On March 17, 2010, the Senate approved, by a vote of 68 – 29, the revised jobs bill (Jobs Bill – H.R. 2847), most recently approved by the House of Representatives on March 4, 2010, and described in our prior alert. President Obama is expected to sign it within the next few days.
Among other things, the 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 Jobs Bill does not affect Recovery Zone Bonds, Build America Bonds (BABs) or qualified forestry conservation bonds; however, a draft bill to be considered by the House Ways and Means Committee does affect Recovery Zone Bonds and BABs.[1]
The Jobs Bill allows QTCB issuers to receive a subsidy payment (Direct Payment), similar to the direct payment option given to issuers of BABs. Under current law, the QTCB subsidy is a federal income tax credit (Tax Credit). Under the 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 (1) the interest paid by the issuer on each interest payment date; or (2) 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 (1) the interest paid by the issuer on each interest payment date; or (2) 70 percent 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 Jobs Bill provisions will be effective for QTCBs issued after the date of enactment.
If you have any questions regarding QTCBs, please contact the authors, or visit McGuireWoods’ Public Finance practice. You can also refer to prior alerts on QSCBs, QZABs, New CREBs, and BABs in our news archive and the Stimulus Package section of our website for more updates on ARRA.
1.Representative Sander M. Levin (D-MI), Chairman of the House Ways and Means Committee, has prepared a draft bill that, among other things, affects Recovery Zone Bonds and BABs, as described in the linked summary.