The House and Senate are closing in on final draft legislation that would authorize the issuance by Tribes of up to $2 Billion worth of tax-exempt government bonds for economic development projects. The provisions are included in the “American Recovery and Reinvestment Tax Act of 2009” (H.R. 598) sponsored by Representative Charles Rangel of New York, a broad package of stimulus measures and tax credits designed to spur public infrastructure works and economic growth throughout the country.
Section 1532 of the Bill provides for federal support to “Indian Tribal governments” to issue up to $2 Billion in tax-exempt “Tribal economic development bonds”. The bonds will pay interest to investors who purchase them, but that interest will not be subject to federal taxes. The revenue generated by Tribes through the sale of these bonds may be used to provide capital for Tribal infrastructure projects and essential governmental functions. Tribes will not be permitted to apply such revenues to “any portion of a building in which class II or class III gaming is conducted”, nor for “any facility located outside the Indian reservation”.
The use of tax-exempt bonds by Tribal governments has increased significantly in recent years, as they provide both needed capital for Tribes and are attractive securities for tax-conscious investors. If signed by the President and fully implemented, H.R. 598 will provide significant assistance to Native communities in accessing capital markets for development projects in 2009.