Build America Bonds (BABs) - Tax Credit

Who can issue these bonds?

Any state or local government; cannot be for private activity and cannot be for not-for-profits

What can they be used for?

For new governmental capital expenditure; can be for refunding outstanding bonds; can be for working capital (Compare with BABs - Direct Pay)

How are they subsidized by the feds?

Federal tax credit to investors equal to 35% of interest payable by issuer on taxable BABs (net of tax credit)

What are the benefits?

Issuers borrow at rates equal to about 74% of comparable taxable rates. Issuer provided with more financing options (eg., refunding) in exchange for lower effective savings when compared to the BAB-Direct Payment option

Are there special reporting requirements?

Election to issue BABs must be made on or before the issue date of the BABs. Otherwise, same information requirements as tax-exempt state or local government bonds

How long will these bonds be available?

BABs must be issued before 1/1/2011

Is there a cap?

No

Where can I find more information?

Section 1531 of ARRTA; Limited Interim Guidance Issued 4/3/2009; US Treasury website http://www.irs.gov/newsroom/article/0,,id=206044,00.html

What else should I know?

Go to http://mass.gov/recovery/finance for more information related to Municipal Finance Opportunities under ARRA.