Industrial revenue bond


An industrial revenue bond, also formerly known as an Industrial Development Bond, is a unique type of revenue bond organized by a state or local government. The bond issue is sponsored by a government entity but the proceeds are directed to a private, for-profit business.

Bond Structure

An IRB differs from traditional government revenue bonds, as the bonds are issued on behalf of a private sector business. IRBs are typically used to support a specific project, such as a new manufacturing facility.
The bond issue is created and organized by a sponsoring government, with the proceeds used by the private business. The business is responsible for bond repayment. The sponsoring government holds title to the underlying collateral until the bonds are paid in full. In some cases, this arrangement may provide a federal tax exempt status to the bonds, and many times a property tax exemption on the collateral. The sponsoring government is not responsible for bond repayment and the bonds do not affect the government’s credit rating. IRBs are desired as the private business receives a lower interest rate, a property tax exemption, and a long-term, fixed rate financing package.
Bond proceeds may be used for a variety of purposes, including land acquisition, building construction, machinery and equipment, real estate development fees, and the cost of bond issuance.

IRS Statute

In the United States IRBs are governed by IRS statute and include the following provisions: