IRS puts federal lien on Files-owned firm

A company owned by state Senate Revenue and Taxation Committee Chairman Jake Files has a federal tax lien filed against it for more than $111,000 in unpaid payroll and unemployment taxes.

Files, a Republican from Fort Smith, said Friday in a written statement that 2014 was "a challenging year" for his business, which is in the construction industry. His business also was affected by his absence while he attended the Arkansas Legislature's regular session earlier this year, he said.

The Internal Revenue Service filed the lien against Foster, Files & Harris LLC of Fort Smith on Nov. 10, according to records in the Sebastian County clerk's office. The firm provides payroll services for Files' FFH Construction, according to Files.

Files said he expects to resolve the federal tax lien against the firm in the next 30 to 45 days.

In October, Files' finances were the subject of attention about a $30,000 loan he received from lobbyist Bruce Hawkins of Morrilton and about two state tax liens against Foster, Files & Harris.

Files has said he repaid the loan from Hawkins on Oct. 14 and paid off the state tax liens, which Sebastian County records show were released in November.

The IRS lien filed against Foster, Files & Harris concerns unpaid payroll taxes of:

• $22,676.33 in the period that ended March 31.

• $30,537.56 in the period that ended Dec. 31.

• $30,303.74 in the period that ended Sept. 30, 2014.

• $27,104 in the period that ended June 30, 2014.

The lien also was for unpaid unemployment taxes of $762.90 in the period that ended Dec. 31.

Payroll taxes, according to the IRS website, are for federal tax withholding, Social Security and Medicare.

In Friday's written statement, Files said that "being in the construction industry, I knew it was a cyclical industry with ups and downs depending on the market conditions.

"This, coupled with the fact that I was away from work for about 3 months in early 2015 serving in the Legislature, proved to be a difficult time in a slow market," he said.

"We got behind on some quarterly payments and have been working to get caught up," his statement said.

"Our company had some energy tax credits that I was hoping to be able to apply against some of these payments [and] that did not work out to be the case.

"I anticipate having this taken care of and released in the next 30-45 days and continuing to work on improving our position and don't look at having any issues moving forward," he said.

He issued the written statement after a reporter for the Arkansas Democrat-Gazette stopped by Files' office in Fort Smith.

In addition to the federal tax lien, two other companies connected to Files have more than $167,000 in overdue payments, fees and penalties for loans and tax credits for two apartment complexes, according to the state agency that approved the loans and federal tax credit applications.

The two companies, both limited partnerships, were formed to build apartment complexes in Fort Smith and Conway.

Some of the financing came from money the state received from the federal HOME Investment Partnerships Program of the U.S. Department of Housing and Urban Development. The HOME program website says the program is "designed exclusively to create affordable housing for low-income households."

The money was issued to the partnerships as loans by the Arkansas Development Finance Authority. Companies of Files' are general partners of both limited partnerships.

Files, a developer and contractor, was between terms in the Legislature when the Development Finance Authority approved the apartment loans. He was in the House of Representatives from 1999-2003 and has served in the Senate since 2011.

Files said in an Oct. 30 email that he's provided "full disclosure in the Senate Journal of my involvement here, but am precluded while I am in elected office from applying for additional HOME funds, which I have not done, and additionally [am] not involved in any of this development or construction at this time."

"While these loans are to these entities, they are not personally guaranteed by the GP [general partner] or LP [limited partner]," Files said.

In his Fort Smith office Friday, Files declined further comment about the limited partnerships' finances regarding the two apartment complexes.

One company, FFH of Fort Smith Limited Partnership, is $88,919.95 delinquent on payments, according to state officials. The company built Rock Creek Apartments of Fort Smith.

The partnership made 10 payments on the loan but hasn't made any payments since January 2013. The monthly payment is $2,540.57, said Aaron Burkes, Development Finance Authority president.

FFH of Fort Smith has a loan of $900,000 that helped pay for the construction of the 56-unit apartment complex. In addition to the late payments, more than $4,300 in late fees and interest may be assessed, according to Development Finance Authority officials, who say the agency is unlikely to foreclose on the loan because it is in a second lien position.

FFH of Fort Smith's loan is the most delinquent among the Development Finance Authority's HOME multifamily loans that have closed since Aug. 1, 2007, and for which payments are due, said Katherine Hall, loan servicing manager for the authority.

The partnership's limited partner is First National Bank of Fort Smith, with 99.98 percent ownership. Files' FFH of Arkansas LLC is the general partner, and Special L.P. LLC is a special limited partner, Files said in his Oct. 30 email to the Democrat-Gazette.

Asked why no payments have been made since January 2013, Files said in his Oct. 30 email: "I am not involved, nor is the limited partner, on a day-to-day basis with the development, and it is managed by a third party management company," First Capital Residential Co. in Little Rock.

"We pay as funds are available," John Shiver, managing member of First Capital Residential, said in a recent interview. Shiver said that if the funds are unavailable, "it falls back" on the partnership.

Another company, FFH of Conway Limited Partnership, owes $78,139 in fees and penalties for Rock Creek Apartments of Conway, said Layne Anderson, vice president and general counsel for the Development Finance Authority.

Those fees and penalties are:

• $32,000 for compliance monitoring fees charged by the authority. The fees help fund monitoring of the development for the next 35 years to make sure tenants meet income eligibility guidelines and minimum property standards.

• $25,230 in late fees of $15 per day over the developers' failure to complete cost certifications within the time allowed by the IRS after the development was placed in service.

• $14,309 for asset management fees charged by the authority on federal stimulus-financed developments. Federal officials "realized these developments had to be watched for a period of 35 years and it would be a burden to housing agencies not to let them charge a fee," said Lornea Wells, multifamily program specialist for the Development Finance Authority.

• $6,600 for "allocation fees" of $150 per low-income tax credit unit to compensate the authority for administering the low-income tax credit housing program.

FFH of Conway had been $5,081.14 delinquent on a $900,000 loan from the authority for the Conway complex, but back payments were received and posted Nov. 20, according to officials. The monthly payments are $2,540.57. The Development Finance Authority approved the loan on Jan. 28, 2009, the authority's records show.

Regis Investment Fund LLC is the Conway partnership's limited partner and Files' FFH of Central Arkansas is the general partner, Files said. He said he's the only investor in Regis Investment Fund.

FFH of Conway Limited Partnership received two other loans totaling $4.2 million that were approved by the authority and that are financed with federal stimulus funds. Loan payments aren't yet due on those loans, authority officials said.

On Oct. 27, Files said he used a $30,000 loan from Hawkins, the lobbyist, to pay off a hot check of more than $6,800, for "working capital" for his construction businesses and to purchase material for other construction jobs. Files and Hawkins have said the loan was made April 20. The loan was allowed under state law regarding lobbyists.

The state Department of Finance and Administration filed a lien on Sept. 2 in Sebastian County against Foster, Files & Harris for $1,368.91 over withholding wage taxes. On Oct. 13 in Sebastian County, the state Department of Workforce Services filed a lien against the firm for $2,440.80 over delinquent contributions, according to county records.

Metro on 12/05/2015

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