."
On Tuesday night, the Council agreed, through Act 9, to aid Nucor Steel Arkansas with a $40 million expansion at its Hickman facility.
The city is trying to avoid liens that could jeopardize those types of projects.
"We are trying to move forward with an installment agreement with the IRS, working out a procedure where the remaining taxes can be paid and certainly a payment like that would show a measure of good faith by the city," Fones said.
Meanwhile, Overman, who chairs the Finance and Purchasing Committee, suggested council members begin thinking about prices for city farmland that could pay down some of the remaining tax debt.
Sanders said city will be "above board" in selling the land.
The mayor asked Hodges, a banker, to find an appraiser for the land.
mbrasfield@blythevillecourier.com