Tax Exempt and Taxable Industrial Revenue Bonds (IRB) are issued by the Newport News Economic Development Authority or the Newport News Industrial Development Authority, subject to the approval of bond counsel and, for tax-exempt IRBs, the availability of a state allocation. Typically, IRBs are used for long-term financing of fixed assets of at least $1,000,000.
For tax-exempt bonds, federal law establishes an upper limit of $20,000,000 on total capital investment by the company in a community over a 3-year, (forward and backward) period. The facility benefiting from the IRB must also meet a strict definition of being engaged in manufacturing. The interest received by the lender on a tax-exempt IRB is exempt from federal and state income taxes. A tax-exempt rate is generally lower than prime, for credit-worthy companies, typically by 75 basis points.
For projects that do not meet the tax-exempt test, a taxable rate is generally several basis points higher than a tax-exempt rate, but lower than conventional financing. The interest on a taxable IRB is still exempt from the Virginia income tax.