The IRS has just released Notice 2009-51 soliciting applications for and providing interim guidance on the $2 billion of Tribal Economic Development Bonds authorized in the American Recovery and Reinvestment Tax Act, and providing an application form for Tribes to use.
Tribal Economic Development Bonds can be used to finance on a tax-exempt basis anything that a State or local government could finance on a tax-exempt basis, whether with tax-exempt governmental bonds or tax-exempt private activity bonds, except for any portion of a building in which gaming is conducted or any property actually used for gaming and facilities not located on the reservation.
The IRS notice appears to establish that no portion of a building may be financed with these bonds if gaming is conducted in any other portion of the same building, even if those portions are physically discrete from each other. The notice provides a safe harbor under which a structure will be treated as a separate building if it has an independent foundation, independent outer walls and an independent roof. Connections such as doorways, covered walkways or other enclosed common area connections between two adjacent independent walls of separate buildings may be disregarded as long as such connections do not affect the structural independence of either wall.
Other notable points from the IRS guidance include:
The volume cap for these bonds will be allocated in two $1 billion tranches.
Applications for an allocation from the first tranche must be filed with the IRS by August 15, 2009, and the bonds must be issued by December 31, 2009.
Applications for an allocation from the second tranche must be filed with the IRS after August 15, 2009 and before January 1, 2010, and the bonds must be issued on or before December 31, 2010.
No single Tribal government may be awarded more than $30 million from the first tranche, but there is authorization for projects to be financed jointly. If the total of applications for the first tranche exceed $1 billion each award will be reduced pro rata so the total does not exceed $1 billion.
A similar limit is expected to apply to applications for the second tranche, but the IRS reserves the right to change or eliminate the limit.
Unused volume cap for these bonds would carry over to future years under a process to be determined at some future date.