Disaster Area Bonds
by Dean Spina, Attorney
December 2009 -- Business owners are getting some very good news just in time for the holidays. On December 18, 2009, the IRS released information regarding Midwestern Disaster Area Tax-Exempt Bonds ("MDA Bonds").
To give you a little history about the MDA Bonds, they were authorized on October 3, 2008, to aid in disaster recovery in most counties in Iowa. The statutory language required interpretation, and initial indications from the IRS negatively impacted the anticipated use of MDA Bonds.
The good news from the IRS is that it will defer the statutory interpretation to the Governor or a designee of the Governor. Thus, the determination of which projects meet the statutory requirement of being used by a business that suffered a loss as a result of the floods of 2008, or which replaces such a business, will be made at the state level.
What this means is the MDA Bond capacity (over $2.4 billion) will be available for projects that satisfy the Governor or his designee. We expect that favorable determinations will be made on a variety of projects.
MDA Bonds should be strongly considered to achieve substantial savings in interest expense. MDA Bonds must be issued before the end of 2012.
As a result of legislation adopted as a part of the Stimulus bill, banks can acquire MDA Bonds to a limit of two percent of adjusted basis of bank assets. At the present time, the MDA Bonds must be issued before the end of 2010 to be eligible for bank purchase.
Dean Spina can be contacted at 319-861-8725 if you would like more information.