1. Can tax-exempt IDBs be used to acquire an existing facility from another company?

Your company may qualify for IDB financing when acquiring an existing manufacturing facility. You may be able to use tax-exempt proceeds to acquire the fixed assets of the company being acquired. These assets must continue to be used for manufacturing and cannot be relocated. Tax-exempt funds cannot be used solely to finance used equipment without being part of an integrated facility. The $10 million capital expenditure test* is applied to the jurisdiction where the acquired facility is located. At least 15% of the amount financed with IDB proceeds must be spent to refurbish the facility or equipment. This amount may be financed either through the IDB or paid directly by the company within 24 months of bond closing.
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2. What other financing products are available using governmental conduit financing?

Taxable IDBs
Transactions that do not qualify for tax-exempt IDB financing may be closed using a similar structure but at taxable rates. The benefit of a taxable IDB offered by many jurisdictions is the avoidance of sales tax or property tax abatements on real estate and/or equipment.

Exempt Facility Bonds
Another type of tax-exempt financing that is not subject to the $10 million capital expenditures limitation* or the $40 million test is an exempt facility bond. The Internal Revenue Code limits the types of facilities that can be financed with an exempt facility bond. Some specific uses include airports, docks and wharves, solid waste disposal and recycling facilities, and facilities in empowerment zones.
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3. How long will the IDB process take?

The time between inducement and bond closing can range from 45 to 120 days.
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*It is important to note that while the current capital expenditure limitation is $10 million, Congress has recently authorized an increase to $20 million, which will be implemented for deals issued after December 31, 2006.