ECONOMIC, BUSINESS & WORKFORCE DEVELOPMENT

Tribal Economic Development Bonds

Department & Agency:

Department of Treasury, Internal Revenue Service

Agency Contact:

Internal Revenue Service
http://www.irs.gov

Stimulus Funding:

Section 1402 authorizes tribal governments temporarily to issue economic development bonds without satisfying the essential governmental function test. There is a national bond limitation of $2 billion that will be allocated as the Secretary of the Treasury determines appropriate, in consultation with the Secretary of the Interior.  

Eligibility and Type:

Section 1402 authorizes tribal governments to issue tax-exempt tribal economic development bonds, which are defined as any bond issued by a tribe (1) the interest on which would be tax-exempt if issued by a state or local government, and (2) is designated by the tribe as a tribal economic development bond. This provision removes the restriction under current law that tribes may issue tax-exempt bonds only if most of the proceeds are used for an “essential governmental function,” which has excluded tribes from using the bonds for economic development projects that are customarily performed by state and local governments.

Program Description:

Tribal economic development bonds are defined as any tax-exempt bond issued by the tribe for economic development purposes.

General Provisions:

Section 1402 specifically excludes bonds from being used to finance a building in which class II or class III gaming is conducted or housed, or any other property used in the conduct of gaming. Nor can the tribal economic development bonds be used to finance any facility located outside the Indian reservation. This section also requires the Secretary of the Treasury to study whether the “essential governmental function” restriction should be permanently repealed.

Analysis:

See Tribal Bonds Alert: Tribal Bond Provisions Included in the Economic Stimulus Package

On March 18, NCAI hosted a webinar on the Recovery Act provisions for tribal financing. This live presentation discussed these energy conservation bonds. To view the webinar, click on the link below.

http://www.indiancountryworks.org/webinars.cfm#financeoptions

Technical Assistance:

See links above.