The Internal Revenue Service’s tax-exempt bond office has published the first in a series of announcements about available allocations of national bond volume cap for tribal economic development bonds.
The announcement said the volume cap limit as of April 1, is $308,726,846 or 20% of the total amount of available volume cap of $1,543,634,230.
In general, the published volume cap limit for any period is the greater of 20% of the amount of available volume cap as of the first day of such period determined by the IRS based on available information, including allocation data and reports of bonds issues or $100 million.
The announcement also said the IRS will allocate available volume cap equal to the amounts requested on a first-come, first-served basis for all applications that meet the requirements under the TED bond program.
“The whole point of this release is to alert potential tribal government applicants as to the new maximum limit of volume cap that can be awarded based upon the current amount of volume cap available,” said Steve Chamberlin, acting director of the IRS tax-exempt bond office. “In the future TEB will update this release to reflect changes to the maximum limit that can be awarded as the amount of available volume cap changes.”
The American Recovery and Reinvestment Act created TEDs and Congress authorized $2 billion of them to be issued in 2009 and 2010 to promote economic development on tribal lands.
That legislation temporarily removed the requirement that tribal bonds only be used to finance projects with an “essential governmental function” like schools or sewer system projects, but said they had to be on reservations and not involve gambling. The idea was to put TEDs on a level playing ground with tax-exempt bonds, which are not limited to financings for essential governmental functions.
Last July, TEB reallocated $1.8 billion of available bond volume cap for TEDs. These bonds, which were allocated to tribal governments in 2009, still remain largely unissued for projects even after the second reallocation.
Since then, approximately $300 million approved for use for tribal government projects.
The Bond Buyer previously reported that several reasons for the low issuance rate was due to the allocation period being too short, credit constraints, the TED program not being easily understood and the economic environment has not been conducive to new bond issuances.