Build America Bonds (BABs) are taxable municipal bonds issued by state and local governments to help fund infrastructure projects. Congress initially authorized BABs in the Recovery Act of 2009. These tax-exempt bonds are issued to states and municipalities to help finance infrastructure investment in the U.S. BABs are a component of the American Recovery and Reinvestment Act of 2009, which was signed into law by President Barack Obama on February 17, 2009. 2009 and made effective as of May 22, 2009.The U.S. Treasury Department is the issuer of BABs. The program was designed to help states and municipalities finance major construction projects by allowing them to issue tax-exempt bonds in order to access lower interest rates. BABs are similar to Recovery Zone Facility Bonds issued by the U.S. Treasury Department to help finance projects in designated areas of the U.S. with high levels of unemployment.To be considered for a BAB allocation, a state or local government must have its project approved by the United States Department of Transportation (U.S. DOT). Projects that have been approved include construction upgrades for roads, bridges, ports, airports and other public transportation.
