During the Great Recession, Congress temporarily authorized a direct pay bond program known as Build America Bonds, or BABs. Interest paid on these direct-pay bonds is taxable to the bondholder, so the interest rate is higher than a tax-exempt rate. The federal government, however, pays an amount equal to a percentage of the interest payable on the bonds directly to the issuer of the bonds, effectively reducing the financing cost of the project funded by these bonds.

Why We Care

The subsidy reduces the cost of financing infrastructure for state and local governments, while the taxable rates broaden the purchaser base by attracting new investors who would not otherwise be interested in tax-exempt bonds. By creating a new iteration of direct-pay bonds, Congress and the administration can add an additional, efficient, and tested financing tool for state and local governments.

NABL Stance

Congress and the Administration should create a new form of direct pay bonds to expand purchaser bases and provide a new financing tool to our communities. NABL endorses bills on a case-by-case basis but is supportive of efforts to create new direct pay bond programs. For further inquiries, email advocacy@nabl.org.

Latest on Direct Pay Bonds

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Statement for the Record: Our Nation’s Crumbling Infrastructure and The Need for Immediate Action

Statement for the Record of Dee P. Wisor, President, National Association of Bond Lawyers (NABL) in response to a U.S. House of Representatives Committee on Ways and Means hearing entitled…

  • Comments

Letter to Treasury on Proposed Tax Amendments to Build and Maintain Infrastructure (2017)

Letter to the U.S. Department of Treasury proposing various recommendations for revisions to the Internal Revenue Code to support the construction of new and maintenance of existing infrastructure.

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PFN Letter in Support of Building American Jobs Act of 2011

Letter to Congressman Sander Levin (D-MI) thanking him for his support and leadership on including municipal bond provisions in the Building American Jobs Act of 2011.