As one of the states with the most developed space industries, Florida is poised to benefit perhaps more than any other from provisions in the recently passed "One Big Beautiful Bill" Act that will allow the use of alternate minimum tax-eligible municipal bonds to support spaceport infrastructure.
"The new legislation enables the U.S. space industry to better compete in an increasingly competitive global market not only in a commercial context, but also from a national security perspective," said Rob Long, president and CEO of Space Florida, a space economic development agency.
"While government funding of spaceport activities can provide a foundation, the use of more capital efficient tax-exempt private-activity bonds can accelerate the takeoff (pun intended) of spaceport activities which would otherwise be difficult to finance with current funding mechanisms," Long said.
The new provisions allowing AMT municipal bonds for building space ports and for space-related manufacturing were
For many years only the federal government sent things into outer space. However, since about 2009 private-sector operators have gotten into the business of sending objects and sometimes people into space, said Jeff Kottkamp, executive vice president and general counsel of Florida TaxWatch.
Jeff Bezos' Blue Origin, Elon Musk's SpaceX, Airbus U.S. Space & Defense, Amazon's Project Kuiper, CAE USA and others are using Florida sites for space-related activities. In addition to Cape Canaveral, there are space ports in Cecil, Cape San Blas, and three Air Force bases.
"The industry is truly taking off," said Katie Inman, a partner at Holland & Knight.
"I believe these new bonds would be attractive to investors especially if there was a bit more yield due to the unfamiliar and new characteristics of the program," said John Hallacy, president of John Hallacy Consulting, LLC. "The real question is exactly what revenue stream would be backing the bonds."
Long said financial institutions have already told Space Florida they are interested in becoming involved in projects using the space municipal bonds.
John Mousseau, vice chairman and chief investment officer of Cumberland Advisors, was more skeptical of the significance of the bonds to the muni community. He said estimates of this type of financing are around $6 billion to $7 billion a year, "just a thimbleful compared to the rest of the market."
Nevertheless, Mousseau said he expected space bonds would be issued. "I have not seen how the bonds are secured — probably by revenues generated from the space ports and associated leases and services. Not sure what kind of credit enhancement would be available — if any. But maybe some kind of pledge from Musk or Bezos? But if the muni market has proven anything, no matter what the project, deals will find people to buy it."
Most, but not all, politicians and market participants support the federal government's offer of a tax exemption to space investments.
U.S. Sen. Ashley Moody, R-Florida, sponsored a bill in May on extending municipal bonds to the space industry that later became the basis for the provision in the OBBBA.
"I have seen firsthand how public and private entities can come together to make great strides in innovation on Florida's Space Coast," she said in May. "It is vital to incentivize these partnerships and ensure the U.S. remains at the forefront of the space industry to not only build upon Florida's economic successes but protect national security interests as well."
Hallacy said the AMT extension to the bonds was appropriate, "especially if the program creates new job opportunities."
Long said the use of AMT financing was reasonable for space purposes, "by putting spaceports on equal footing with airports, seaports, and other modes of transportation, we support the build out of critical infrastructure, which will accelerate the growth of America's commercial space economy, and allow America to maintain its advantage on the global stage."
Mousseau saw things differently. He said the tax exemption means Musk's Space X and Bezos' Blue Origins will benefit. The public relations fallout will be, "why are we benefitting billionaire owned businesses in a time where we are shrinking the federal government and trying to reduce government debt — at least as a percentage of gross domestic product?"
Long said, in Florida "A wide range of stakeholders are interested in access to tax-exempt private-activity bond access [for space activities], including state and regional governments, infrastructure developers and private aerospace companies."
Inman and Long said they expected sending things and people to space would be more common 10 years from now than it is today.
"Last year, we launched more than 2 million pounds of payload into orbit from Florida, and we're on track to exceed that this year," Long said, "Space has become part of the world's core infrastructure."
The new rules don't require public use of spaceports for the ports to be financed by AMT bonds, said Edward Rojas, partner at Holland & Knight.
While
State tax exemption status may vary from state to state, Rojas said. The bonds aren't subject to a volume cap.
Florida's government passed two bills, Senate Bills 1516 and 1662, that went into effect July 1 providing grants to the state's space industry, giving additional boosts to it.
Elsewhere in the Southeast there are space ports and facilities at Spaceport Camden in Georgia, Huntsville International Air and Space in Alabama and Mid-Atlantic Regional Spaceport and Wallops Flight Facility in Virginia.
