On February 17, 2009, President Obama signed the widely
anticipated economic stimulus legislation formally known as the
American Recovery and Reinvestment Act of 2009 (the Act). The Act
encourages more activity in the public finance sector by, among
other things, introducing new types of bonds. The following
information is intended to serve as a general overview of one such
type – Build America Bonds (BABs) – and does
not constitute an exhaustive discussion or legal advice.
BUILD
Build America Bonds are taxable tax credit
bonds.
Like their tax-exempt counterparts, taxable tax credit bonds are
a vehicle for federal subsidization of state and local government
obligations. Taxable tax credit bonds are different from tax-exempt
bonds, however, in that the interest paid to bondholders is
taxable, and a portion of the interest consists of a federal tax
credit (the amount of which is also taxable). Despite the taxable
status of the interest and credit, the Act provides
