Qualified Zone Academy Bonds
Encyclopedia
Qualified Zone Academy Bonds (QZABs) are a U.S. debt instrument created by Section 226 of the Taxpayer Relief Act of 1997
. QZABs allow certain qualified schools to borrow at nominal interest rate
s (as low as zero percent) for costs incurred in connection with the establishment of special programs in partnership with the private sector.
The annual allocation each year has been $400,000,000. The allocation is divided up by all fifty states and US possessions. QZABs are a temporary program, subject to reauthorization. The last authorization was for the calendar years 2006 and 2007. Authorizations must be used within two years following the year for which they were given, meaning that authorizations given in 2007 must be used by 2009. As of February 1, 2008, the President's budget did not include reauthorization of the QZAB program.
Public schools (K-12) located in empowerment zone
s or enterprise communities and public schools with 35% or more of their student body on the free and/or reduced lunch programs are eligible to participate.
In order for a school district to participate, a Zone Academy must be created. The Zone Academy must create programs to enhance the curriculum
, increase graduation rates, improve employment opportunities, and better prepare students for the workplace or higher education
.
Funds can be used for renovation and rehabilitation projects, as well as equipment purchases (including computers). QZABs can not be used for new building construction. The school district must obtain matching funds from a private-sector partner equal to at least 10% of the cost of the proposed project. All state and local laws applicable to bonds also apply to QZABs, including Section 148 of the IRS Code.
A qualified lender as defined by the law must purchase bonds. Qualified lenders can be insurance companies, some bank
s or other corporations actively engaged in lending (each qualifying entity is determined by the Internal Revenue Code governing each). The lender receives a tax credit
in lieu of interest payments from the school. The IRS determines the amount of this tax credit.
"Pay to play" contributions are strictly prohibited. Set up fees, discounts on equipment purchased with QZAB funds, or contributions associated with the district’s construction projects are not eligible.
The renovation of Oak Ridge High School
in Oak Ridge, Tennessee
has been partially funded by $8 million in QZABs. Matching funds to qualify for QZAB funding were provided through private donations.
Taxpayer Relief Act of 1997
The Taxpayer Relief Act of 1997 reduced several federal taxes in the United States.Subject to certain phase-in rules, the top capital gains rate fell from 28% to 20%. The 15% bracket was lowered to 10%....
. QZABs allow certain qualified schools to borrow at nominal interest rate
Interest rate
An interest rate is the rate at which interest is paid by a borrower for the use of money that they borrow from a lender. For example, a small company borrows capital from a bank to buy new assets for their business, and in return the lender receives interest at a predetermined interest rate for...
s (as low as zero percent) for costs incurred in connection with the establishment of special programs in partnership with the private sector.
The annual allocation each year has been $400,000,000. The allocation is divided up by all fifty states and US possessions. QZABs are a temporary program, subject to reauthorization. The last authorization was for the calendar years 2006 and 2007. Authorizations must be used within two years following the year for which they were given, meaning that authorizations given in 2007 must be used by 2009. As of February 1, 2008, the President's budget did not include reauthorization of the QZAB program.
Public schools (K-12) located in empowerment zone
Empowerment zone
The Empowerment Zone Program consists of three US congressional designations. The Renewal Communities , Empowerment Zones and Enterprise Communities are highly distressed urban and rural communities who may be eligible for a combination of grants, tax credits for businesses, bonding authority and...
s or enterprise communities and public schools with 35% or more of their student body on the free and/or reduced lunch programs are eligible to participate.
In order for a school district to participate, a Zone Academy must be created. The Zone Academy must create programs to enhance the curriculum
Curriculum
See also Syllabus.In formal education, a curriculum is the set of courses, and their content, offered at a school or university. As an idea, curriculum stems from the Latin word for race course, referring to the course of deeds and experiences through which children grow to become mature adults...
, increase graduation rates, improve employment opportunities, and better prepare students for the workplace or higher education
Higher education
Higher, post-secondary, tertiary, or third level education refers to the stage of learning that occurs at universities, academies, colleges, seminaries, and institutes of technology...
.
Funds can be used for renovation and rehabilitation projects, as well as equipment purchases (including computers). QZABs can not be used for new building construction. The school district must obtain matching funds from a private-sector partner equal to at least 10% of the cost of the proposed project. All state and local laws applicable to bonds also apply to QZABs, including Section 148 of the IRS Code.
A qualified lender as defined by the law must purchase bonds. Qualified lenders can be insurance companies, some bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
s or other corporations actively engaged in lending (each qualifying entity is determined by the Internal Revenue Code governing each). The lender receives a tax credit
Tax credit
A tax credit is a sum deducted from the total amount a taxpayer owes to the state. A tax credit may be granted for various types of taxes, such as an income tax, property tax, or VAT. It may be granted in recognition of taxes already paid, as a subsidy, or to encourage investment or other behaviors...
in lieu of interest payments from the school. The IRS determines the amount of this tax credit.
"Pay to play" contributions are strictly prohibited. Set up fees, discounts on equipment purchased with QZAB funds, or contributions associated with the district’s construction projects are not eligible.
The renovation of Oak Ridge High School
Oak Ridge High School (Oak Ridge, Tennessee)
Oak Ridge High School is the public high school for Oak Ridge, Tennessee, enrolling grades 9 through 12. It was established in 1943 to educate the children of Manhattan Project workers. It currently has about 1500 students.-Founding and first location:...
in Oak Ridge, Tennessee
Oak Ridge, Tennessee
Oak Ridge is a city in Anderson and Roane counties in the eastern part of the U.S. state of Tennessee, about west of Knoxville. Oak Ridge's population was 27,387 at the 2000 census...
has been partially funded by $8 million in QZABs. Matching funds to qualify for QZAB funding were provided through private donations.
External links
- Qualified Zone Academy Bonds - Frequently Asked Questions, U.S. Department of Education website
- List of State's QZAB Allocations for 2007, 2008, & 2009
- U.S. Department of Education Guidance on The Qualified Zone Academy Bonds, January 1998
- California School Boards Association
- Other School Tax Credit Bonds