Tribal governments in the United States need access to capital to fund government buildings, schools, medical facilities and other infrastructure, and tax-exempt financing is one solution that can bring these projects to completion.
Tribal Economic Development Bonds demonstrated an investment demand of at least $4.36 billion, according to the Internal Revenue Service.
Teamwork approach for tribal government needs
To create tribal tax-exempt financing solutions, KeyBank’s Native American group teams up with the municipal financing experts at Key Government Finance. By placing all such financings into Key's tax-exempt portfolio as “direct placements, or loans,” Key is able to offer turnkey, cost-effective solutions to support tribal economies.
When it comes to tribal debt issuance, tribes can issue tax-exempt debt, but only if proceeds are used in the “exercise of an essential governmental function.”
Additionally, interest earnings on tax-exempt tribal debt may be excluded from income, which decreases borrowing costs for the nation (compared to conventional loan interest rates).
Other features include:
- The lender or investor does not pay federal income tax on interest received from a tribal issuer
- The tribal issuer receives low interest rates, typically 1% to 2%
- Compared to taxable debt, tax-exempt debt leverages a different investor pool
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