The Modernizing Agricultural and Manufacturing Bonds Act, which failed to launch in the last Congress, is back for another attempt thanks to a reintroduction by Sen. Joni Ernst.
"We are thrilled that MAMBA has been reintroduced in the U.S. Senate with bipartisan support," said Council of Development Finance Agencies President & CEO Toby Rittner.
"By updating the 40-year-old rules around agricultural and manufacturing bonds, MAMBA allows for the innovative financing tools necessary to invest in local communities by expanding and growing American manufacturing and farming."
Various versions of MAMBA has been crawling through both chambers of Congress since 2017. It is designed to update Internal Revenue Service regulations governing aggie bonds and spur the development of light manufacturing industries in underpopulated areas.
Attempts to attach it to a major Farm Bill have failed as have efforts to write new agriculture legislation.
The Agriculture Improvement Act of 2018 was the last major piece of passed legislation related to farming and has been extended numerous times. It's currently set to expire Sept. 30.
According to the CDFA, over the past decade, Industrial Development Bonds, also known as manufacturing bonds and aggie bond issuances "have substantially declined due in major part to the outdated rules and regulations that govern the use of these bonds."
The IRS rules governing IDBs date back to 1986.
The current version of MAMBA would expand the definition of a "manufacturing facility," eliminate restrictions on "directly related and ancillary facilities," and increase the maximum IDB size limitation to $30 million from $10 million, indexed to inflation.
It would also increase the limitation on small issue bond proceeds for first-time farmers to $1 million, indexed to inflation.
"It's time to cut the red tape and give our farmers, small manufacturers, and rural lenders room to grow," said Sen. Ernst, R-Iowa.
"My bipartisan MAMBA legislation's commonsense updates will do that by driving new investment and making it easier for beginning farmers and manufacturers to access capital and grow their businesses," said Senator Ernst.
Sen. Mark Warner, D-Va., joins Ernst as a co-sponsor of the bill, which also is drawing support from the Bond Dealers of America.
"This commonsense and bipartisan legislation will embolden small manufacturers and first-time farmers in a time when investment in rural America is needed more than ever," said BDA.
"It has been over 30 years since these bonds have been modernized, causing stagnation in these respective industries. We call on Congress to advance this overdue legislation."
Aggie bonds are usually tax-exempt, and the lenders are typically smaller agricultural banks who utilize state development agencies as a conduit. Below market rates are used to finance land, buildings, livestock, machinery, and refinancing existing debt.
The IRS classifies aggie bonds as private activity bonds designed to assist "first time farmers," who do not own "substantial farmland" and have not received financing for an amount that when added to a current financing exceeds $250,000.
MAMBA is written to help farmers new to the agriculture industry and businesses looking for lower than market credit in sparsely populated areas. Changing the definition of manufacturing facility in the tax code would open the door for makers of microchips and software.
The bill would allow up to a quarter of bond proceeds to be used for facilities that are located on or near the same site while aligning aggie bond definitions with the U.S. Department of Agriculture Farm Service Agency.
