The Internal Revenue Service has released guidance for Midwestern and Gulf Coast states that wish to issue up to $17 billion of special tax-exempt private-activity bonds or tax-credit bonds authorized this year to help natural disaster recovery efforts.
In the 15-page notice released late Tuesday, the IRS detailed which counties in the Midwest affected by flooding and which Gulf Coast counties and Louisiana parishes affected by Hurricane Ike could issue special tax-exempt and tax-credit disaster bonds as part of their recovery efforts. The bonds must be issued before the beginning of 2013.
The authority to issue the disaster bonds, which do not count against the states' private-activity bond volume caps, was granted when President Bush earlier this year signed into law a bill that contained a number of tax incentives.
All told, the IRS identified 12 counties in Arkansas, 18 in Illinois, 40 in Indiana, 78 in Iowa, 30 in Missouri, 16 in Nebraska, and 30 in Wisconsin that were declared federal disaster areas as a result of flooding, and are eligible for the incentives. It also identified 20 parishes in Louisiana and 34 counties in Texas that are Hurricane Ike disaster areas, but only two parishes - Calcasieu and Cameron - and five counties - Brazoria, Chambers, Galveston, Jefferson, and Orange - are eligible to benefit from the issuance of tax-exempt disaster bonds.
The notice also provided the official Census figures states should use to calculate the amount of their tax-exempt disaster bond allocation.
In the Midwest, states can issue up to $1,000 per person living in the disaster area, whereas along the Gulf, Texas, and Louisiana can sell bonds totaling $2,000 per person in the affected areas.
According to the Census figures included in the notice, the Midwest disaster zones could issue up to $14.6 billion of bonds. Wisconsin, since it had the most people affected, can issue up to $3.8 billion, and Indiana can issue up to $3.1 billion. Iowa is eligible for up to $2.6 billion of bonds. Illinois can issue up to $1.5 billion, Missouri can issue up to $1.4 billion, Nebraska can issue up to $1.1 billion, and Arkansas can issue up to $957 million.
Texas can issue up to $1.9 billion in Hurricane Ike disaster bonds for its seven counties and Louisiana can issue up to $384 million for projects in the two parishes.
Midwestern areas affected by flooding can also issue tax-credit bonds which would provide the holders with tax credits in lieu of interest payments. Proceeds of the tax-credit bonds could be used by states to provide assistance to communities unable to meet their debt service payments as a result of the disasters.
States with a disaster-area population of at least two million people can issue up to $100 million in tax-credit bonds. States with at least one million people affected can issue up to $50 million in tax-credit bonds. States with fewer than one million affected are not eligible for tax-credit bonds.
In addition to the bond incentives, the notice also detailed the additional housing credit available to disaster victims as part of the low-income housing tax credit. Texas and Louisiana can distribute extra tax credits in the amount of $16 per person in the counties and parishes cited above, which totals $18 million.