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Industrial Development Bonds: Achievement of Public Benefits Is Unclear

RCED-93-106 Published: Apr 22, 1993. Publicly Released: May 20, 1993.
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Highlights

Pursuant to a congressional request, GAO reviewed the use and benefits of small-issue industrial development bonds (IDB) for manufacturing, focusing on: (1) the public benefits of IDB; (2) the IDB default rate; and (3) early repayment of IDB.

Recommendations

Matter for Congressional Consideration

Matter Status Comments
Given the questions that surround whether IDB are achieving the benefits attributed to them and in view of the tax revenue forgone, Congress may wish to consider not renewing the IDB provision.
Closed – Not Implemented
Title XIII, Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66) permanently extended the authority to issue tax-exempt qualified small-issue bonds (which include industrial development bonds) and placed no restrictions on their use.
If Congress should act to extend the provision, it may wish to specify requirements to better direct IDB toward achieving public benefits that would not occur from alternative investment of the money. For example, Congress may wish to provide requirements that would direct IDB to economically distressed areas or to start-up companies.
Closed – Not Implemented
Title XIII, Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66) permanently extended the authority to issue tax-exempt qualified small-issue bonds (which include industrial development bonds) and placed no restrictions on their use.

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Topics

Economic analysisEconomic developmentEconomically depressed areasEmploymentLoan defaultsManufacturing industryMunicipal bondsSubsidiesTax exempt statusTax lawIndustrial policy