This new program, allows state and local governments to issue taxable tax-credit bonds in lieu of tax-exempt governmental bonds.  BABs can be used for any governmental purpose. There is no authorization limit associated with BABs – any government may issue BABs in 2009 and 2010 for those projects where governments may otherwise issue tax exempt bonds (other than private activity bonds).  The BAB program also contains an option for the issuer to receive a rebate equaling 35% of interest paid from the federal government instead of allowing investors to receive a tax credit.  Therefore, a government would receive a check from the federal government equal to 35% of the interest on the bonds.  In order to qualify for this special rebate option, the bond proceeds must be used for capital expenditures, issuance costs and reserve funds.  All rules that apply to tax-exempt bonds also apply to BABs – e.g., private use restrictions and arbitrage rebate regulations.

Please note: We are currently waiting on written guidance from the U. S. Treasury for the majority of the TCBs listed above. If you need IMMEDIATE assistance or information, it is recommended that you use the volumes of information relating to QZABs or CREBs.

Treasury has temporary guidance on the Build America Bonds program. Interested municipalities are advised to seek assistance from a licensed (FINRA/SEC) investment firm or contact the nation’s leading tax-credit bond firm, McLiney And Company at (800) 432-4042.

American Recovery and Reinvestment Tax Act of 2009

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