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RCED-92-247R 1 (1992-07-24)

handle is hein.gao/gaobackcx0001 and id is 1 raw text is: General Accounting Office Washington, D.C. 20548 Resources, Community, and Economic Development Division July 24, 1992 147389 The Honorable Ted Weiss Chairman, Human Resources and Intergovernmental Relations Subcommittee Committee on Government Operations House of Representatives Dear Mr. Chairman: In a July 16, 1992, meeting with your office, we were asked to provide the preliminary results of certain aspects of our ongoing work, performed at your request, on small issue industrial development bonds (IDB). Under the Internal Revenue Code (IRC), the authorization to issue IDBs expired on June 30, 1992. Because the Congress is now considering whether to extend the IDB provision, your office requested that we provide you with the information currently available to us on (1) whether federal, state, and local requirements for approving the issuance of IDBs are targeted to specific objectives and (2) what public K benefits are achieved from the use of IDBs. Q I IDBs are bonds exempt from federal taxes that are issued by 0 states and localities to help private companies finance the construction or expansion of small manufacturing projects. According to the Department of the Treasury and the Joint rA Committee on Taxation, the federal government forgoes tax revenue of $2 billion annually for all cumulative 4) 41 outstanding IDB issues. State and local issuers approve S projects for IDB financing, and they facilitate the sale of the bonds to private investors. Proceeds from the bond wsale are provided to the developer undertaking the project, and the developer is obligated to repay the investors with 4 interest. The total amount of tax-exempt bonds that state and local authorities can issue--including IDBs--is determined each year by a per capita formula. In 1991, the 50 states issued about $1.2 billion in IDBs. Under the IRC, the interest on these bonds is exempt from federal taxes because the 1DB-f inanced projects are considered to be serving a public purpose. Proponents of extending the IDB provision claim that IDBs achieve GAOIRCED-92-247R, Industrial Development Bonds '5 5wA

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