Qualified Zone Academy Bonds (QZABs) are one of several types of tax credit bonds authorized under IRC Section 54A, that allow a credit to investors that hold such bond on one or more of the quarterly credit allowance dates. QZABs must comply with the requirements of IRC Section 54E.
For what purposes can QZABs be issued?
QZABS may be issued to rehabilitate or repair the public school facility in which the academy is established; to provide equipment for use at such academy; to develop course materials for education to be provided at such academy; and, to train teachers and other school personnel in such academy. QZABS may not be used for new construction.
Who can issue QZABs?
QZABs may be issued by a State or local government located within the jurisdiction of a qualified zone academy.
What is a qualified zone academy?
A qualified zone academy is any public school or program established and run by an eligible local education agency to educate and train below the post-secondary level if:
- the school or program is designed together with business to enhance the curriculum, increase graduation and employment, and prepare students for the workforce;
- the students will be subject to the same academic standards and assessments as other students in the eligible local education agency;
- the comprehensive education plan is approved by the eligible local education agency; and
- such public school is located in an empowerment zone or enterprise community or there is a reasonable expectation that at least 35% of students will be eligible for free or reduced-cost lunches.
What is the private business contribution required by QZABs?
QZABs require the issuer to certify that it has satisfied the “private business contribution.” To satisfy the private business contribution, the issuer must have received written commitments from private entities having a present value of not less than 10% of the proceeds of the bonds. A qualified contribution consists of: equipment for use in the qualified zone academy (including state-of- the-art technology and vocational equipment); technical assistance in developing curriculum or in training teachers in order to provide appropriate market driven technology in the classroom; services of employees as volunteer mentors; internships, field trips, or other educational opportunities outside the academy for students; or, any other property or service specified by the eligible local educational agency.
How is QZAB volume cap allocated?
The QZAB volume cap is allocated by the Secretary. The national allocation to States and territories for:
- 2008 was $400 million and 2009 was $1.4 billion - Notice 2010-22
- 2011 was $400 million - Notice 2013-3
- 2014 was $400 million - Notice 2016-20
Can unused volume cap allocation for QZABs be carried forward?
Yes, but only for two years, then any unused allocation expires.
For what years can an irrevocable election to treat a QZAB as a Specified Tax Credit Bond eligible for direct pay be made?
An irrevocable election to treat a QZAB as a Specified Tax Credit Bond eligible for direct pay can only be made for 2009 and 2010 volume cap allocations. Volume cap allocations after December 31, 2010 can only be issued as tax credit bonds.