Both the American Recovery and Reinvestment Act of 2009 (ARRA) and the Housing and Economic Recovery Act of 2008 (HERA) contain provisions that together expand and make more appealing the use of Industrial Development Bonds (IDBs).
IDBs are authorized under Section 144 of the Internal Revenue Code and provide manufacturing and processing companies with low-interest financing for capital expenditures. A governmental agency issues these tax-exempt bonds, and the bond proceeds are loaned to the manufacturing company to finance capital expenditures. Eligible capital expenditures include the acquisition of land, building construction, building renovation and the purchase of machinery and equipment. An issuance of IDBs to finance a borrower’s capital expenditures cannot exceed $10 million.
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