School districts and charter schools can use Qualified Zone Academy Bonds (QZABs) to save money on bonds issued to finance school rehabilitation or repair projects. The QZAB program is a federal program that provides bond holders with tax credits that are approximately equal to the interest that states and communities would ordinarily pay the holders of taxable bonds.
The program does not grant funding. No monetary payments or awards are issued from the state to the school district or charter school. This program allows the state to grant program authorization to a limited number of qualifying school districts and charter schools. This authorization allows those school districts and charter schools to issue QZABs that benefit qualifying projects.
For a school district or charter school to gain QZAB program authorization, it must submit a program application that satisfies all requirements of the application process. Additional requirements may have to be met after receipt of an authorization to comply with federal tax law regarding this authorization. For more information on those possible additional requirements, consult a bond counsel.
A school district or charter school must file an application and receive authorization before it can issue its QZAB debt.
Sequestration affected the subsidy received for interest payments from March 1, 2013, through September 30, 2013, for the school districts and charter schools that held Direct Pay Subsidy Bonds. Payments were reduced by 8.7 percent under Section 6431 of the Internal Revenue Code (which allows the issuer of certain qualified bonds to receive the interest payments directly for Build America Bonds, Qualified School Construction Bonds, Qualified Zone Academy Bonds, New Clean Renewable Energy Bonds, and Qualified Energy Conservation Bonds).
More information can be found at Effect of Sequestration on Certain State and Local Government Filers of Form 8038-CP.
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