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IRS Releases Guidance on ARRA Bond Provisions

The American Recovery & Reinvestment Act of 2009 (ARRA) created several new types of tax-exempt bonds and tax credit bonds under the Internal Revenue Code. Of particular note, the ARRA created new tax incentives for certain taxable governmental bonds called Build America Bonds and Recovery Zone Economic Development Bonds whereby the governmental issuer of such bonds may elect (in lieu of issuing tax-exempt bonds) to receive a direct refundable credit payment from the Federal government equal to a percentage of the interest payments on these bonds.

The latest guidance, forms and information on the ARRA bond provisions is available at the links below. For more information about other ARRA tax provisions, please visit the American Recovery and Reinvestment Act of 2009: Information Center.

Build America Bonds & Recovery Zone Economic Development Bonds

Notice 2009-50 (Recovery Zone Bond Volume Cap Allocations)
This notice provides guidance regarding the maximum face amount of recovery zone economic development bonds and recovery zone facility bonds that may be issued by each state before January 1, 2011 under sections 1400U-2 and 1400U-3, respectively, of the Internal Revenue Code, as provided by section 1400U-1 of the Code.

The Treasury Department and the IRS recognize that the required local suballocations of the national volume cap for Recovery Zone Bonds among counties and large municipalities impose administrative burdens for the States and involve mandatory local suballocations without State discretion. Accordingly, the Treasury Department and the IRS have determined these required local suballocations to facilitate prompt availability of Recovery Zone Bonds as a source for State and local governmental borrowing at lower borrowing costs to promote job creation and economic recovery in areas particularly affected by employment declines. Click here to access these suballocations.

Notice 2009-26 (Build America Bonds and Direct Payment Subsidy Implementation)
This notice provides guidance on the new tax incentives for Build America Bonds under section 54AA of the Internal Revenue Code and the implementation plans for the refundable credit payment procedures for these bonds. The notice also includes guidance on the modified Build America Bond program for Recovery Zone Economic Development Bonds under section 1400U-2 of the Code.

Form 8038-CP – Return for Credit Payments to Issuers of Qualified Bonds
Governmental issuers of qualified Build America Bonds and Recovery Zone Economic Development Bonds must submit this form to request refundable credit payments payable under section 6431 of the Internal Revenue Code. Instructions for Form 8038-CP – Return for Credit Payments to Issuers of Qualified Bonds.

IRS News Release, IR-2009-33, April 3, 2009 (IRS Issues Guidance on New Build America Bonds)

Education Related Bond Provisions

Notice 2009-30 (Qualified Zone Academy Bond Allocations for 2008 and 2009)
This notice provides guidance on qualified tax credit bonds called Qualified Zone Academy Bonds (QZABs) under section 54E of the Internal Revenue Code. The notice sets forth the amount of QZABs that may be issued within each State for each of the calendar years 2008 and 2009. QZABs may be issued to finance certain expenditures relating to a qualified zone academy established by a local education agency.

Notice 2009-35 (Qualified School Construction Bond Allocations for 2009)
This notice provides guidance on qualified tax credit bonds called Qualified School Construction Bonds (QSCBs) under section 54F of the Internal Revenue Code. The notice sets forth the amount of QSCBs that may be issued by each State and large local education agency in 2009. QSCBs may be issued to finance certain construction and land acquisition expenditures relating to public school facilities.

Notice 2010-17 (Qualified School Construction Bond Allocations for 2010)
This notice sets forth the maximum face amount of qualified school construction bonds allocated by the Department of the Treasury to each State and large local educational agency for 2010 under section 54F(d) of the Internal Revenue Code.

Energy Related Bond Provisions

Notice 2009-29 (Qualified Energy Conservation Bond Allocations for 2009)
This notice provides guidance on qualified tax credit bonds called Qualified Energy Conservation Bonds (QECBs) under section 54D of the Internal Revenue Code. The notice sets forth the amount of QECBs that may be issued for each State. QECBs may be issued to finance projects designed to reduce greenhouse gas emissions.

Notice 2009-33 (New Clean Renewable Energy Bonds Application and Requirements)
This notice provides guidance on and solicits applications for authority to issue qualified tax credit bonds called New Clean Renewable Energy Bonds (New CREBs) under section 54C of the Internal Revenue Code to finance certain clean renewable energy facilities described under section 45(d) of the Code. There is a national limitation of $2.4 billion of volume of New CREBs which the IRS may allocate to qualified issuers. Application for Notice 2009-33 (New Clean Renewable Energy Bonds) – Rich Text Format.

IRS announces New Clean Renewable Energy Bonds Allocations

New Clean Renewable Energy Bonds 2009 Allocation Schedule

Treasury News Release on New Clean Renewable Energy Bonds Allocations

Tribal Economic Development Bond Provisions

Notice 2009-51 (Tribal Economic Development Bonds). This notice provides guidance on and solicits applications for allocations of the $2 billion national bond volume limitation authority ("volume cap") to issue tribal economic development bonds under new section 7871(f) of the Internal Revenue Code. Application for Notice 2009-51 (Tribal Economic Development Bonds) - Rich Text Format.

The IRS addressed the interaction between tribal economic development bonds and build America bonds in Office of Chief Counsel memorandum number AM2009-14.

In addition to the program announced in Notice 2009-51, tribal governments can also issue regular tax credit bonds to finance public school construction under a $200 million authorization that is administered by the Department of Interior (See Notice 2009-35).

IRS Announces Tribal Economic Development Bonds Allocations

The IRS announced, in a news release (IR-2009-81), the allocation of the first $1 billion of volume cap to tribal governments under the new TEDBs program.

The IRS announced, in a news release ( IR-2010-20), the allocation of the second $1 billion of volume cap to tribal governments under the new TEDBs program.

Allocation Schedule of 1st Tranche of Tribal Economic Development Bonds

Allocation Schedule of 2nd Tranche of Tribal Economic Development Bonds

Davis-Bacon Labor Standards Provisions

Pursuant to the American Recovery and Reinvestment Act, Division B, section 1601, Davis-Bacon labor standards must be applied to projects financed with the proceeds of the following tax-favored bonds:

  1. Any new clean renewable energy bond (as defined in section 54C of the Internal Revenue Code of 1986) issued after February 17, 2009,
  2. Any qualified energy conservation bond (as defined in section 54D of the Internal Revenue Code of 1986) issued after February 17, 2009,
  3. Any qualified zone academy bond (as defined in section 54E of the Internal Revenue Code of 1986) issued after February 17, 2009,
  4. Any qualified school construction bond (as defined in section 54F of the Internal Revenue Code of 1986), and
  5. Any recovery zone economic development bond (as defined in section 1400U–2 of the Internal Revenue Code of 1986).

The Department of Labor, Wage and Hour Division has issued guidance in All Agency Memorandum No 208, concerning applicability of Davis-Bacon labor standards to construction financed with the proceeds of these tax-favored bonds under ARRA Division B, section 1601.

The Davis-Bacon contract clauses stated in 29 CFR 5.5(a)(1) through (10) must be incorporated into covered contracts for construction, alteration, or repair work. Additional information regarding the application of Davis-Bacon labor standards is available at the U.S. Department of Labor Wage and Hour Division website.

Page Last Reviewed or Updated: 14-Feb-2014