Municipal issuers of Build America Bonds will see their subsidy payments from the federal government reduced through the end of the fiscal year due to the budget sequestration cuts that took effect on March 1.
The sequester report issued by the Obama Administration this month reported that the budget cuts will reduce federal Build America Bond payments by 5.1 percent or $171 million this year. According to additional information posted by the IRS on March 4, this translates to an 8.7 percent reduction in payments to issuers of Build America and other qualified direct pay bonds between now and the end of the 2013 fiscal year on September 30.
The Build America Bond program was a popular component of the 2009 economic stimulus legislation. The program offers municipal bond issuers a 35 percent subsidy on interest paid to bondholders, at a cost to the U.S. Treasury of about $3.4 billion per year.