In 2008, Congress first authorized Qualified Energy Conservation Bonds (QECBs) to finance renewable energy and energy efficiency projects. Later, the American Recovery and Reinvestment Act of 2009 (ARRA) increased the QECB volume cap by $2.4 billion to a total of $3.2 billion. Based on population, Texas was allocated a total bonding authority of $252 million. The state must award allocations before the authority can be utilized.
QECBs may be issued by state, local governments (including county) and tribal governments to finance qualified energy conservation projects. At least 70 percent of a state’s allocation must be used for governmental purposes, and the remainder may be used to finance private activity projects. There is no statutory deadline for eligible public entities to issue QECBs.
Issuers can choose to issue taxable bonds with a corresponding tax credit to the holders of the bonds or, as is more commonly done, elect to receive a direct cash payment from the U.S. Department of the Treasury in lieu of the allowance of the tax credit to the holders.
QECBs may only be issued for qualified conservation purposes as defined in section 54D of the U.S. Internal Revenue Code. Section 54D(f) defines the term “qualified conservation purpose” to mean any of the following.
For more information, please see this page on the Texas Bond Review Board’s website or call the board at (512) 463-1741.