4.7.1.5 Qualified Small-Issue Bonds

Qualified small issue bonds are also known as industrial development bonds (IDBs). These are bonds issued in the aggregate face amount of $1 million or less and at least 95% of the net proceeds are used to finance a manufacturing operation and at least 75% of the net proceeds are used to acquire, construct, or improve land or depreciable property or to redeem bonds previously used for such purposes and provide the actual production facilities of the manufacturing operation, as opposed to office and warehouse structures and equipment. The $1 million limitation on issue size may be increased to $10 million if certain requirements are met. To qualify for the $10 million limit, the sum of the following items may not exceed $10 million during the 6 year period beginning 3 years before the date of issuance of the bonds and ending 3 years after the date of issuance:

All expenditures made by the following:
- The nongovernmental borrower or any related person for any facilities within the political jurisdiction in which the project is to be sited
- Any other principal user of the facility being financed
- Any person (whether or not a principal user) to benefit from the bond financed facility
The face amount of the bonds to be issued
The remaining principal amount of all prior outstanding qualified small issue bonds issued to finance facilities in the same incorporated municipality (or in the same county but not in any incorporated municipality) as the project being financed, a principal user of which is the nongovernmental borrower for the project being financed

If this capital expenditure limitation of $10 million is exceeded, the bonds will lose their tax exempt status from the date the limit is exceeded. See Section 3.3.9.2, Small Manufacturing Facilities.