Legal Alert: Sequestration to Cause CREB Payments to Be Reduced by 8.7%

The Office of Management and Budget has issued its Report to the Congress on the budget sequestration for federal fiscal year 2013 required by the Balanced Budget and Emergency Deficit Control Act of 1985, as amended by the Budget Control Act of 2011. Interest subsidy payments for New Clean Renewable Energy Bonds (New CREBs) are among the federal programs impacted by sequestration.

As required by law, the President has cancelled $85 billion in budgetary spending across the federal government for federal fiscal year 2013, including 5.1% cuts for non - exempt, non - defense mandatory spending programs such as direct - pay interest reimbursements on certain qualified tax credit bonds, including New CREBs. Because New CREB interest reimbursements were fully paid during the first five months of the current federal fiscal year, the cuts to the New CREB program must be spread over seven months, rather than the 12 months of the full fiscal year. As a result, New CREB interest reimbursements coming due from March 1, 2013, through September 30, 2013, will actually be reduced by 8.7%, according to guidance rel eased late Monday by the tax - exempt bond office of the Internal Revenue Service.

Please see full alert below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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