On Feb. 24, 2010, the Senate passed a jobs bill proposed by Sen. Harry Reid
S.A. 3310 (the “Senate Jobs Bill”). Most significantly for the state and
local finance industry, the Senate Jobs Bill expands the subsidies available for
qualified school construction bonds (QSCBs), qualified zone academy bonds (QZABs),
new clean renewable energy bonds (New CREBs), and qualified energy conservation
bonds (QECBs and together with QSCBs, QZABs and New CREBs, the QTCBs). The
Senate Jobs Bill does not affect qualified forestry conservation bonds.
The Senate Jobs Bill allows QTCB issuers to receive a subsidy payment (Direct
Payment), similar to the direct payment option given to issuers of build America
bonds (BABs). Under current law, the QTCB subsidy is a federal income tax credit
(Tax Credit). Under the Senate Jobs Bill, a QTCB issuer may choose whether the
subsidy is delivered in the form of a Tax Credit or a Direct Payment. For QTCB
issuers that issue $30 million or less in tax-exempt bonds (excluding private
activity bonds) and QTCBs (regardless of whether issued with a Tax Credit or
Direct Payment) in a single calendar year, the Direct Payment equals 65 percent
of the interest paid by the issuer on each interest payment date. For other QTCB
issuers, the Direct Payment equals 45 percent of the interest paid by the issuer
on each interest payment date. The foregoing Senate Jobs Bill provisions will be
effective for QTCBs issued after the date of enactment.
The Senate Jobs Bill's amendments are to be contrasted with the provisions of
H.R. 2847, the Jobs for Main Street Act of 2010, that was passed by the
House of Representatives on Dec. 16, 2009 (House Jobs Bill) and for which the
pertinent provisions contained in a predecessor bill were described in our
The House Jobs Bill provides the Direct Payment option to issuers of QSCBs and
Under the House Jobs Bill, the amount of the Direct Payment is calculated
differently than under the Senate Jobs Bill. Under the House Jobs Bill, the
Direct Payment is equal to the lesser of (i) the interest paid by the issuer on
each interest payment date or (ii) the amount of interest that would have been
payable had the issuer selected the Tax Credit option and such interest was
determined using the applicable rate of the Tax Credit.
Under each of the bills, an issuer must irrevocably elect the Direct Payment.
The Senate Jobs Bill also contains technical corrections. One such correction
allows large local education agencies having received direct 2009 QSCB
allocation to carry forward their unused 2009 allocations. This provision is
retroactively effective as of Feb. 17, 2009, the date of enactment of the
American Recovery and Reinvestment Act of 2009 (ARRA).
Regarding the Senate Jobs Bill, the Joint Committee of Taxation released its
technical explanation in
JCX-4-10, and its revenue score in
If you have any questions regarding QTCBs, please contact the authors, or visit McGuireWoods'
practice. You can also refer to prior alerts on QSCBs, QZABs, New CREBs, and
BABs in our
news archive and our Stimulus
Package section for more updates on ARRA.