IRS Reviews Build America Bonds

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Build America Bonds (BABs) that were issued last year along with the stimulus program is being reviewed by the IRS to ensure they comply with tax laws. According to a notice on the IRS website, the agency is also seeking to understand this new type of bonds.

The government’s purpose for BABs was to increase investment in infrastructure. These bonds pay a federal rebate equal to 35% of interest costs. This type of bond payments is called ‘direct pay’. This makes them very popular despite the fact that they are taxable. Since its introduction, cities and local governments have been issuing BABs, which has accounted for nearly 25% of new bonds issued this year. The popularity of BABs has prompted Congress to reevaluate the other bonds issued under the stimulus package and change them to the same model as BABs i.e. taxable bonds paying federal rebates or direct pay bonds.

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The Law Offices of Darrin Mish, P.A. on:

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