Guidance on AARA Bond Provisions
The U.S. Treasury Department/Internal Revenue Service issued guidance on April 3, on several new types of bonds created under the recently enacted American Recovery and Reinvestment Act of 2009. Guidance (Notice 2009-26) is provided on the Build America Bonds program, which will assist state and local governments in lowering their borrowing costs on capital improvement projects. Build America Bonds are taxable and state and local governments are given the option of receiving a direct federal payment subsidy equal to 35 percent of the borrowing costs on these bonds. According to Treasury Secretary Tim Geithner, “Build America Bonds is an innovative approach to augment the ailing tax-exempt bond market and shows the Administration’s commitment to economic recovery for Main Street.”
Guidance (Notice 2009- 35 and Notice 2009-30) is also provided on Qualified School Construction Bonds and Qualified Zone Academy Bonds. These tax credit bond programs allow state and local governments to finance authorized public school construction projects and other eligible costs for public schools with interest-free borrowing. For Qualified School Construction Bonds, the guidance provides for the division of $11 in billion national bond volume authorizations for 2009 among the states and the 100 largest local school districts based on federal school funding. For the Qualified Zone Academy Bonds, the guidance provides for the division of the $1.4 billion in national bond volume authorizations for 2008 and 2009 among the states based on poverty levels.