Industrial Development Revenue Bonds
The Mississippi Business Finance Corporation (MBFC) is a public, non-profit corporation with the mission of coordinating a variety of state resources to assist business and industry in obtaining bond financing. The Industrial Revenue Bond Program (IRB) reduces interest costs of financing projects for companies through the issuance of both taxable and tax-exempt bonds. Sales tax exemptions are granted for this type of public financing. Other significant tax incentives may also be available, including state income tax offsets offered through the Rural Economic Development Assistance Program and ad valorem exemptions.
Most types of commercial businesses are eligible for IRB financing. Proceeds of the bond issue may be used for the acquisition and construction of real property, machinery and equipment, capitalized interest and limited bond issuance expenses.
Only bonds rated investment grade or better will be issued by MBFC. This typically requires that the company obtain a letter of credit from a commercial bank.
Mississippi Small Enterprise Development Finance Program
Through the Mississippi Small Enterprise Development Finance Program (SED), the Mississippi Business Finance Corporation may provide tax exempt bond financing for smaller projects through the issuance of bonds on a composite basis. The costs of issuing the bonds are prorated to each company participating in the issue.
Proceeds may be used to finance fixed assets such as land, buildings and new machinery and equipment. Companies eligible to participate in this program are manufacturers, processors and in certain areas of the state, other industrial enterprises. The company must provide a letter of credit from a qualified financial institution in support of the bonds.
This type of financing provides below market interest rates and a fixed term. The typical project size is from $350,000 to $4,000,000. Sales tax exemptions are granted for this type of public financing. Other significant tax incentives may also be available, including state income tax offsets offered through the Rural Economic Development Assistance Program and ad valorem exemptions.
Local Industrial Development Revenue Bonds
Local political entities in Mississippi, including counties, supervisors' districts, incorporated cities and towns, have the authority to issue tax-exempt and taxable industrial development revenue bonds to finance new or expanding industrial enterprises. There is no election approval required unless 20% or more of the entity's electors object to the bond issuance in writing. Ownership of a bond-financed facility is retained by the issuing political entity, which leases it to a company for rental sufficient to pay the annual principal and interest on bonds.
Industrial development revenue bonds can finance up to 100% of total project costs, including land, buildings, fixtures, new equipment, new machinery and professional fees.
Facilities financed by such bonds are allowed up to a ten-year property tax exemption, in addition to being exempt from most sales and use taxes on project related purchases during construction.
General Obligation Bonds
Local political entities have the authority to issue general obligation bonds for the purpose of acquiring sites and constructing facilities for lease to new or expanding industries with rentals sufficient to amortize the debt service on the bonds.
General obligation bonds carry the full faith and credit of the issuing political entity. As title to the property remains with the political entity issuing the bonds, no taxes, except school taxes, are assessed on the improvements made with the proceeds of such bonds. An agreement is negotiated between the industry and the political entity covering the details of the issuance of the bonds and the lease.