debt issued by a municipality to finance plants and facilities that are then leased to private industrial businesses; also called industrial revenue bond. The subsequent lease payments are used to service the bonds. The intent of IDBs is to attract private industry to promote local economic development. IDBs appealed to investors because they were exempt from federal income taxes. Exemption for IDBs is being phased out. A new category of tax-exempt bonds, called qualified redevelopment bonds, is to be used to finance land acquisition and redevelopment in blighted areas.

type of municipal revenue bond issued to finance fixed assets that are then leased to private firms, whose payments amortize the debt. IDBs were traditionally tax-exempt to buyers, but under the tax reform act of 1986 , large IDB issues ($1 million plus) became taxable effective August 15, 1986, while tax-exempt small issues for commercial and manufacturing purposes were prohibited after 1986 and 1989 respectively. Also, effective August 7, 1986, banks lost their 80% interest deductibility on borrowings to buy IDBs.

obligation issued where the proceeds are used in the trade or business of a nonexempt person and the payment of the principal or interest is secured by an interest in, or derived from payment with respect to, property or borrowed money used in a trade or business. State and local government bond interest is exempt from federal income tax; however, interest from IDBs is taxable unless certain requirements are met to qualify the bonds for tax exemption.