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Proposed direct subsidy payments for QSCB and QZAB programs

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Benesch Friedlander Coplan & Aronoff LLP
USA
January 12 2010

In December 2009, the U.S. House of Representatives passed the Jobs for Main Street Act of 2010 (the Jobs Act) that includes provisions expanding the Qualified School Construction Bond (QSCB) and Qualified Zone Academy Bond (QZAB) tax-credit programs.    

What was the purpose of the QSCB and QZAB programs?

  • The allocation of the tax credits provided by the QSCB and QZAB programs was designed to provide certain school districts the ability to issue debt for certain projects with zero or near zero interest rates.

Were the QSCB and QZAB programs successful in 2009?

  • Because the market for tax-credit debt has been limited, many school districts have not been able to utilize their QSCB or QZAB allocations. As a result, only $2.4 billion of the $11 billion of QSCBs authorized and $43.1 million of the $1.4 billion of QZABs authorized were issued as of mid-December 2009.

How would the proposed Jobs Act expand the QSCB and QZAB programs?

  • The Jobs Act as passed by the U.S. House of Representatives would permit school districts with QSCB or QZAB allocations to issue taxable bonds and receive direct payment subsidies from the federal government similar to the direct payment subsidies received by political subdivisions issuing Build America Bonds. Build America Bonds were a popular financing option in 2009, with over $64 billion issued.

When is the U.S. Senate expected to consider the Jobs Act?

  • The U.S. Senate is expected to consider the Jobs Act early this year.

How might the proposed Jobs Act provisions impact the QSCB and QZAB programs?

If the U.S. Senate passes the Jobs Act retaining the provisions permitting school districts with QSCB and QZAB allocations to issue taxable debt with direct subsidy payments from the federal government, many commentators believe that such school districts could successfully issue such debt to finance their projects.

The information contained in this article should not be construed as legal or tax advice on any specific facts or circumstances. Readers should not act upon the information contained in this article without professional counsel. The contents are intended for general information purposes only and may not be quoted or referred to in any other publication or proceeding without the prior written consent of the Firm, to be given or withheld at its discretion. The information contained in this article is not intended to create or constitute an attorney-client relationship. Any use of this article is for personal use only. All other uses are prohibited.  This article constitutes Attorney Advertising under applicable NY rules and regulations. © 2001-2010 Benesch, Friedlander, Coplan & Aronoff LLP. All rights reserved.

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