Build America Bonds (BABs)

Build America Bonds are a type of taxable municipal bond created under the American Recovery and Reinvestment Act of 2009. BABs were issued during 2009 and 2010 for the same purposes as tax-exempt municipal bonds. The two types of BABs are Direct Payment, where the issuer receives a 35% subsidy from the U.S. Treasury for interest paid on the bonds, and Tax Credit, where bondholders receive a tax credit for 35% of the interest on the bonds.