TAX-EXEMPT BONDS

Tax-Exempt Bonds can be issued by a state or local government or by an agency or political subdivision of a state or local government.

Private Activity Bonds - Bonds are issued to investors by a City or State (or an agency thereof) and proceeds are then loaned to private businesses.

Public or Private Purpose.-

Bond proceeds can be used for a "public" purpose such as renovating City Hall or, in certain instances, for a "private" purpose such as for a commercial entity acquiring or constructing a manufacturing facility.

Most issuers will help a commercial entity obtain the benefit of tax-exempt private activity bonds as long as the money is used to finance a facility that will create economic growth, create jobs, or otherwise benefit the applicable community.

Interest Savings.
Exempt Interest.
Governmental Issuer has no Real Liability.
Issuance Costs.

Savings Vary.

Longer Maturity.

Types of Private Activity Bonds. ....The three general categories of tax-exempt private activity bonds available to finance commercial facilities are:

Exempt Facility Bonds. Exempt facility bonds may be used to finance (1) Airports, (2) docks and wharves, (3) mass commuting facilities, (4) sewage facilities, (5) solid waste disposal facilities, (6) facilities for furnishing of water, (7) residential rental projects, (8) local electric energy or gas facilities, (9) local district heating or cooling facilities, (10) hazardous waste facilities, (11) high speed intercity rail facilities, or (12) environmental improvements to hydroelectric generating facilities.

Enterprise Community and Empowerment Zone Bonds.
Small Issue Obligations.

Private Activity Bond Restrictions - In General

Proceeds Use.
Arbitrage Limitations.
Registration Requirements.
Volume Cap.
Maturity Limits.
Other Private Activity Bond Restrictions.

First Step.

Industrial Development Bonds (IDB's) For Manufacturing

IDB's can finance core manufacturing costs including:

Acquisition, Expansion or Renovation of land or real estate; and
Machinery and equipment of a manufacturing facility.

Manufacturing Definition.

Maximum Size.

Federal Empowerment Zones and Enterprise Communities- The 1993 tax law created Enterprise Communities and Empowerment Zones. Tax-Exempt Bond Financing is available within Enterprise Communities and Empowerment Zones.

Federal Empowerment Zones.
Chicago Zones. Chicago's empowerment zone consists of three non-contiguous areas on Chicago's West, Near Southwest and South sides.
Maximum Amounts Issued.

Go to Government Incentives for Illinois Businesses Table of Contents

For the full unabridged edition of this document

or for other Governmental Law assistance from Chris Cohen, call 847/867-8500.

---

E-Mail Chris | goto Christopher B. Cohen Home Page