ARRA created these bonds to stimulate the economy by assisting state and local governments in financing capital projects at lower borrowing costs. This debt instrument can be used for clean energy projects.
Build America Bonds (BABs) were created by the ARRA, and are described by the IRS in Notice 2009-26 of April 3, 2009. According to the IRS, “This new program is intended to assist state and local governments in financing capital projects at lower borrowing costs and to stimulate the economy and create jobs.” [1] The BAB program allows issuers to deliver governmental bonds (not private activity) as taxable tax-credit bonds in lieu of traditional tax-exempt municipal bonds. This means that the bonds are initially issued as taxable bonds, with a 35 percent tax benefit being delivered later, either as an income tax credit to the bond holder, or as a direct payment from the IRS to the issuer (i.e. to the issuing local government. These so-called Build America Bonds may be issued at least through December 31, 2010. Public entities started to issue such bonds in April 2009. Depending on the issuer, the taxable BAB may cost less than a traditional tax exempt bond. These bonds are for general capital expenditures, and while they are not directly tied to renewable energy per se, (like CREBs and QECBs), for a city agency issuing debt for projects that may include PV, BABs are a debt instrument worth consideration by public entities to finance their clean energy projects.
| < Prev | Next > |
|---|
