• IRS Begins Compliance Check of Direct Payment Build America Bonds
  • March 12, 2010 | Author: George T. Magnatta
  • Law Firm: Saul Ewing LLP - Philadelphia Office
  • In February 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (the "Act"). The Act amended the Internal Revenue Code of 1986, as amended ("Code") to allow state and local governments to issue two types of taxable bonds ("Build America Bonds"), that would otherwise qualify as tax-exempt bonds. An issuer can choose one of two options when issuing Build America Bonds: (i) the issuer can elect to issue tax-credit Build America Bonds, which allow an investor to receive taxable interest along with a federal tax-credit equal to 35 percent of the interest received; or (ii) the issuer can choose to receive a direct payment from the federal government equal to 35 percent of the interest paid on the bonds ("Direct Payment BABs").