Part III - Administrative, Procedural, and Miscellaneous Qualified Zone Academy Bond Allocations for 2014

Part III - Administrative, Procedural, and Miscellaneous

Qualified Zone Academy Bond Allocations for 2014

Notice 2015-11

SECTION 1. PURPOSE

This notice sets forth the maximum face amount of Qualified Zone Academy

Bonds (“QZABs”) that may be issued for each State for the calendar year 2014 under §

54E(c)(2) of the Internal Revenue Code. Under § 54A(e)(3), the term State includes the

District of Columbia and any possession of the United States.

SECTION 2. BACKGROUND

.01 INTRODUCTION

Section 313 of the Tax Extenders and Alternative Minimum Tax Relief Act of

2008, Div. C of Pub. L. No. 110-343, 122 Stat. 3765 (2008) (“Act”) added new § 54E,

which provides revised program provisions for QZABs in lieu of the existing provisions

under §1397E, effective for obligations issued after October 3, 2008. The Act amended

§ 54A(d)(1) to provide that the term qualified tax credit bond (“QTCB”) means, in part, a

qualified zone academy bond which is part of an issue that meets the requirements of

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§§ 54A(d)(2), (3), (4), (5), and (6) regarding expenditures of bond proceeds, information

reporting, arbitrage, maturity limitations, and prohibitions against financial conflicts of

interest. The Act also amended § 54A(d)(2)(C) to provide that, for purposes of

§ 54A(d)(2), the term “qualified purpose” for a QZAB means a purpose specified in

§ 54E(a)(1), described below.

The Act added § 54E(c)(1) to provide a national zone academy bond limitation

authorization for QZABs of $400 million for each of calendar years 2008 and 2009.

Section 1522 of Title I of Division B of the American Recovery and Reinvestment Act of

2009, Pub. L. No. 111-5, 123 Stat. 115 (2009) (“2009 Act”) amended § 54E(c)(1) to

provide an increased national zone academy bond limitation authorization for QZABs of

$1.4 billion for each of calendar years 2009 and 2010. Section 758 of the Tax Relief,

Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Public L. No.

111-312, 124 Stat

rican Recovery and Reinvestment Act of

2009, Pub. L. No. 111-5, 123 Stat. 115 (2009) (“2009 Act”) amended § 54E(c)(1) to

provide an increased national zone academy bond limitation authorization for QZABs of

$1.4 billion for each of calendar years 2009 and 2010. Section 758 of the Tax Relief,

Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Public L. No.

111-312, 124 Stat. 3296 (2010) (“2010 Act”) amended § 54E(c)(1) to provide an

authorization for QZABs of $400 million for calendar year 2011. Section 310 of the

American Taxpayer Relief Act of 2012, Public L. No. 112-240, 126 Stat. 2313 (2012)

(“2012 Act”) amended § 54E(c)(1) to provide authorization for QZABs of $400 million for

each of calendar years 2012 and 2013. Section 120 of the Tax Increase Prevention Act

of 2014, Public L. No. 113-295 (2014) (“2014 Act”) amended § 54E(c)(1) to provide

authorization for QZABs of $400 million for calendar year 2014. The amendment

made by § 120 of the 2014 Act applies to obligations issued after December 31, 2013.

Section 202 of the 2014 Act also amended § 6431(f)(3)(A)(iii) to provide that the direct-

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pay subsidy option does not apply to any national zone academy bond limitation for

years after 2010 or any carryforward of any such limitation.

.02 QUALIFIED ZONE ACADEMY BOND UNDER § 54E

Section 54E(d) defines “qualified zone academy” as any public school (or

academic program within a public school) which is established by and operated under

the supervision of an eligible local education agency to provide education or training

below the postsecondary level provided: (A) the public school or program is designed in

cooperation with business to enhance the academic curriculum, increase graduation

and employment rates and prepare students for college and the workforce; (B) students

will be subject to the same academic standards and assessments as other students

educated by the eligible local education agency; (C) the comprehensive education plan

is approved by the eligib

c school or program is designed in

cooperation with business to enhance the academic curriculum, increase graduation

and employment rates and prepare students for college and the workforce; (B) students

will be subject to the same academic standards and assessments as other students

educated by the eligible local education agency; (C) the comprehensive education plan

is approved by the eligible local education agency; and (D)(i) such public school is

located in an empowerment zone or enterprise community including such designated

after October 3, 2008; or (ii) there is a reasonable expectation (as of the date of bond

issuance) that at least 35 percent of the students will be eligible for free or reduced cost

lunches under the school lunch program established under the National School Lunch

Act.

Section 54E(a) provides that a “qualified zone academy bond” or QZAB means

any bond issued as part of an issue if: (1) 100 percent of the available project proceeds

of such issue are to be used for a qualified purpose with respect to a qualified zone

academy established by an eligible local education agency; (2) the bond is issued by a

State or local government within the jurisdiction of which such academy is located, and

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(3) the issuer: (A) designates such bond for purposes of this section; (B) certifies that it

has written assurances that the private business contribution requirement of § 54E(b)

will be met; and, (C) certifies that it has the written approval of the eligible local

education agency for such bond issuance.

Section 54E(d)(3) provides that a qualified purpose with respect to each

academy means: (A) rehabilitating or repairing the public school facility; (B) providing

equipment; (C) developing course materials; and, (D) training teachers and other school

personnel

4E(b)

will be met; and, (C) certifies that it has the written approval of the eligible local

education agency for such bond issuance.

Section 54E(d)(3) provides that a qualified purpose with respect to each

academy means: (A) rehabilitating or repairing the public school facility; (B) providing

equipment; (C) developing course materials; and, (D) training teachers and other school

personnel. The private business contribution requirement of § 54E(b) is met if the

eligible local education agency that established the qualified zone academy has written

commitments from private entities to make qualified contributions having a present

value (as of the date of issuance of the issue) of not less than 10 percent of the

proceeds of the issue. Section 54E(d)(4) defines “qualified contributions” as any

contribution (of a type and quality acceptable to the eligible local education agency) of:

(A) equipment for use in the qualified zone academy (including state-of-the-art

technology and vocational equipment); (B) technical assistance in developing

curriculum or in training teachers to promote appropriate market driven technology in

the classroom; (C) employees’ services as volunteer mentors; (D) internships, field trips,

or other educational opportunities outside the academy; or (E) any other property or

service specified by the eligible education agency. Section 54E(d)(2) defines “eligible

local education agency” as any local educational agency as defined in § 9101 of the

Elementary and Secondary Education Act of 1965.

Section 54E(c)(2) provides that the Department of the Treasury shall allocate the

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national zone academy bond limitation among the States on the basis of their respective

populations of individuals below the poverty line (as defined by the Office of

Management and Budget). The limitation amount allocated to a State under the

preceding sentence shall be allocated by the State education agency to qualified zone

academies within such State

the Treasury shall allocate the

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national zone academy bond limitation among the States on the basis of their respective

populations of individuals below the poverty line (as defined by the Office of

Management and Budget). The limitation amount allocated to a State under the

preceding sentence shall be allocated by the State education agency to qualified zone

academies within such State.

Under § 54E(c)(3), the maximum aggregate face amount of bonds issued during

any calendar year which may be designated as QZABs with respect to any qualified

zone academy shall not exceed the limitation amount allocated to such academy for

such calendar year. However, under § 54E(c)(4)(A), if for any calendar year the

limitation amount for any State exceeds the amount of bonds issued during such year

which are designated QZABs with respect to qualified zone academies within such

State, the limitation amount for such State for the following calendar year shall be

increased by the amount of such excess. Under § 54E(c)(4)(B), however, any

carryforward of a limitation amount may be carried only to the first 2 years following the

unused limitation year. For these purposes, the limitation amount shall be treated as

used on a first-in first-out basis.

Sections 1.1397E-1 (the “Final Regulations”) sets forth regulations that were

issued under § 1397E. For other guidance concerning the applicability of the

regulations issued under § 1397E, the credit rate, and the sinking fund yield see §

1.397E-1(m), and Notice 2009-15, 2009-6 I.R.B. 449, Notice 2009-30, 2009-16 I.R.B.

852, Notice 2010-22, 2010-10 I.R.B. 435, and Rev. Proc. 2011-19, 2011-6 I.R.B. 465.

SECTION 3. NATIONAL ZONE ACADEMY BOND LIMITATION FOR 2014

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The national limitation for QZABs issued under § 54E for calendar year 2014 is

$400 million

issued under § 1397E, the credit rate, and the sinking fund yield see §

1.397E-1(m), and Notice 2009-15, 2009-6 I.R.B. 449, Notice 2009-30, 2009-16 I.R.B.

852, Notice 2010-22, 2010-10 I.R.B. 435, and Rev. Proc. 2011-19, 2011-6 I.R.B. 465.

SECTION 3. NATIONAL ZONE ACADEMY BOND LIMITATION FOR 2014

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The national limitation for QZABs issued under § 54E for calendar year 2014 is

$400 million. This amount is allocated among the States as follows:

Qualified Zone Academy Bond Allocations (in dollars) by

State or Territory, 2014

State or Territory

QZAB Allocation

Alabama

$7,035,000

Alaska

$575,000

Arizona

$9,550,000

Arkansas

$4,410,000

California

$50,069,000

Colorado

$5,264,000

Connecticut

$2,954,000

Delaware

$916,000

DC

$911,000

Florida

$25,858,000

Georgia

$14,637,000

Hawaii

$1,214,000

Idaho

$1,952,000

Illinois

$14,574,000

Indiana

$7,979,000

Iowa

$2,983,000

Kansas

$3,099,000

Kentucky

$6,354,000

Louisiana

$7,099,000

Maine

$1,435,000

Maryland

$4,680,000

Massachusetts

$6,100,000

Michigan

$13,024,000

Minnesota

$4,688,000

Mississippi

$5,476,000

Missouri

$7,349,000

Montana

$1,260,000

Nebraska

$1,857,000

Nevada

$3,428,000

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New Hampshire

$911,000

New Jersey

$7,876,000

New Mexico

$3,465,000

New York

$24,276,000

North Carolina

$13,540,000

North Dakota

$641,000

Ohio

$14,191,000

Oklahoma

$4,939,000

Oregon

$5,044,000

Pennsylvania

$13,355,000

Rhode Island

$1,173,000

South Carolina

$6,793,000

South Dakota

$904,000

Tennessee

$8,930,000

Texas

$35,854,000

Utah

$2,849,000

Vermont

$585,000

Virginia

$7,446,000

Washington

$7,620,000

West Virginia

$2,624,000

Wisconsin

$5,963,000

Wyoming

$491,000

American Samoa

$247,000

Guam

$287,000

Northern Mariana Islands

$211,000

Puerto Rico

$12,872,000

U.S. Virgin Islands

$183,000

Total Allocation

$400,000,000

SECTION 4

ennessee

$8,930,000

Texas

$35,854,000

Utah

$2,849,000

Vermont

$585,000

Virginia

$7,446,000

Washington

$7,620,000

West Virginia

$2,624,000

Wisconsin

$5,963,000

Wyoming

$491,000

American Samoa

$247,000

Guam

$287,000

Northern Mariana Islands

$211,000

Puerto Rico

$12,872,000

U.S. Virgin Islands

$183,000

Total Allocation

$400,000,000

SECTION 4. EFFECTIVE DATE OF NATIONAL ZONE ACADEMY BOND

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LIMITATIONS

The national limitation allocated in section 3 for calendar year 2014 is effective

for QZABs issued after December 31, 2013.

SECTION 5. DRAFTING INFORMATION

The principal authors of this notice are James A. Polfer and David E. White of the

Office of Associate Chief Counsel (Financial Institutions and Products). For further

information regarding this notice contact David White or James Polfer at (202) 317-6980

(not a toll-free call).