The American Reinvestment and Recovery Act of 2009 created two new categories of tax-advantaged bonds to promote economic development.
Recovery Zone Facility Bonds (RZF Bonds) are tax-exempt private activity bonds issued for businesses. Interest rates are significantly lower than conventional loans because interest paid to bondholders is exempt from federal income taxes.
Recovery Zone Economic Development Bonds (RZED Bonds) are taxable bonds issued by and for governmental entities. Borrowers receive direct payments from the federal government equal to 45% of their interest payments to bondholders.
Recovery Zones include:
- areas designated as having significant poverty, unemployment, rate of home foreclosures or general distress;
- areas designated as economically distressed by reason of a base closure; and
- areas for which a designation as an empowerment zone or renewal community was in effect as of February 17, 2009.
In Massachusetts, all Economic Target Areas (ETA) have been designated as Recovery Zones. Additional recovery zones can be designated by the Secretary of the Executive Office for Administration and Finance.
For additional information on Massachusetts’ recovery zone bond programs, visit www.mass.gov/recoverybonds.
