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Congress provided authority to issue Qualified Zone Academy Bonds (QZAB) in Section 226(a) of the Taxpayer Relief Act of 1997 to help strengthen schools serving large concentrations of low-income families. The federal government subsidizes these 15-year (max) bonds by providing tax credits to bondholders that are approximately equal to the interest that states and communities would ordinarily pay the holders of taxable bonds. The federal government allocates the authority to issue these bonds to states based on their proportion of the U.S. population living below the poverty line. States may directly issue the bonds on behalf of eligible schools or they may sub-allocate authority to issue the bonds within the state. Issuers are required to have authority under state and local law to incur this additional debt.

QZAB – All 2015 and 2016 authorization has been allocated.  No future authorizations have been received at this time.

For additional information, please contact Kimberly Beachy at 217-785-8779.​

Eligibility

These bonds may be used on behalf of schools or programs that meet the following eligibility criteria:

These schools:

  1. must have located in an empowerment zone or an enterprise community; or
  2. have at least 35 percent of their students eligible for free or reduced-cost lunches under the National School Lunch Act.

Eligible schools must have an education program designed in cooperation with business and receive a private business contribution that is not less than 10 percent of the proceeds of the bond.

Eligible schools must have an education plan that is approved by its school district and its students must be subject to the same standards and assessments as other students in the district.​​

Purpose

Qualified Zone Academy Bond proceeds may be used for:

  1. renovating school buildings;
  2. purchasing equipment;
  3. developing curricula; and
  4. training school personnel.

The proceeds may not be used for new construction.

  • Nationally authorizes dollars of locally issued bonds to be designated as "Zone Academy Bond"
    • Such bonds provide federal tax credits to holders instead of paying interest
    • Eligible holders are limited to:
    • Banks
    • Insurance companies
    • Other companies that normally make loans
  • State Education Agency is assigned responsibility of allocating authorized amounts among eligible schools
  • Public Schools designated as "Zone Academies" are eligible.
    • Must be located in an "Empowerment Zone" or an "Enterprise Community" or have at least 35% of students eligible for Free or Reduced Lunch.
    • Curriculum must be a product of "public private partnership"
    • School must be provided "substantial business support" (i.e. in-kind contributions of at least equal to 10% of amount borrowed).
  • Issuing authorities must:
    • Approve Zone Academy Plan
    • Issue bonds on behalf of Academy
    • Issue information tax returns to purchasers​

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