No Cost Funding For Local Growing Businesses

Ever heard of tax exempt bonds to fund private, for-profit businesses? Not only do these exist but now, as part of the American Recovery & Reinvestment Act of 2009 (ARRA), offer many additional benefits to companies looking to grow and prosper - even during this recession.

Prior to the ARRA, local businesses could approach their State's economic development agencies and request tax exempt bonds be issued on their behalf. The States agree to issue (really are more mandated to) issue these bonds for projects that benefit the state as whole - including increasing manufacturing production and jobs. These tax exempt issues allow these local businesses to raise funds at lower interest rates. And, on the other side, investors receive exceptions from Federal & State taxes (thus tax exempt). A win-win situation.

Now, under the ARRA, there are newly created tax incentives termed - Build America Bonds and Recovery Zone Economic Development Bonds - where the issuer can "elect to receive a direct refundable credit payment from the Federal government equal to a percentage of the interest payments on these bonds" per the IRS.

Thus the cost to issue these bonds and service them over their life may just be comped by the U.S. Government - essentially these businesses would receive no cost funding - merely having to repay only the principle amount over the life of the bonds.

Per the IRS these bonds issues are as follows:

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.

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)

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).

For more information, Google Council of Development Finance Agencies, the American Recovery & Reinvestment Act of 2009 or the Economic Development Authority in your state.

If you qualify - makes no sense to pass these up.

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