Attention: Direct Pay Subsidy Bond Holders
School districts and charter schools who hold Direct Pay Subsidy Bonds should be aware that Sequestration will have an effect on the subsidy received for interest payments from March 1, 2013 through September 30, 2013.
Payments under Sec. 6431 (which allows the issuer of certain qualified bonds to receive the interest payments directly for Build America Bonds, Qualified School Construction Bonds, Qualified Zone Academy Bonds, New Clean Renewable Energy Bonds, and Qualified Energy Conservation Bonds) are reduced by 8.7%.
More information can be found at Effect of Sequestration on Certain State and Local Government Filers of Form 8038-CP.
Qualified Zone Academy Bonds (QZABs) are bonds that school districts and charter schools can use to save money on school rehabilitation or repair projects. The QZAB program is a federal program designed to provide to bond holders tax credits that are approximately equal to the interest that states and communities would ordinarily pay the holders of taxable bonds. The program does not grant funding. No monetary payments or awards are issued from the state to the school district or charter school. This program allows the state to grant program authorization to a limited number of qualifying school districts and charter schools. This authorization allows those school districts and charter schools to issue QZABs that benefit qualifying projects.
For a school district or charter school to gain QZAB program authorization, it must submit a program application that satisfies all requirements of the application process. Additional requirements may have to be met after receipt of an authorization to comply with federal tax law regarding the authorization. For more information on those possible additional requirements, ask your local bond counsel. An application must be filed and an authorization must be approved before the school district or charter school issues its QZAB debt.
QZAB Program Description
For additional information, contact:
Division of Statel Funding