In December of 2006, Congress adopted the President’s proposal to extend the Qualified Zone Academy Bond (QZAB) authority through 2007 as part of the Tax Relief and Health Care Act of 2006 (Public Law 109-432). This legislation continued the QZAB program at its prior annual bond allocation level of $400 million a year nationally, but included new restrictions for issuers. Under the new law, issuers must reasonably expect to spend 95% of QZAB proceeds within five years of the sale of bonds and must expect, within six months, to enter into a binding commitment with a third party to spend at least 10% of the proceeds. Issuers must also comply with arbitrage rebate and information reporting requirements and redeem the unspent portion of QZABs within 90 days if the proceeds have not been spent within the five-year period.
In accordance with the Arkansas Department of Education (ADE) Rules and Regulations Governing the Allocation of Qualified Zone Academy Bonds (QZAB Rules), section 7.04, the total allocation of $765,000 remaining for calendar year 2007 is available for the August 2008 allocation cycle. The allocation amount of $765,000 could increase if any of the allocation approved in prior cycles is unused and returned. Applications for this allocation cycle will be accepted through the deadline of July 14, 2008. The approval of these applications will be considered at the Arkansas State Board of Education meeting on August 11, 2008. If the full amount of available allocation is not approved at the August 11, 2008, State Board meeting, the remaining allocation will be available for the December 2008 cycle.
There have been no changes made to the November 2000 QZAB Rules. The Additional Information section of the QZAB application was revised in 2007, in part as a result of the federal law changes. The application and QZAB Rules are posted to the Arkansas Department of Education website: http://www.arkansased.org/. The Treasury and Internal Revenue Service issued guidance in the spring of 2007, in the form of regulations, on the new and existing QZAB provisions.
Questions may be directed to Cindy Hedrick at 501/682-4258. A fiscal agent or bond attorney may be able to provide additional information regarding the new federal regulations.