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The Internal Revenue Code classifies private activity development bonds" as those bonds which are used in the trade or business of a for-profit person or enterprise and which are secured by payments made in respect to property used in such trade or business. The significance of the classification of a bond as a private activity bond under the code is that only certain types of private activity bonds qualify for tax-exemption under the code. The types of private activity bonds on which interest is tax-exempt can be divided into three basic categories:

Exempt Facilities
The Internal Revenue Code designates certain exempt facilities which may be used in the trade or business of a for-profit person or enterprise and can be financed by the issuance of tax- exempt private activity bonds without any limit as to the size of the bond issue. Such exempt facilities are as follows:

1. The amount of outstanding bonds when added to the capital expenditures of all principal users (users of 10% or more by space, value or purchase of output) in the city or unincorporated area that the project is located during the 3 year period prior to the issuance of the bonds and ending 3 years after issuance of the Bonds cannot exceed $10,000,000).

2. The amount of tax-exempt bonds of any principal users of the facilities during the period described in the preceding sentence cannot exceed $40,000,000 each.

3. Issues sold at substantially the same time (15 days), pursuant to the same plan of financing and reasonably expected to be paid from substantially the same source may have to be treated as part of the same issue for purposes of limitation of "1" above.

4. Can only include minimal office facilities necessary for the operation of the facilities.

5. Bonds issued to finance manufacturing facilities are subject to the state volume cap (approximately $224,000,000 per year).

6. 95% or more of the proceeds must be use for land or depreciable property.

7. No more than 2% of the proceeds of the Bonds may be used to pay the costs of issuance of the Bonds.

8. Only expenditures paid within 60 days prior to the adoption of an official intent resolution, and any time thereafter, may be reimbursed with Bond proceeds.

9. Bonds must be issued not later than 18 months after the later of (a) the date any payments are made, or (b) the date the project is first placed in service (but in no event later than 3 years after the date payments were made).

10. Weighted average maturity of the Bonds cannot exceed 120% of the weighted average life of the facilities financed.

11. Generally no more than 25% of the net proceeds of an issue may be used to finance land.

12. Bonds proceeds may not be used to finance existing facilities or used equipment unless:

(a) In the case of an integrated building and equipment, an amount at least equal to 15% of the acquisition price is used for rehabilitation; or

(b) In the case of structures other than buildings (i.e. docks and wharves) an amount equal to at least 100% of the acquisition price is spent on rehabilitation.

The Process >



Contact Us:
Sharon Martin - Administrator
Industrial Development Board of the City of New Orleans
1340 Poydras Street, Suite 1114
New Orleans, Louisiana 70112
Telephone: 504 658-4242 ? FAX: 504 617-6514
Mail To:

P.O. Box 19996
New Orleans, Louisiana 70179

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