QZABs

Currently, the Qualified Zone Academy Bond (QZAB) program allows tax credit bonds to be issued to fund renovation and rehabilitation of existing facilities and provides the bondholder with a federal tax credit in lieu of a cash interest payment.  Because the federal government provides the tax credit, the issuer of a QZAB is usually only responsible for repaying the principal of the QZAB and minimal or no interest.

QZAB volume is allocated by the U.S. Department of Education to the Indiana Department of Education, and reallocated to Indiana school corporations.  To qualify for QZAB volume:

· Thirty-five percent of the students who attend the building to be renovated or rehabilitated (the academy) must be eligible for the free or reduced lunch program; and

· The school corporation must receive written verification that the academy will receive a contribution of cash, goods or services in an amount equal to 10 percent of the amount of the QZAB from private sources. 

The maximum term of the bonds is set by the Department of Treasury on a monthly basis and has ranged from 12 to 19 years.  The current maximum term is 17 years.  The tax credit rate is established daily and set once the issuer enters into a binding written contract.  For example, on February 22, 2010, the tax credit rate was 6.08 percent.

If you have any questions, please contact Jane Herndon, Erik Long, Kristin McClellan or Todd Ponder.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice.  The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.