A new bill aims to provide the first update in nearly 40 years to the Internal Revenue Service’s rules for Industrial Development Bonds for small and mid-size manufacturers and First-Time Farmer Bonds, also known as aggie bonds.
Introduced by Sens. Sherrod Brown, D-Ohio, and Joni Ernst, R-Iowa, the Modernizing Agricultural and Manufacturing Bonds Act would increase access to capital for small and mid-size manufacturers by tripling the bond size limit from $10 million to $30 million and indexing it to inflation. In addition, it allows up to 25% of bond proceeds to be used for facilities that are located on the same site or ancillary to a manufacturing facility.
Council of Development Finance Agencies President and CEO Toby Rittner said in a statement, “In the wake of the COVID-19 pandemic and amid increased global economic competition, it has become clear that investments in farmers and manufacturers are necessary to shore up the United States’ supply chains."
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The bill also aligns aggie bond rules with those of USDA’s Farm Service Agency, “making it easier for lending to provide affordable capital to first-time farmers,” according to the senators.
David Howard, policy development director at the National Young Farmers Coalition, said access to land is the top issue facing new farmers today, which also limits their ability to access capital.
“Aggie bonds provide a win-win mechanism that affords tax free interest to private agricultural lenders on lower interest loans made to first-time farm owners. This proposed legislation will make several commonsense updates to this important credit accessibility tool,” Howard said.
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