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ARRA Tax-Exempt Bond Changes
One element of the American Recovery and Reinvestment Act is the immediate relaxation of several regulations that make it much easier for manufacturers to obtain tax-exempt bonds. These include:
- Removes the 25 percent ancillary facility limitation, meaning that bonds can be used to finance more non-core manufacturing assets. Normally, not more than 25 percent of the proceeds of the bonds may be used to finance non-core items at manufacturing facilities. Non-core items include space used for: lunchrooms, warehouses, showrooms, offices, loading docks, testing labs, employee parking lots, and land improvements.
- Bonds can be used to produce intangible property, such as software production, research labs, recording and film studios. Normally, bonds can only be used in connection with fixed assets, such as the purchase of land and building or the construction of a building.
- Temporary suspension of alternative minimum tax. This provision lowers the interest rate on the bonds. Since the interest income is not subject to AMT, bondholders will accept a lower yield on the bonds.
Manufacturers may also be eligible for even lower interest rates, similar to the additional benefits provided by bank qualified bonds.
Note that these relaxed provisions expire at the end of 2010.
For more information, contact Rick Palank at rpalank@slcec.com or 314.615.7667.
Click here to view the press release.
