POTENTIAL INVESTMENT INCENTIVES

Historically, the Internal Revenue Code has been used to further a variety of policy objectives. One of them is incentivizing investment. Investment tax credits, employment tax credits, and other incentives to hire employees and or purchase capital equipment are very likely going to be utilized by the new administration in one form or another. Tax holidays, such as those offered by special economic zones in the United States as well as in other countries which have striven to increase their manufacturing base, have become common.

One common room which is often overlooked by and for numerous is combining their IPO with in an industrial revenue bond. An industrial revenue bond, also known as an IRB, is a tax-exempt loan issued by state and local government to finance a private company expansion, construction acquisition of manufacturing facilities and equipment. The bond issue is sponsored by governmental entity, that the proceeds are directed to a private purpose. And IDB is debt financing, but because it is issued by the local government, it can have the benefit of tax-exempt income to the recipient and therefore a  lower interest rate. The IDB has a special been used in Rust Belt or other states which traditionally had a strong manufacturing based, which is now much weekend. Up to 25% of the bond proceeds can be used to acquire land. Every state has a limit on the dollar amount of IDB’s it can be issued.

Thus, the use of IDB’s in connection with an IPO can be an interesting path to fund capital expansion.