Efforts to extend and expand stimulus law provisions for qualified zone academy bonds and qualified school construction bonds would get a boost under a bill recently introduced by Rep. Charles Rangel, D-N.Y.
The Rebuilding America's Schools Act, or HR 2394, which the House Ways and Means Committee member described in a release on Wednesday, would extend both QSCBs and QZABs through 2015 and would allow them to be issued with direct-pay federal subsidy rates equal to 100% of issuers' interest rate costs.
Rangel's bill is similar to legislation introduced in April by Sen. John D. Rockefeller, D-W.Va., a member of the Senate Finance Committee, and pending before that panel. But the Rangel bill differs in that it would allow QZABs to be issued for new construction projects, his spokesperson said Wednesday.
Both the Rangel and Rockefeller bills would waive the historically required 10% match from private parties for QZABs under certain circumstances.
"Many of our nation's schools are in dire need of rehabilitation and repair," Rangel said in a statement. "In order to compete in a global economy, it is imperative that we recommit ourselves to making sure that the next generation of Americans is endowed with access to quality education."
The QSCBs, which can be used for school construction, were created by the American Recovery and Reinvestment Act of 2009. The ARRA authorized $22 billion of them to be issued during 2009 and 2010. Though most of the ARRA programs expired at the end of 2010, issuers are still selling their unused allocated amounts of bonds.
The QZAB program, which has been around since 1997 and permits the bonds to be used for school rehabilitation, received a $1.4 billion allocation under the ARRA and then another $400 million under the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, which was enacted last December.
The Hiring Incentives to Restore Employment Act that was enacted in March 2010 gave issuers the option of selling QSCBs and QZABs as direct-pay bonds with a federal subsidy of 100% of the interest cost. Before that change, QSCBs and QZABs could only be issued as tax-credit bonds and drew tepid interest from investors.
The additional $400 million of authority provided for QZABs in 2011 by the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act stipulated they be issued only as tax-credit bonds, not direct-pay bonds.
Both types of bonds are taxable. Tax-credit bonds allow bondholders to receive tax credits. Direct-pay bonds require the Treasury Department to provide issuers with periodic subsidy payments.
Issuers sold $192.6 million of QZABs this year through July 5, $199.3 million in 2010, and $52.6 million in 2009, according to Thomson Reuters. Those figures, which include direct-pay as well as tax credit QZABs, are up from 2008, when issuers sold only $11.1 million of tax-credit QZABs.