Native American Legal Update
Treasury and IRS Announce New Guidance for Tribal Economic Development Bonds
On July 18, Treasury and the IRS published new guidance on allocating Tribal Economic Development Bonds ("TEDBs"). The TEDB program provides tribes with authority to issue tax-exempt debt for a broad range of activities to encourage economic development in Indian country.
Under the new guidance, tribes can receive TEDB allocations for projects in the final stages of going to the market to receive financing. Tribes must move to final debt issuance within six months of receiving an allocation, or else the funds will be returned to Treasury for redistribution.
The maximum single allocation that a tribe can receive is $360 million, or 20 percent of the remaining TEDB authority, which is currently about $1.8 billion. Once the remaining TEDB authority reaches less than $500 million, the maximum allocation will be $100 million.
When Treasury's two-year $2 billion Indian tax exempt pilot was originally launched as part of the American Recovery and Reinvestment Act of 2009, the cap on single allocations was $30 million. However, the money went largely unused for a variety of reasons: credit constraints, the capital market, and issues with allocation, among other things. The new guidance raised the cap on single allocations to encourage big projects and economies of scale.
The new guidance is available on Treasury's web site.
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