Certain provisions of the American Recovery and Reinvestment Act (ARRA), P.L. 111-5 (2009), may be of interest to physician group practices that need to finance new medical office buildings, electronic medical record systems and/or high-tech medical equipment.
The ARRA created a new category of tax exempt bonds known as Recovery Zone Facility Bonds (RZFBs) that can be issued by governmental issuers (e.g., a county or city) for the benefit of any borrower that will finance capital expenditures paid or incurred on property located in a recovery zone. Most potential borrowers are unaware that RZFBs may be available for funding new medical office building construction, electronic medical record systems and/or high-tech medical equipment because the typical constraints with tax exempt financing – the borrower is a tax exempt entity, and stringent limits on "private business use" by independent physicians and other service providers – do not apply to facilities funded by RZFBs.
"Recovery zones" are identified and designated by the relevant governmental issuer, and the ARRA gives issuers broad latitude in making that determination to maximize the likelihood that RZFBs will stimulate new projects. The total volume of RZFBs is capped, and each state has received an allocation of that volume.