The American Recovery & Reinvestment Act of 2009 (ARRA) created several new types of tax-exempt bonds and tax credit bonds under the Internal Revenue Code. Of particular note, the ARRA created new tax incentives for certain taxable governmental bonds called Build America Bonds and Recovery Zone Economic Development Bonds whereby the governmental issuer of such bonds may elect (in lieu of issuing tax-exempt bonds) to receive a direct refundable credit payment from the Federal government equal to a percentage of the interest payments on these bonds.
The latest guidance, forms and information on the ARRA bond provisions is available at the links below. For more information about other ARRA tax provisions, please visit ARRA information page.
Build America Bonds & Recovery Zone Economic Development Bonds
Notice 2009-50 (Recovery Zone Bond Volume Cap Allocations)
This notice provides guidance regarding the maximum face amount of recovery zone economic development bonds and recovery zone facility bonds that may be issued by each state before January 1, 2011 under sections 1400U-2 and 1400U-3, respectively, of the Internal Revenue Code, as provided by section 1400U-1 of the Code.
The Treasury Department and the IRS recognize that the required local suballocations of the national volume cap for Recovery Zone Bonds among counties and large municipalities impose administrative burdens for the States and involve mandatory local suballocations without State discretion. Accordingly, the Treasury Department and the IRS have determined these required local suballocations to facilitate prompt availability of Recovery Zone Bonds as a source for State and local governmental borrowing at lower borrowing costs to promote job creation and economic recovery in areas particularly affected by employment declines. Click here to access these suballocations.
Notice 2009-26 (Build America Bonds and Direct Payment Subsidy Implementation)
This notice provides guidance on the new tax incentives for Build America Bonds under section 54AA of the Internal Revenue Code and the implementation plans for the refundable credit payment procedures for these bonds. The notice also includes guidance on the modified Build America Bond program for Recovery Zone Economic Development Bonds under section 1400U-2 of the Code.
Form 8038-CP – Return for Credit Payments to Issuers of Qualified Bonds
Governmental issuers of qualified Build America Bonds and Recovery Zone Economic Development Bonds must submit this form to request refundable credit payments payable under section 6431 of the Internal Revenue Code. Instructions for Form 8038-CP – Return for Credit Payments to Issuers of Qualified Bonds.
IRS News Release, IR-2009-33, April 3, 2009 (IRS Issues Guidance on New Build America Bonds)
Education Related Bond Provisions
Notice 2009-30 (Qualified Zone Academy Bond Allocations for 2008 and 2009)
This notice provides guidance on qualified tax credit bonds called Qualified Zone Academy Bonds (QZABs) under section 54E of the Internal Revenue Code. The notice sets forth the amount of QZABs that may be issued within each State for each of the calendar years 2008 and 2009. QZABs may be issued to finance certain expenditures relating to a qualified zone academy established by a local education agency.
Notice 2009-35 (Qualified School Construction Bond Allocations for 2009)
This notice provides guidance on qualified tax credit bonds called Qualified School Construction Bonds (QSCBs) under section 54F of the Internal Revenue Code. The notice sets forth the amount of QSCBs that may be issued by each State and large local education agency in 2009. QSCBs may be issued to finance certain construction and land acquisition expenditures relating to public school facilities.
Energy Related Bond Provisions
Notice 2009-29 (Qualified Energy Conservation Bond Allocations for 2009)
This notice provides guidance on qualified tax credit bonds called Qualified Energy Conservation Bonds (QECBs) under section 54D of the Internal Revenue Code. The notice sets forth the amount of QECBs that may be issued for each State. QECBs may be issued to finance projects designed to reduce greenhouse gas emissions.
Notice 2009-33 (New Clean Renewable Energy Bonds Application and Requirements)
This notice provides guidance on and solicits applications for authority to issue qualified tax credit bonds called New Clean Renewable Energy Bonds (New CREBs) under section 54C of the Internal Revenue Code to finance certain clean renewable energy facilities described under section 45(d) of the Code. There is a national limitation of $2.4 billion of volume of New CREBs which the IRS may allocate to qualified issuers. Application for Notice 2009-33 (New Clean Renewable Energy Bonds) – Rich Text Format.
Tribal Economic Development Bond Provisions
Notice 2009-51 (Tribal Economic Development Bonds)
This notice provides guidance on and solicits applications for allocations of the $2 billion national bond volume limitation authority ("volume cap") to issue tribal economic development bonds under new section 7871(f) of the Internal Revenue Code. Application for Notice 2009-51 (Tribal Economic Development Bonds) - Rich Text Format.
In addition to the program announced in Notice 2009-51 for applications for economic development bonds, which are not for tax-credit bonds, Tribal governments can also issue Build America Bonds for essential governmental functions either as direct pay bonds (the tribe would receive a direct payment equal to 35% of the interest payable on the bond) which are not tax credit bonds or as tax credit bonds where the holder of the bond receives a tax credit equal to 35 percent of the interest payable on the bond. For example, if the Tribe issued a 5% taxable build American bonds (tax credit) with $100 of principle, the holder would receive $5 of interest from the tribe and a tax credit equal to 35% of $5 which it could use to reduce its federal tax liability. Finally, the Tribes can issue regular tax credit bonds to finance public school construction under a $200 million authorization that is administered by the Department of Interior ( See notice 2009-35).
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