WASHINGTON -- The Internal Revenue Service has told two Texas housing authorities that their 1985 black-box bond issues are not tax-exempt because the apartment projects they were to finance had already been built with tax-exempt bonds sold in 1982 by another housing authority.

The IRS warned the Galveston County Housing Finance Corp. and the Baytown Housing Finance Corp. that if they do not agree by Sept. 30 to pay the government all or a portion of the arbitrage profits from the 1985 Raintree and Huntcliff black-box deals, "we will pursue our remedies against the holder[s] of the ... bonds."

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