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Abstract: 

The American Recovery and Reinvestment Act of 2009 (ARRA) will have a significant impact on tax-exempt investing by banks. The ARRA modifies several federal tax laws affecting tax-exempt bonds; the Act: 1) Permits political subdivisions to sell more bonds to banks; 2) Creates several new tax-exempt and tax-credit bond programs; 3) Eliminates the alternative minimum tax (AMT) on tax-exempt bonds; and 4) Expands the eligible use of private activity bonds. The provisions in the ARRA relating to tax-exempt bonds and tax-credit bonds generally only apply through 2010, so banks have only a limited window to take advantage of the new investment opportunities now available. This article summarizes several of the key ARRA provisions and explains how they differ from, and mesh with, the pre-ARRA law.

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Affiliations:  1: Perry-Smith LLP.