Reimbursement
Use of bond proceeds to pay project costs prior to the issuance of bonds. Reimbursement raises questions related to whether the reimbursement qualifies as an expenditure of tax-exempt bond proceeds for federal income tax purposes.
bond-basics
Official Action / Intent
The evidence of Official Intent of the Issuer (or the Conduit Borrower if it is a 501(c)(3) Organization) to Reimburse expenditures with proceeds of the Bonds, including a general functional description of the project to which the reimbursement relates and the maximum Principal amount of obligations expected to be issued for the project. Sometimes called an intent resolution, a declaration of intent, or an Inducement Resolution, it is required under the Code if the Issuer (or the Conduit Borrower if it is a 501(c)(3) Organization) is to be Reimbursed for certain expenditures paid from non-borrowed funds prior to the issue date of the Bonds. Note that a Conduit Borrower that is not a 501(c)(3) Organization cannot be the party that adopts the evidence of Official Intent. In such a case, the Conduit Issuer must adopt the Official Intent.
The action must be adopted not more than sixty days after the Reimbursed expenditure, and the reimbursement with Bond proceeds must occur not later than eighteen months after the later of (i) the date on which the original expenditure was paid, or (ii) the date on which the property was placed in service (or abandoned).
Dive Deeper on Tax Issues
Learn more about how various aspects of tax law intersect with municipal securities.
See Also
Start with the Bond Basics
Hundreds of Terms and Concepts
Notice of Sale
The notice published by an issuer to advertise an upcoming sale of bonds in a competitive sale.