Effect of Sequestration on Direct-Pay Bonds


The American Recovery and Reinvestment Act of 2009 allowed, for a limited period of time, the issuance of taxable state or local bonds for which the U.S. Treasury Department pays the issuer a specified percentage of interest on the bonds, with the percentage depending on the applicable type of direct-pay bonds.

On Friday, March 1, 2013, the President signed an executive order reducing budgetary authority to accounts subject to sequester, including payments to issuers of direct-pay bonds. As of March 1, 2013, amounts claimed by an issuer on Form 8038-CP filed with the Internal Revenue Service are subject to a reduction of 8.7% of the amount budgeted for such payments.

Please see full alert below for more information.

LOADING PDF: If there are any problems, click here to download the file.