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Industrial Revenue Bonds

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Industrial Revenue Bonds

Industrial revenue bonds, also known as self-sustaining bonds, are a type of revenue bond. These qualified private activity bonds are tax-exempt bonds issued by a state or local government, the proceeds of which are used for a defined qualified purpose by an entity other than the governmental entity issuing the bonds (the “conduit borrower”). The interest on the bonds is exempt from both federal and state income tax, resulting in lower debt service, and the bonds are repaid from the project and/or the borrower’s revenues.

About CI’s IRB Program

IRBs offer flexible amortization and maturity—up to 40 years or 120% of the economic life of the asset that is financed. Bonds can equal 100% of the project cost and are customarily credit-enhanced when sold to the public, although privately- placed bonds may not require credit enhancement. Bonds are typically secured by a mortgage or security interest.

Eligibility and Conditions

  • The borrower must usually be a manufacturer, although certain non-manufacturing projects, including exempt facilities, may be eligible. These include:
    • Water, waste disposal, sewage, local district heating/cooling, airports, docks and wharves, environmental enhancements of hydro-electric generating facilities and government facilities
    • 501(c)(3) corporations
    • Qualified redevelopment projects
  • The borrower must obtain CI’s Inducement Resolution before undertaking the project/acquisition
  • A company’s total non-exempt bonds outstanding nationwide are limited to $40 million

Restrictions

  • Bond proceeds must be used for the acquisition of capital assets directly related to manufacturing
  • Certain non-manufacturing facilities ancillary and related to manufacturing are limited to 25% of bond proceeds
  • For a private activity bond to be tax-exempt, 95% or more of the net bond proceeds must be used for one of the several qualified purposes. Within this 5% non-qualifying costs, the cost of bond issuance may not exceed 2%.

Additional information can be found at: http://www.irs.gov/pub/irs-pdf/p4078.pdf

For more information or an application, contact Karin Lawrence at 860-258-7814 or at Karin.Lawrence@ctinnovations.com.

Please have the following available:

  • Description of the project
  • Breakout of estimated project costs
  • Description of the business and its products
  • Three years of historic and three years of projected capital investment