The U.S. Internal Revenue Service is auditing $200 million of bonds that built an unfinished jail in Wayne County, Mich., seeking to determine whether to revoke federal subsidies given to the cash-strapped government, Bloomberg News reported yesterday. Wayne County, which includes Detroit, sold the federally taxable debt in December 2010 to build a new jail, only to shut down the project in the middle of construction about three years later because of cost overruns. The U.S. Treasury pays 45 percent of the interest under a program aimed at spurring development in economically distressed areas. The IRS told the county it is scrutinizing the bonds "because of information we received from external sources or developed internally that causes a concern that the debt issuance may fail one or more provisions” of the tax code, according to a Sept. 9 filing with the Municipal Securities Rulemaking Board.
