On May 22, the Internal Revenue Service (IRS) at the U.S. Department of the Treasury provided updated guidance on refinancing tax-exempt tribal government bonds under the Tribal Economic Development Bonds (TEDBs) program. The IRS guidance clarifies that tribal governments can refinance existing economic development tax-exempt debt without it counting against the original $2 billion authorization.
Tribes have successfully utilized the TEDBs program to issue tax-exempt debt for a broad range of activities with lower borrowing costs, making it easier to engage in economic development projects. However, that volume cap is quickly running out and there were concerns that refinancing tax-exempt debt issued under the program would count twice - depleting the cap even faster. NAFOA has advocated for such guidance to ensure that tribes can refinance without duplicative allocation, similar to other tax-exempt debt programs.
“Tribal economic development bonds are vital for tribes that seek funding for projects on their reservations, and we applaud this decision by the IRS to approve the refinancing of these bonds. This has become an urgent issue throughout Indian Country, and today’s ruling will benefit all tribes that have relied on TEDBs to prosper and strive toward economic self-sufficiency.”– Kenneth Kahn, Tribal Chairman for the Santa Ynez Band of Chumash Indians
Tribal Government Tax-Exempt Bonds Refunding Criteria
Based on the IRS guidance, tribal governments have the assurances they need to refinance economic development tax-exempt debt under the TEDBs program without it counting against the current volume cap so long as specific criteria outlined in the guidance (and below) are met: