Private Activity Bond Allocation "Tax Exempt" Bond Cap

PURPOSE
Provides lower-interest financing for certain types of projects.

AUTHORIZATION
Internal Revenue Code of 1986, as amended, Codified at 26 U.S.C. §§ 141 to 150
Sections 108.500 to 108.532, RSMo

ELIGIBLE AREAS
Statewide.

ELIGIBLE APPLICANTS
Certain state agencies, cities, counties and industrial development authorities.

ELIGIBILITY CRITERIA
Details about eligible bonds are in the federal tax code.  It is very important that determinations of eligibility be made only after consulting the applicable federal law.

For general informational purposes, the types of projects for which tax-exempt bond cap may be allocated include:

• Multi-family and/or elderly rental housing for low income residents (MFH);
• Small manufacturing facilities;
  NOTE: The Stimulus Act expands the use of IDBs issued in 2009 and 2010 to include any facility used in the manufacturing, creation, or production of tangible or intangible property. In addition, the 25% restriction on directly related and ancillary facilities does not apply to IDBs issued in 2009 and 2010; and tax-exempt obligations may be issued to finance facilities that are “functionally related and subordinate” (must be at same site).
• First-time farmers;
• “Utility” projects, including water, sewer, electric and gas;
• Bonds issued to finance student loans; and
• Bonds issued to provide loans for home ownership.

PROGRAM BENEFITS/ELIGIBLE USES

The federal tax code authorizes each state an allocation of tax-exempt bond cap. The amount is based upon the state's population in the preceding year.

In Missouri, the Department of Economic Development (DED) has the authority to allocate the tax-exempt cap to projects.

FUNDING LIMITS
Missouri's cap for 2010 is $538,882,200.

APPLICATION/APPROVAL PROCEDURE

• Once the issuing entity has passed an inducement resolution, an application is submitted to the department.  Applications are accepted year-round.
• An application fee made payable to the Missouri Economic Development Advancement Fund is due at the time the application is submitted:
• $250.00 for allocation requests up to $5 million
• $500.00 for allocation requests between $5 million and $10 million
• $1,000.00 for allocation requests over $10 million
• For Industrial Revenue Bond (IRB) projects only, a copy of the local Industrial Development Authority (IDA) application or relevant jobs, wages, and investment data must be submitted with the application.
• A “hold letter” is typically issued to every applicant pending a decision by the department.
• For Multi-Family Housing projects:
• Housing projects should first apply to the Missouri Housing Development Commission (MHDC), following their procedures and deadlines. MHDC will recommend projects to DED for approval.
• A decision is made on a case-by-case basis.
• An allocation letter is issued if appropriate.
• The allocation is good for 60 days from the date of the letter. A 30 day extension can be granted.
• Upon issuance of the bonds, the issuer must notify DED both by telephone (no later than the next business day) and submit a report of issuance by overnight courier or certified mail (no later than five calendar days from issuance).
• An issuance fee made payable to the Missouri Economic Development Advancement Fund is due and payable at closing and remitted to DED within 30 days:
• For an issuance up to $2 million: 5 basis points (amount x .05%)
• For an issuance over $2 million: 10 basis points (amount x .10%)

REPORTING REQUIREMENTS
Annual activity reports must be filed no later than January 31st of the year following issuance.

CONTACT
Missouri Department of Economic Development
Division of Business and Community Services
Business and Community Finance Team
301 West High Street, Room 680
P.O. Box 118
Jefferson City, Missouri 65102
Phone: 573-751-4539                 Fax: 573-522-4322

MISSOURI DEVELOPMENT FINANCE BOARD
MDFB is one statewide issuer of various types of tax-exempt bonds, including some for small manufacturing facility projects.  Additional information about the programs and services provided by MDFB can be found at www.mdfb.org.

MISSOURI HOUSING DEVELOPMENT COMMISSION
MHDC receives bond cap for its "Mortgage Revenue Bond Program", in which the Commission partners with participating lenders to offer eligible first-time homebuyers lower interest rates.

MHDC is also an issuer for some MFH projects, and has several other programs directed toward the rehabilitation or development of affordable housing in Missouri.

For more information about the programs and services provided by MHDC, visit their web site at www.mhdc.com.

MISSOURI HIGHER EDUCATION LOAN AUTHORITY
MOHELA typically receives bond cap.  The savings from the tax-exempt bond financing helps allow the Authority to offer benefits such as reduced interest rates in its Rate Relief and Public Service Reward programs.  MOHELA’s web site is www.mohela.com.

MISSOURI AGRICULTURAL AND SMALL BUSINESS DEVELOPMENT AUTHORITY 
The Authority receives bond cap to underwrite loans to first time farmers for acquisition of land, equipment or breeding livestock.  Visit its web site at www.mda.mo.gov for more information on the “Beginning Farmer Loan Program.”

ENVIRONMENTAL IMPROVEMENT AND ENERGY RESOURCES AUTHORITY 
EIERA is a statewide issuer for some energy and environmental projects.  Visit its web site at www.dnr.mo.gov/eiera for more information.

LOCAL ENTITIES
There are many local entities, such as industrial development authorities, that can issue tax-exempt bonds as well.  Contact the city government of the location of your proposed project for more information.

Business and Community Services
301 W. High Street, Rooms 720, 770  Jefferson City, Missouri 65102
Tel: 1-866-647-3633    Fax: 1-573-751-7384    Email: missouridevelopment@ded.mo.gov