The Modernizing American Manufacturing Bonds Act (MAMBA), currently pending in the United States House of Representatives, would modernize provisions in the Internal Revenue Code regarding Qualified Small Issue Manufacturing Bonds, which are colloquially known as small issue industrial development bonds, or small issue IDBs. Small issue IDBs are an economic development mechanism designed to provide small- and mid-sized manufacturers access to low-cost capital through the issuance of tax-exempt private activity bonds. The transformation of the American economy over the last 30 years has significantly limited the usefulness of small issue IDBs, and job creators are seeking to update the law to enhance the effectiveness of the program.

MAMBA proposes four reforms, each of which are aimed at making small issue IDBs available for larger, more meaningful projects in today’s economy. First, MAMBA would expand the definition of manufacturing to include certain intangible products, such as software, biotechnology, intellectual property and processes. Second, it would eliminate complex restrictions regarding the portions of facilities that may or may not be financed with bond proceeds in favor of clearer rules. Third, it would increase the maximum bond size from $10 million (a limit set in the mid-1980s) to $30 million in an effort to give the proceeds of small issue IDBs the same buying power they had over 30 years ago. Fourth, it would increase the overall capital expenditure limitation for small issue IDBs from $20 million to $40 million, enabling tax-exempt bond proceeds to be used within the context of larger projects.

For more information, read the full text of MAMBA or read the Council of Economic Development Agencies’ position statement on MAMBA.