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Spending the Last of Your Build America Bond Proceeds

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March 28, 2012
Client Alert

The American Recovery and Reinvestment Act of 2009 allowed the issuance of taxable municipal bonds, called build America bonds, which provide the issuer of such bonds with a direct payment from the federal government equal to 35 percent of the interest payable on such bonds. One of the tax law requirements for these bonds is that 100 percent of bond proceeds (other than amounts spent on costs of issuing the bonds) must be allocated to capital expenditures.

The following is a brief explanation of capital expenditures. With an idea of what qualifies as a capital expenditure, you can spend remaining build America bond proceeds on qualifying capital expenditures and prevent certain negative consequences outlined below resulting from the failure to spend build America bond proceeds on capital expenditures. 

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