What is an Industrial Revenue Bond?
Industrial Revenue Bonds (IRB) are tax exempt securities issued by the state or its political subdivisions by authority of U.S. Congress. They are tax exempt because the income derived by the bond holder is not subject to federal income tax. Because of this, the cost to the company for which the bonds are issued is less than the cost of conventional financing.
IRB's are used to help finance local manufacturing or industrial facilities. The state's principal interest in these bonds is to assist new and expanding companies while providing North Carolinians with good jobs at good wages.
Eligibility:
IRB proceeds can be used only by companies engaged in manufacturing.
How Bonds Can Be Used:
IRB proceeds may be used only for land, buildings and/or equipment. Bonds can also be issued to finance pollution control projects under a different set of criteria than those discussed here.
Employment Requirements:
The company receiving the bonds must agree to pay its employees the lesser of the average manufacturing wage in the county where the plant is located or the state's average manufacturing wage plus 10%. It must also agree to a formula-based number of new employees.
How Much Financing is Available:
Federal regulations limit the bond amount per project to $10 million, less any capital expenditures incurred during the period beginning three year before the date of issuance of the bonds and ending three years after the date of issuance of the bonds.
Generally, a bond issue must be at least $2.5 million to be cost-effective, but could be smaller under certain circumstances. There is a nationwide maximum for any company of $40 million.
How the Program Works:
The Mecklenburg County Industrial Facilities and Pollution Control Financing Authority (the "Bond Authority") was established by the Mecklenburg County Board of Commissioners in 1976 to process bond applications for new and expanding manufacturers in Mecklenburg County.
To preserve eligibility for IRB financing under both State and Federal law, it is important that a company enter into an inducement agreement with the Bond Authority prior to making economic commitments or signing contracts or purchase orders for the proposed capital expenditures.
Additional Information:
For more information about Industrial Revenue Bonds contact Marvin A. Bethune, Attorney to the Bond Authority at 704-377-1634 or visit the North Carolina Department of Commerce website.
