Qualified School Construction Bonds (I.R.C. 54F)

Volume Cap Allocations

According to statements by Aviva Roth (who, as of May 2010 is no longer at TEB) at the 2009 Bond Attorneys Workshop in Phoenix, QSCB allocations from the IRS to large local school districts cannot be carried forward by such large local school districts. The allocations must be transferred to the state. The state will then be able to carry forward the allocation.  Section 54F(e) of the Code states that an allocation to the State may be carried forward to a subsequent year if not used.  It is not sure how such allocation carryforward is put into practice.

Qualified Purposes

All QSCB expenditures after costs of issuance (not exceeding two percent) must be used for capital expenditures for construction, rehabilitation or repair of the school facility or to acquire land on which the facility is to be constructed with proceeds of the QSCBs.  In a separate publication (Notice 2009-35) and also in an IRS Q&A from 2010 (http://www.irs.gov/pub/irs-tege/tc_and_stcb_q-a._09-07-10_1.5.pdf), the IRS has indicated that QSCB proceeds can also be used for “equipment or furniture” so long as the equipment of furniture is used in the portion of the public school facility that is being constructed, rehabilitated or repaired with part of the QSCB proceeds.


Bonds that refund QSCBs (or reissued bonds) will not retain the status as qualified tax credit bonds.  Legislation or guidance will be needed to determine whether, e.g., a current refunding bond can remain a QSCB.  The statute and notices provide that refundings are not permitted purposes for QSCBs (except in very limited cases).

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