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Tax exempt bond financing program

The IDA’s primary purpose is to implement Prince William Co.’s program for issuing so-called “private activity” bonds – see § 141 of the Internal Revenue Code (“IRC”) - on behalf of private parties. “Private activity” bonds were formerly called or referred to as industrial development bonds, IDBs, industrial revenue bonds, or IRBs. The interest paid on “private activity” bonds is generally exempt from federal and Virginia state income taxes. See IRC § 103 and Virginia Code § § 58.1 – 322 and 58.1 - 402. “Private activity” bond financing is viewed as an alternative financing arrangement to conventional borrowing. Instead of signing a promissory note for a loan, the borrower applies for the IDA to issue “private activity” bonds to the lender. The lender for an IDA bond issue may be a bank, which purchases the bonds. Alternatively, in many cases, the IDA bonds are backed by a letter of credit from a bank and are sold to multiple investors.

While the IDA’s issuance of the bonds qualifies the bonds as local government bonds, the interest from which is tax exempt, the arrangement requires the bondholder, i.e. the lender or the letter of credit issuer, to look solely to the private party, which is borrowing the money, for payment of all principal and interest. Neither the IDA, nor the Prince William Co. government, nor the Commonwealth of Virginia is responsible for making any payments on the bonds in case of the borrower’s default or otherwise.

Because the interest paid on the “private activity” bonds is exempt from federal and Virginia income tax, lenders will pay a lesser amount of tax and usually will reduce the interest rate, which they charge to the borrower.

The types of projects, which may qualify for “private activity” bond financing, are set forth in IRC § 141. The following is a representative list of projects, which may qualify for “private activity” bond financing:

  1. Projects for organizations, which have obtained tax-exempt status under IRC § 501(c)(3), such as hospitals, private schools, and multiple-unit housing facilities,
  2. Some manufacturing projects,
  3. Some “for – profit” housing projects,
  4. Local government projects, and
  5. Certain air, water, and wastewater facilities related to pollution control.

CONTACT US OR YOUR ATTORNEY TO DETERMINE WHETHER YOUR PROJECT MAY QUALIFY FOR TAX EXEMPT BOND FINANCING. IF YOU THINK THAT YOUR PROJECT WILL QUALIFY, CONTACT US FOR AN APPLICATION OR DOWNLOAD AN APPLICATION HERE. SUBMISSION OF A PROPERLY COMPLETED APPLICATION, ACCOMPANIED BY A NON-REFUNDABLE APPLICATION FEE, WILL START THE PROCESS.

Other economic development projects

Besides the Tax Exempt Bond Financing Program, the Prince William Co. IDA also participates in two other economic development related activities.

  1. The Incentives Program: In some instances Prince William Co. and/or the Commonwealth of Virginia will provide financial incentives to locate a facility, such as a manufacturing plant or an office building, in Prince William Co. The IDA serves as a conduit for transferring those funds to the recipient.

  2. The Economic Development Program: Periodically, the IDA will make grants or loans to entities in Prince William Co. Most recently, the IDA has made grants and/or loans to the following “501(c)(3) organizations”:
  • The Dr. William E.S. Flory Small Business Development Center, which provides counseling and assistance to entrepreneurs and small businesses,
  • The Freedom Museum, which exhibits military equipment used in 20th century conflicts, and
  • The Community Development Center, which is engaged in an affordable housing project.