Modernizing Agricultural and Manufacturing Bonds Act
The Modernizing Agricultural and Manufacturing Bonds Act aims to refresh and expand how qualified small issue bonds (a type of tax-exempt private activity bond) can be used to finance manufacturing facilities and certain agricultural ventures. Specifically, it broadens what counts as a manufacturing facility to include intangible property (such as IP rights) and related ancillary facilities, provided they are on the same site and do not exceed a 25% share of net proceeds. It also increases several bond-issuance limits (per project and per taxpayer) and adds an inflation-adjustment mechanism for those limits starting after 2025. In addition, the bill expands the private activity bond exemptions for first-time farmers, raising the dollar caps and aligning related limits with the expanded manufacturing-bond framework, while adjusting how farmland size is measured for eligibility. Overall, the bill seeks to modernize financing tools to support advanced manufacturing (including IP-driven activity) and first-time farming ventures, with inflation provisions to keep these limits current over time. Key provisions apply to bonds issued after enactment (with some sections explicitly applying to bonds issued after December 31, 2025). The changes could broaden the use of tax-preferred financing for modern, IP-backed manufacturing projects and for first-time agricultural ventures, potentially enabling larger projects and a wider group of eligible borrowers. The changes also preserve certain existing refunding protections and introduce inflation adjustments to keep bond limits in line with rising costs.
Key Points
- 1Manufacturing facilities broadened to include intangible property and related facilities.
- 2- A facility used for manufacturing tangible property, producing intangible property described in tax code, or functionally related facilities on the same site can be treated as a manufacturing facility.
- 3- Ancillary facilities on the same site can be included if they are directly related and not more than 25% of net bond proceeds.
- 4- Office space and refunding rules continue to apply with limitations similar to existing rules.
- 5Chapter 144 bond limits significantly raised and made inflation-adjustable.
- 6- The per-project or per-issue limit in 144(a)(4)(A)(i) increases from $10 million to $30 million.
- 7- Additional capital expenditures not counted toward other limits rise to $30 million.
- 8- The aggregate limit per taxpayer rises from $40 million to $120 million.
- 9- A new inflation-adjustment provision (starting after 2025) updates the $30M and $120M amounts annually, rounded to the nearest $100,000.
- 10Inflation adjustments codified for the manufacturing bond and related limits.
- 11- A new 144(a)(13) provision ties the 30M and 120M limits to the cost-of-living adjustment, starting in calendar year 2026, ensuring these limits keep pace with inflation.
- 12Expansion of private activity bond exceptions for first-time farmers.
- 13- The dollar limitation for first-time farmers under 147(c)(2)(A) increases from $450,000 to $1,000,000.
- 14- The separate lower dollar limitation on used farm equipment is repealed.
- 15- The related small-issue bond limit in 144(a)(11)(A) is increased from $250,000 to $1,000,000.
- 16- Inflation adjustments apply to these amounts after 2026; the cross-reference to inflation is added for the inflation calculation.
- 17Farmland size measurement shifted to average rather than median.
- 18- For purposes of eligibility under the expanded first-time farmer rules, substantial farmland is determined using the average farm size rather than the median size.
- 19Effective dates and transition.
- 20- The amendments generally apply to bonds issued after the enactment date.
- 21- The changes specific to first-time farmer provisions apply to bonds issued after December 31, 2025.