Is a Florida community development district a political subdivision of the state?

Plain-English summary

The Villages Center Community Development District (the Center District) was created in 1992 under Chapter 190, Florida Statutes. The IRS was examining whether the tax-exempt bonds the district had issued really qualified, and one IRS division had taken the position that for a stretch between 1993 and 2004 the district was not a "political subdivision" under federal tax rules because it lacked enough sovereign powers and, in practice, had no qualified electors while its landowner votes were controlled by a single entity. The district's manager asked the Attorney General's office whether such a district is "a division of the State of Florida."

This informal opinion, signed by Assistant Attorney General Joslyn Wilson, split the question in two. The federal piece, whether the district qualifies as a political subdivision for purposes of federal tax law and IRS regulations, the office expressly declined to address, saying that determination should be made by the IRS, which was already considering it. On the state-law piece, the office said that under Florida law a community development district is generally considered a political subdivision of the state. Section 1.01(8), Florida Statutes, includes "all other districts in this state" within the terms "public body," "body politic," and "political subdivision," the district appears on the state's official list of special districts, and special districts are recognized as governmental entities in Article VII of the Florida Constitution. The opinion also noted that Chapter 190 allows a district to be created with a single landowner and with no qualified electors, although a district without qualified electors cannot levy ad valorem taxes. It closed by repeating that the federal political-subdivision question belonged to the IRS, not the AG.

Currency note

This opinion was issued in 2012. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Federal tax rules on what counts as a "political subdivision" for tax-exempt bonds have been the subject of IRS rulemaking and litigation since 2012, and the Florida statutes cited here have been amended and renumbered. This opinion did not decide the federal question. Anyone facing a CDD bond or tax-status issue should get current federal tax advice rather than rely on this page.

Common questions

Q: Is a community development district a political subdivision under Florida law?
A: Generally, yes. The opinion relied on section 1.01(8), which sweeps "all other districts in this state" into the definitions of "public body," "body politic," and "political subdivision," and on the district's listing among the state's official special districts and its recognition as a governmental entity in Article VII of the Florida Constitution.

Q: Did the AG decide whether the district is a political subdivision for IRS purposes?
A: No. The office expressly declined to address the federal-tax question, saying it was one for the IRS, which was already considering it. The opinion answered only the state-law characterization.

Q: Can a CDD exist with one landowner and no qualified electors?
A: Yes. The opinion noted that Chapter 190 does not bar creating a district with a single landowner or with no qualified electors, though a district without qualified electors may not levy ad valorem taxes.

Q: Why was the federal characterization being litigated?
A: According to the opinion, an IRS division had asserted that for the 1993-2004 period the district did not qualify as a political subdivision under IRS rules because it lacked sufficient sovereign powers, which bore on whether its bonds were properly tax-exempt. The district was challenging that before the IRS Chief Counsel.

Background and statutory framework

Florida's general definitional statute, section 1.01(8), provides that "public body," "body politic," or "political subdivision" include counties, cities, and "all other districts in this state." Community development districts are created under Chapter 190 (the statement of need is in section 190.002), and they appear on the official list of special districts maintained under section 189.4035. Special districts are recognized as governmental entities in Article VII of the Florida Constitution, including in the provisions on local taxes, pledging credit, and local bonds.

The opinion noted a wrinkle in the case law: in Canaveral Port Authority v. Department of Revenue, 690 So. 2d 1226 (Fla. 1996), the Florida Supreme Court rejected a lower court's treatment of an airport authority as a "political subdivision" immune from taxation, holding the constitution did not let the Legislature decide what entities are immune from ad valorem tax. The Legislature responded the next year with Chapter 97-255, revising the special-district definition in section 189.403(1) to treat special districts like municipalities for the property-tax exemption. Whether the district was a political subdivision for federal tax purposes, however, was the IRS's question to decide, and the office declined to answer it.

Citations and references

Statutes and constitution:

• s. 1.01(8), Fla. Stat. ("all other districts" included in "political subdivision")
• s. 190.002, Fla. Stat. (legislative need for community development districts)
• s. 190.003(17), Fla. Stat. (definition of "qualified elector")
• s. 189.4035, Fla. Stat. (official list of special districts)
• s. 189.403(1), Fla. Stat. (special districts treated as municipalities for tax exemption)
• s. 190.006(3)(a)1., Fla. Stat. (district without qualified electors may not levy ad valorem taxes)

Cases:

• Canaveral Port Authority v. Department of Revenue, 690 So. 2d 1226 (Fla. 1996), Legislature cannot decide what entities are immune from ad valorem tax
• North Port Road and Drainage District v. West Villages Improvement District, 82 So. 3d 69 (Fla. 2012)

Source

• Landing page: https://www.myfloridalegal.com/ag-opinions/political-subdivisions-community-development-district
• Original PDF: https://www.myfloridalegal.com/print/pdf/node/8134

Original opinion text

Ms. Janet Y. Tutt

District Manager

Villages Center Community

Development District

3201 Wedgewood Lane

The Villages, Florida 32162

Dear Ms. Tutt:

You ask whether a community development district with no qualified electors and with all or a majority of its landowner votes controlled by one entity is a division of the State of Florida.

The Villages Center Community Development District (Center District) was created in 1992 by city ordinance pursuant to Chapter 190, Florida Statutes.[1] Your inquiry is prompted by an examination by the Internal Revenue Service (IRS) into the tax exempt status of bonds issued by the Center District. From the information provided by your staff, it appears that a division of the IRS has asserted that based upon IRS regulations, the Center District was not a political subdivision during the period of November 29, 1993, through June 1, 2004, as it did not qualify as a division of the state or a local government unit and did not possess sufficient sovereign powers as identified by previous IRS rulings and general council memoranda.[2] You state that the Center District has challenged this assertion and the issue is now being considered by the IRS Chief Counsel.

The determination as to whether the Center District qualifies as a political subdivision of the State of Florida for purposes of federal law and IRS regulations and rulings is an issue that this office must decline to address. Such a determination should, more appropriately, be addressed by the IRS which is currently considering this issue. Under state law, however, a community development district is generally considered to constitute a political subdivision of the state. Section 1.01(8), Florida Statutes, provides that in construing the Florida Statutes, where the context will permit, the words "public body," "body politic," or "political subdivision" include "counties, cities, towns, villages, special tax school districts, special road and bridge districts, bridge districts, and all other districts in this state."[3] (e.s.) The Center District is listed in the Official List of Special Districts maintained by the Department of Economic Opportunity.[4] Special districts are recognized in Article VII, Florida Constitution as governmental entities[5] and this office has stated that a community development district is a local unit of special-purpose government created pursuant to Chapter 190, Florida Statutes.[6] The need for such districts is set forth in the statement of legislative findings, policies, and intent set forth in section 190.002, Florida Statutes, which provides in part:

"There is a need for uniform, focused, and fair procedures in state law to provide a reasonable alternative for the establishment, power, operation, and duration of independent districts to manage and finance basic community development services; and that, based upon a proper and fair determination of applicable facts, an independent district can constitute a timely, efficient, effective, responsive, and economic way to deliver these basic services, thereby providing a solution to the state’s planning, management, and financing needs for delivery of capital infrastructure in order to service projected growth without overburdening other governments and their taxpayers."[7]

Chapter 190, Florida Statutes, does not prevent the establishment of a community development district merely because there is only one landowner and, as you note, in the past such districts have been created with a single landowner. Nor does the chapter prevent the creation of such districts when there are no qualified electors as that term is defined in section 190.003(17), Florida Statutes,[8] although without qualified electors, a community development district may not levy ad valorem taxes.[9]

As noted supra, however, the determination as to whether the Villages Center Community Development District qualifies as a political subdivision of the State of Florida for purposes of federal law and IRS regulations and rulings is one that must be addressed by the IRS rather than by this office.

Thank you for contacting the Attorney General's Office.

Sincerely,

Joslyn Wilson

Assistant Attorney General

JW/tsh

[1] Chapter 190, Fla. Stat., is entitled the "Uniform Community Development District Act of 1980."

[2] Request for Technical Advice TEB Group 7226 Village Center Community Development District.

[3] But see Canaveral Port Authority v. Department of Revenue, 690 So. 2d 1226 (Fla. 1996), in which the Florida Supreme Court rejected the lower court's recognition of the Sarasota-Manatee Airport Authority as a "political subdivision" for purposes of immunity from taxation, stating that the Florida Constitution did not empower the Legislature to designate what entities are immune from ad valorem taxation. The following year, the Legislature enacted Ch. 97-255, Laws of Fla., which revised the definition of "Special District" in s. 189.403(1), Fla. Stat., to clarify that special districts are to be treated like municipalities for purposes of exempting district owned property from taxation.

[4] See s. 189.4035, Fla. Stat. An alphabetized list of special districts is available online at: http://dca.deo.myflorida.com/fhcd/sdip/OfficialListdeo/alphalist.cfm.

[5] See, e.g., Art. VII, s. 9, Fla. Const., entitled "Local taxes" and providing, inter alia, that special districts may be authorized by law to levy ad valorem taxes and may be authorized by general law to levy other taxes; Art. VII, s. 10, Fla. Const. (Pledging credit); and Art. VII, s. 12, Fla. Const. (Local bonds). And see North Port Road and Drainage District v. West Villages Improvement District, 82 So. 3d 69 (Fla. 2012).

[6] See Op. Att'y Gen. Fla. 08-02 (2008).

[7] Section 190.002(1)(a), Fla. Stat.

[8] But see Op. Att'y Gen. Fla. 09-41 (2009), stating that Ch. 190, Fla. Stat., contemplates that the election of board members will transition from the landowners to the qualified electors of the community development district. See s. 190.006(3)(a)2., Fla. Stat.

[9] See s. 190.006(3)(a)1., Fla. Stat.