SECTION 6. ALLOCATIONS OF

RECOVERY ZONE BOND VOLUME CAP

.01 VOLUME CAP DESIGNATIONS IN GENERAL

Sections 1400U–2(b)(2) and 1400U–3(b)(2) provide generally that the maximum face amount of the applicable type of Recovery Zone Bonds designated for issuance by an issuer cannot exceed the amounts of volume cap for the applicable Recovery Zone Bonds allocated to such issuer under § 1400U–1. For this purpose, these designations, including associated determinations of qualified economic development purposes, may be made by an issuer in any reasonable manner as it shall determine in good faith in its discretion, taking into account the special

sues, at the same time and in the same manner as required under § 149(e), with modifications as described below. Issuers of Recovery Zone Facility Bonds should complete Part II of Form 8038 by checking the box on Line 11q (Other), writing “Recovery Zone Facility Bonds” in the space provided for the bond description, and entering the issue price of the Recovery Zone Facility Bonds in the Issue Price column. For purposes of this notice, the term “issue” has the meaning used for tax-exempt bond purposes in § 1.150–1(c).

.04 ELIGIBLE ISSUERS IN GENERAL AND ALLOCATIONS OF VOLUME CAP TO ULTIMATE BENEFICIARIES

Eligible issuers of Recovery Zone Bonds include States, political subdivisions as defined for purposes of § 103, and entities empowered to issue bonds on behalf of any such entity under rules similar to those for determining whether a bond issued on behalf of a State or political subdivision constitutes an obligation of that State or political subdivision for purposes of § 103 and § 1.103–1(b) of the Income Tax Regulations. Further, eligible issuers include otherwise-eligible issuers in conduit financing issues (as defined in § 1.150–1(b)). An eligible issuer may issue Recovery Zone Bonds based on a volume cap allocation received by the eligible issuer itself or by a conduit borrower or other ultimate beneficiary of the issue of the bonds. In all events, the eligible costs for qualified economic development purposes or recovery zone property, as applicable, financed with the proceeds of an issue of Recovery Zone Bonds under §§ 1400U–2 or 1400U–3, respectively, must relate to any such purpose or property that is located within, or attributable to, both the jurisdiction of the issuer of the bonds and the jurisdiction of the entity authorized to allocate volume cap to an issue of bonds for the financing of such purpose or property.

Entities authorized to allocate volume cap to ultimate beneficiaries consist of States (with respect to allocations waived or deemed waived by any county or large municipality), counties, and large municipalities (as defined in § 1400U–1(a)(3)(B)) that receive volume cap allocations under § 1400U–1(a)(3)(A). Such States, counties, and large municipalities may use such

volume cap themselves for eligible costs or may allocate such volume cap received to ultimate beneficiaries in any reasonable manner as they shall determine in good faith in their discretion for use for eligible costs for qualified economic development purposes or recovery zone property, as applicable. In the event that a county or large municipality that receives an allocation of volume cap under § 1400U–1(a)(3)(A) of Recovery Zone Economic Development Bonds or Recovery Zone Facility Bonds does not possess substantial taxing, eminent domain, and police powers, any entity the jurisdiction of which includes such county or large municipality may issue bonds and designate such bonds as Recovery Zone Economic Development Bonds or Recovery Zone Facility Bonds, as applicable, on behalf of, and for the benefit of, such county or municipality, subject to the applicable volume cap limitations for those Recovery Zone Bonds allocated to such county or large municipality. In such case, the proceeds of an issue of Recovery Zone Economic Development Bonds or Recovery Zone Facility Bonds under §§ 1400U–2 or 1400U–3, respectively, must be allocated to eligible costs for qualified economic development purposes or recovery zone property, as applicable, that is located within, or attributable to, both the jurisdiction of the issuer of the bonds and the jurisdiction of the county or large municipality that received the volume cap allocation under § 1400U–1(a)(3)(A). Thus, for example, a county or large municipality that received a volume cap allocation under § 1400U–1(a)(3)(A) may issue bonds and designate them as Recovery Zone Economic Development Bonds or Recovery Zone Facility Bonds, as applicable, for use of that volume cap by an ultimate beneficiary (including such county or large municipality itself or another entity) or another eligible issuer may issue bonds and designate them as Recovery Zone Economic Development Bonds or Recovery Zone Facility Bonds, as applicable, for use of that volume cap by an ultimate beneficiary (including such county or municipality or another entity), based on an allocation by such county or large municipality of that volume cap to an ultimate beneficiary. In all events, the proceeds of the issue must be used to finance eligible costs for qualified economic development

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the term “large municipality” means a municipality with a population of more than 100,000. For purposes of determining the local employment decline under § 1400U–1(a)(3), the employment decline of any county or large municipality is determined in the same manner as the determination of the State employment decline under 1400U–1(a)(2), except that in the case of a municipality any portion of which is in a county, such portion is treated as part of such municipality and not as part of such county.

.03 STATE ALLOCATIONS OF RECOVERY ZONE BOND VOLUME CAP

Pursuant to § 1400U–1(a), the $10 billion national volume cap for Recovery Zone Economic Development Bonds and the $15 billion national volume cap for Recovery Zone Facility Bonds under §§ 1400U–2 and 1400U–3, respectively, are allocated among the States as follows:

Recovery Zone Facility Bond

Allocations (in dollars)

rules for eligible issuers under Section 5.04 of this notice.

.02 VOLUME CAP ALLOCATIONS IN GENERAL

Section 1400U–1(a)(1)(A) provides that, subject to § 1400U–1(a)(1)(B) (relating to minimum allocations), generally, the Secretary shall allocate the $10 billion national volume cap for Recovery Zone Economic Development Bonds and the $15 billion national volume cap for Recovery Zone Facility Bonds among the States in the proportion that each State’s 2008 State employment decline bears to the aggregate of the 2008 State employment declines for all of the States. Section 1400U–1(a)(1)(B) provides that the Secretary shall adjust the allocations under § 1400U–1(a)(1)(A) for any calendar year for each State to the extent necessary to ensure that no State receives less than 0.9 percent of the national volume cap for Recovery Zone Economic Development Bonds and 0.9 percent of the national volume cap for Recovery Zone Facility Bonds.

Section 1400U–1(a)(2) provides that for purposes of § 1400U–1(a), the term “2008 State employment decline” means, with respect to any State, the excess (if any) of (A) the number of individuals employed in such State determined for December 2007, over (B) the number of individuals employed in such State determined for December 2008. The volume cap allocations provided pursuant to this notice are based on Local Area Unemployment Statistics (“LAUS”) data for December 2007 and December 2008 released by the United States Bureau of Labor Statistics. See generally http://www.bls.gov/lau/home.htm .

Section 1400U–1(a)(3)(A) provides generally that each State with respect to which an allocation is made under 1400U–1(a)(1) is required, without discretion, to reallocate such allocation among the counties and large municipalities in such State in the proportion that each county’s or municipality’s 2008 employment decline bears to the aggregate of the 2008 employment declines for all the counties and municipalities in such State. For purposes of § 1400U–1(a)(3)(A),

State Recovery Zone Economic

Development Bond Allocations (in dollars)

Alabama 244,676,000 367,014,000 Alaska 90,000,000 135,000,000 Arizona 90,000,000 135,000,000 Arkansas 90,000,000 135,000,000 California 806,225,000 1,209,338,000 Colorado 99,018,000 148,527,000 Connecticut 90,000,000 135,000,000 Delaware 90,000,000 135,000,000 District of Columbia 90,000,000 135,000,000 Florida 538,485,000 807,727,000 Georgia 355,785,000 533,677,000 Hawaii 90,000,000 135,000,000 Idaho 90,000,000 135,000,000 Illinois 666,972,000 1,000,457,000 Indiana 313,081,000 469,621,000 Iowa 90,000,000 135,000,000 Kansas 90,000,000 135,000,000 Kentucky 97,120,000 145,681,000 Louisiana 90,000,000 135,000,000 Maine 90,000,000 135,000,000 Maryland 208,860,000 313,291,000 Massachusetts 222,676,000 334,013,000 Michigan 773,050,000 1,159,575,000 Minnesota 132,154,000 198,231,000 Mississippi 90,000,000 135,000,000 Missouri 229,143,000 343,715,000

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State Recovery Zone Economic

Development Bond Allocations (in dollars)

Recovery Zone Facility Bond

Allocations (in dollars)

Montana 90,000,000 135,000,000 Nebraska 90,000,000 135,000,000 Nevada 90,000,000 135,000,000 New Hampshire 90,000,000 135,000,000 New Jersey 251,104,000 376,655,000 New Mexico 90,000,000 135,000,000 New York 370,098,000 555,147,000 North Caroline 418,154,000 627,231,000 North Dakota 90,000,000 135,000,000 Ohio 422,637,000 633,955,000 Oklahoma 90,000,000 135,000,000 Oregon 103,450,000 155,175,000 Pennsylvania 154,008,000 231,012,000 Rhode Island 100,882,000 151,322,000 South Carolina 115,041,000 172,562,000 South Dakota 90,000,000 135,000,000 Tennessee 231,417,000 347,126,000 Texas 90,000,000 135,000,000 Utah 90,000,000 135,000,000 Vermont 90,000,000 135,000,000 Virginia 104,396,000 156,595,000 Washington 90,000,000 135,000,000 West Virginia 90,000,000 135,000,000 Wisconsin 158,811,000 238,217,000 Wyoming 90,000,000 135,000,000

American Samoa 90,000,000 135,000,000 Guam 90,000,000 135,000,000 Northern Marianas 90,000,000 135,000,000 Puerto Rico 92,757,000 139,136,000 US Virgin Islands 90,000,000 135,000,000

Total 10,000,000,000 15,000,000,000

a document regarding the Recovery Zone Bond volume cap allocations being posted on the IRS’s website at the following web address: http://www.irs.gov/taxexempt- bond/index.html under the heading in the index entitled “IRS Releases Guidance on ARRA Bond Provisions,” to be available on the same date that this notice is released publicly. Stated differently, these local suballocations will be accessible by going to the IRS website at http://ww.irs.gov, then clicking on the heading “Tax-exempt Bond Community” in the top right corner, then clicking on the heading in the index entitled “IRS Releases Guidance on ARRA Bond Provisions,” and then clicking on the subheading regarding the Recovery Zone Bond volume cap allocations, starting on the same date that this notice is released publicly.

.04 LOCAL SUBALLOCATIONS OF RECOVERY ZONE BOND VOLUME CAP AMONG COUNTIES AND LARGE MUNICIPALITIES

The Treasury Department and the IRS recognize that the required local suballocations of the national volume cap for Recovery Zone Bonds among counties and large municipalities impose administrative burdens for the States and involve mandatory local suballocations without State discretion. Accordingly, the Treasury Department and the IRS undertook to determine these required local suballocations. For purposes of these local suballocations among counties and large municipalities, certain county-equivalent entities (including independent cities that are not otherwise located within counties, parishes, boroughs, and similar entities) are treated as counties in the same manner that the

Bureau of Labor Statistics treats such entities as county-equivalent entities in its employment data. This undertaking to provide local suballocations is intended to facilitate prompt availability of Recovery Zone Bonds as a source for State and local governmental borrowing at lower borrowing costs to promote job creation and economic recovery in areas particularly affected by employment declines.

Pursuant to § 1400U–1(a)(3), the State volume caps of the $10 billion national volume cap for Recovery Zone Economic Development Bonds and the $15 billion national volume cap for Recovery Zone Facility Bonds under §§ 1400U–2 and 1400U–3, respectively, are reallocated locally among the counties and large municipalities within the States (except that no such local reallocations are being provided for the Possessions of the United States (see Section 6.05 of this notice below)) in

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under both § 30B and § 30D, the amount of the credit allowed under § 30B is the amount of the otherwise allowable credit under that section reduced (but not below zero) by the amount of the credit allowed under § 30D. In addition, if a vehicle qualifies for a credit under § 30D, no credit is allowed for that vehicle under § 30.