The American Recovery and Reinvestment Act of 2009 (ARRA) created several new types of tax-exempt bonds and tax credit bonds under the Internal Revenue Code. The link above connects to the IRS notice that provides guidance regarding how the Treasury Department and the Internal Revenue Service (IRS) will determine and announce credit rates on certain tax credit bonds described in the notice.

Source: www.irs.gov

This program authorizes state and local governments to issue Build America Bonds as taxable bonds in 2009 and 2010 to finance any capital expenditures for which they otherwise could issue tax-exempt governmental bonds. State and local governments receive a direct federal subsidy payment for a portion of their borrowing costs on Build America Bonds equal to 35 percent of the total coupon interest paid to investors. 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.

Source: www.finance.senate.gov

NOTE: After consultation with Treasury’s IRS, the Office of Management and Budget (OMB) announced on October 9, 2009 that it has determined the ARRA’s Build America Bonds program is excluded from the scope of Single Audit.

The bill authorizes an additional $1.6 billion of new clean renewable energy bonds to finance facilities that generate electricity from the following resources: wind; closed-loop biomass; open-loop biomass; geothermal; small irrigation; hydropower; landfill gas; marine renewable; and trash combustion facilities. This $1.6 billion authorization will be subdivided into thirds: 1/3 will be available for qualifying projects of State/local/tribal governments; 1/3 for qualifying projects of public power providers; and 1/3 for qualifying projects of electric cooperatives. This proposal is estimated to cost $578 million over 10 years.

Source: www.finance.senate.gov

Update: On March 18, 2010, with the signing of the Hiring Incentives to Restore Employment Act issuers of Qualified School Construction Bonds, Qualified Zone Academy Bonds, New Clean Renewable Energy Bonds, and Qualified Energy Conservation Bonds to opt to receive direct subsidies from the federal government instead of providing tax credits to the purchasers of these bonds. Issuers of Qualified Zone Academy Bonds and Qualified School Construction Bonds that choose the direct subsidies will receive payments equal to the actual interest rate of the bonds or the tax-credit rate for municipal tax-credit bonds (set daily by the Treasury), whichever is lesser. Issuers of New Clean Renewable Energy Bonds and Qualified Energy Conservation Bonds will receive payments equal to 70% of that amount.

Alabama's Allocation: $48,364,000.00 (www.irs.gov)
Click here to view large local government QECB 2009 allocations.

Deadline for Issuing Bonds: Currently has no deadline but is expected to be in FY2012

The bill authorizes an additional $2.4 billion of qualified energy conservation bonds to finance State, municipal and tribal government programs and initiatives designed to reduce greenhouse gas emissions. The bill would also clarify that qualified energy conservation bonds may be issued to make loans and grants for capital expenditures to implement green community programs. The bill also clarifies that qualified energy conservation bonds may be used for programs in which utilities provide ratepayers with energy-efficient property and recoup the costs of that property over an extended period of time. This proposal is estimated to cost $803 million over 10 years.

Source: www.finance.senate.gov

Update: On March 18, 2010, with the signing of the Hiring Incentives to Restore Employment Act issuers of Qualified School Construction Bonds, Qualified Zone Academy Bonds, New Clean Renewable Energy Bonds, and Qualified Energy Conservation Bonds to opt to receive direct subsidies from the federal government instead of providing tax credits to the purchasers of these bonds. Issuers of Qualified Zone Academy Bonds and Qualified School Construction Bonds that choose the direct subsidies will receive payments equal to the actual interest rate of the bonds or the tax-credit rate for municipal tax-credit bonds (set daily by the Treasury), whichever is lesser. Issuers of New Clean Renewable Energy Bonds and Qualified Energy Conservation Bonds will receive payments equal to 70% of that amount.

Alabama's Allocation: $51,270,000.00 (www.irs.gov)

The bill would allow a total of $2.8 billion of QZAB issuing authority to State and local governments in 2009 and 2010, which can be used to finance renovations, equipment purchases, developing course material, and training teachers and personnel at a qualified zone academy. In general, a qualified zone academy is any public school (or academic program within a public school) below college level that has 35% or more of the students attending school eligible for free or reduced costs lunches and is designed to cooperate with businesses to enhance the academic curriculum and increase graduation and employment rates. QZABs are a form of tax credit bonds which offer the holder or issuer a Federal tax credit or rebate to offset some or all of the interest of the bonds.

Source: www.finance.senate.gov

QZAB Allocations Currently Available From Each of the years

Click here to view summary of Qualified Zone Academy Bond
Click here to view "Qualified Zone Academy Bond Allocations for 2009 & 2010, IRS Notice 2010-22"

Alabama’s allocation of Recovery Zone Bonds is being administered at the local level by originally awarded localities. A waiver and re-allocation process that will transfer allocations from localities that do not intend to use their full allocation to those that require an additional allocation is being managed by the Alabama Development Office (Linda Swann – 334-353-0221 or Linda.Swann@ado.alabama.gov)

All Recovery Zone Bonds must be issued by December 31, 2010.

*Remember to file IRS verification documents when a Recovery Bond closes.

Attention Local Governments

Important guidelines governing the use of Alabama Recovery Zone Volume Cap Allocations are available online. Click here to read the information issued on January 25, 2010, by Acting State Finance Director Bill Newton.

Alabama's Allocation:

Local Sub-allocations by city and county may be viewed by clicking here.

Source: www.finance.senate.gov

Click here to view summary of Recovery Zone Bonds . *Updated 01/20/2011

The bill would create a new category of tax credit bonds for investment in economic recovery zones. The bill would authorize $10 billion in recovery zone economic development bonds and $15 billion in recovery zone facility bonds. These bonds could be issued during 2009 and 2010. Each state would receive a share of the national allocation based on that state’s job losses in 2008 as a percentage of national job losses in 2008 (each state will receive a minimum allocation of these bonds). These allocations would be sub-allocated to local municipalities. Municipalities receiving an allocation of these bonds would be permitted to use these bonds to invest in infrastructure, job training, education, and economic development in areas within the boundaries of the State, city or county (as the case may be) that has significant poverty, unemployment or home foreclosures. This proposal is estimated to cost $5.371 billion over 10 years.

*“Reallocations are made monthly based on waived funds available.”

• Letter from Acting Finance Director, Bill Newton
• Letter from Acting Finance Director, Exhibit C
• Letter from Acting Finance Director, Exhibit D
• Letter from Acting Finance Director, Exhibit E
• Key Dates for Alabama Recovery Zone Volume Allocation Bonds

Money that has been utilized: $22,565,088.00

Section 1402 of Title I of Division B of the American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5, 123 Stat. 115 (2009) (the “Act”), added new § 7871(f) to the Code.  In general, the purpose of new § 7871(f) is to give Indian tribal governments greater flexibility to use tax-exempt bonds to finance economic development projects than is allowable under the existing standard of § 7871(c).  The more restrictive standard under § 7871(c) generally limits the use by Indian tribal governments of tax-exempt bonds to the financing of certain activities that constitute essential governmental functions customarily performed by State and local governments with general taxing powers and certain manufacturing facilities.  The more flexible standard under new § 7871(f) generally allows Indian tribal governments to use tax-exempt bonds under the new $2 billion volume cap to finance any economic development projects (excluding certain gaming facilities and projects located outside of Indian reservations as provided in § 7871(f)(3)(B)) or other activities for which State or local governments could use tax-exempt bonds under § 103.

Indian tribal governments can use Tribal Economic Development Bonds to finance a broad range of governmental projects, including hotels, convention centers, or golf courses, as well as projects involving certain qualified private activities, to the same extent and subject to the same limitations imposed on State and local governments. The Tribes can also, subject to the limitations of § 7871(f)(3)(B), use the Bonds for refunding issues, to the same extent as State and local governments.

Money that has been utilized: $208,408,607

The Worker, Homeownership, and Business Assistance Act of 2009 has extended the tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence. The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract was signed by April 30, 2010, a home purchase completed by September 30, 2010 will qualify.

For sales occurring after November 6, 2009, the Act establishes income limits of $125,000 for single taxpayers and $225,000 for married couples filing joint returns.

The income limits for sales occurring on or after January 1, 2009 and on or before November 6, 2009, are $75,000 for single taxpayers and $150,000 for married taxpayers filing joint returns.

Alabama's Allocation: $36,456,058

Section 1602 of the American Recovery and Reinvestment Tax Act appropriates funds for grants to States to finance construction or acquisition and rehabilitation of qualified low-income building for low-income housing in lieu of low-income housing tax credits. Treasury will award Section 1602 grants to State housing credit agencies in an amount equal to their low-income housing grant election amount.

The grant election amount is the amount requested by the State which does not exceed 85 percent of:

• (1) 10 times 100 percent of (a) the unused State housing credit ceiling (if any) of the State for calendar year 2008 and (b) the amount of State housing credit ceiling returned in 2009 Plus

• (2) 10 times 40 percent of (c) the greater of $2.30 multiplied by the State population or $2,665,000 and (d) unused housing credit carryover allocated to the State in the 2009 National Pool

It is expected that the Section 1602 program will temporarily fill the gap left by a diminished investor demand for low-income housing tax credits. The Section 1602 program will allow projects for construction or acquisition and rehabilitation of low-income housing to continue where developers are unable to proceed due to lack of investors. In this way, the near term goal of creating and retaining jobs is achieved, as well as the long-term benefit of increasing the affordable housing supply.

Alabama's Allocation: $28,814,688

The American Recovery and Reinvestment Act of 2009 (ARRA) created new sources of funding for affordable rental housing. It established the Tax Credit Assistance Program (TCAP), which will provide direct funding assistance to eligible tax credit projects. The estimated amount of TCAP that Alabama will receive is $28,814,688. The new program is intended primarily to supplement affordable housing developments that have been unable to secure adequate equity commitments in the current market.

The Act requires States to award TCAP funds based upon guidance provided by HUD.

AHFA expects to place the highest funding priority on projects that have agreements in place for equity commitments and are farthest along in the construction process. The funds allocated to any project will not exceed the amount needed to make the project financially feasible, based upon AHFA's underwriting criteria.

Alabama's Allocation: $NA at this time

Under Section 1603 of the American Recovery and Reinvestment Tax Act of 2009 (Section 1603), the United States Department of the Treasury (Treasury) makes payments to eligible persons who place in service specified energy property and apply for such payments. The purpose of the payment is to reimburse eligible applicants for a portion of the expense of such property. Eligible property under this program includes only property used in a trade or business or held for the production of income. Non-business energy property described in section 25C of the Internal Revenue Code (IRC) and residential energy efficient property described in section 25D of the IRC do not qualify for payments under this program but may qualify for tax credits under those provisions.

By receiving payments for property under section 1603, applicants are electing to forego tax credits under sections 48 and 45 of the IRC with respect to such property for the taxable year in which the payment is made or any subsequent taxable year. Applicants must agree to the terms and conditions applicable to the Section 1603 program.

This guidance establishes the procedures for applying for payments under the Section 1603 program and is intended to clarify the eligibility requirements under the program. Treasury welcomes questions about the program and the application process at 1603Questions@do.treas.gov.

Alabama's Allocation: $NA at this time

The New Markets Tax Credit (NMTC) Program permits taxpayers to receive a credit against Federal income taxes for making qualified equity investments in designated Community Development Entities (CDEs). Substantially all of the qualified equity investment must in turn be used by the CDE to provide investments in low-income communities. The credit provided to the investor totals 39 percent of the cost of the investment and is claimed over a seven-year credit allowance period. In each of the first three years, the investor receives a credit equal to five percent of the total amount paid for the stock or capital interest at the time of purchase. For the final four years, the value of the credit is six percent annually. Investors may not redeem their investments in CDEs prior to the conclusion of the seven-year period. Throughout the life of the NMTC Program, the Fund is authorized to allocate to CDEs the authority to issue to their investors up to the aggregate amount of $26 billion in equity as to which NMTCs can be claimed, including $3 billion in Recovery Act Awards and $1 billion of special allocation authority to be used for the recovery and redevelopment of the Gulf Opportunity Zone.

Alabama's Allocation: $NA at this time

The CDFI Fund was created for the purpose of promoting economic revitalization and community development through investment in and assistance to community development financial institutions (CDFIs). The CDFI Fund was established by the Riegle Community Development and Regulatory Improvement Act of 1994, as a bipartisan initiative.

The CDFI Fund achieves its purpose by promoting access to capital and local economic growth in the following ways:

1. through its CDFI Program by directly investing in, supporting and training CDFIs that provide loans, investments, financial services and technical assistance to underserved populations and communities;

2. through its New Markets Tax Credit (NMTC) Program by providing an allocation of tax credits to community development entities (CDEs) which enable them to attract investment from the private-sector and reinvest these amounts in low-income communities;

3. through its Bank Enterprise Award (BEA) Program by providing an incentive to banks to invest in their communities and in other CDFIs; and

4. through its Native Initiatives, by taking action to provide financial assistance, technical assistance, and training to Native CDFIs and other Native entities proposing to become or create Native CDFIs.

Since its creation, the CDFI Fund has awarded $1.11 billion to community development organizations and financial institutions; it has awarded allocations of New Markets Tax Credits which will attract private-sector investments totaling $26 billion, including $1 billion of special allocation authority to be used for the recovery and redevelopment of the Gulf Opportunity Zone.

Money that has been utilized: $260,728,696

A one-time payment of $250 was made in 2009 to:

• Retirees, disabled individuals and Supplemental Security Income (SSI) recipients receiving benefits from the Social Security Administration

• Disabled veterans receiving benefits from the U.S. Department of Veterans Affairs

• Railroad Retirement beneficiaries

These payments were made by the Social Security Administration, Railroad Retirement Board and Department of Veteran's Affairs, not the IRS.

The Social Security Administration, the Railroad Retirement Board and the Department of Veteran's Affairs have information about the economic recovery payments on their Web sites.

The economic recovery payment is a reduction to any Making Work Pay credit for which you may qualify. You claim the Making Work Pay credit on your 2009 tax return filed in 2010. For more information regarding the economic recovery payment and the Making Work Pay credit see these questions and answers.

If you can't recall whether you received the payment, call 1-866-234-2942 and select Option 1. You may also use the Did I Receive a 2009 Economic Recovery Payment? online tool or contact your agency for confirmation before completing and filing your 2009 tax return.

• Social Security Administration: Toll free number is 800-772-1213.
• Department of Veterans Affairs (VA): Toll free number is 800-827-1000.