On March 4, 2010, the House of Representatives approved a
revised jobs bill (the House Jobs Bill) amending the Senate’s version of
jobs legislation. Most significantly for the state and local finance industry,
the House Jobs Bill expands and increases 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 House
Jobs Bill does not affect Recovery Zone Bonds, Build America Bonds or qualified
forestry conservation bonds.
The House Jobs Bill allows QTCB issuers to receive a subsidy payment (the
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 (the Tax Credit). Under the House Jobs Bill, a QTCB issuer may choose
whether the subsidy is delivered in the form of a Tax Credit or a Direct
Payment. For QSCBs and QZABs, 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. For New CREBs and QECBs, the Direct Payment is equal to the lesser of (i)
the interest paid by the issuer on each interest payment date or (ii) 70% of 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. The foregoing House Jobs Bill provisions will be effective for QTCBs
issued after the date of enactment.
The House Jobs Bill's amendments are to be contrasted with the provisions of
the Senate Jobs Bill,
which were described in our
prior alert. Under the Senate Jobs Bill, 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% of the
interest paid by the issuer on each interest payment date. For other QTCB
issuers, the Direct Payment equals 45% of the interest paid by the issuer on
each interest payment date.
Under each of the bills, an issuer must irrevocably elect the Direct Payment.
The House Jobs Bill also contains technical corrections. One such correction
allows large local education agencies having received direct 2009 QSCB
allocation to carryforward their unused 2009 allocations. This provision is
retroactively effective as of February 17, 2009, the date of enactment of the
American Recovery and Reinvestment Act of 2009.
If you have any questions
regarding QTCBs, please contact the authors, or visit
Public Finance 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.