May 2, 2023

Tax-Exempt Bonds: A Quick Guide to Industrial Development Bonds

Industrial Development Bonds (“IDBs,” also referred to as qualified small issue bonds or small issue manufacturing bonds) are a type of qualified private activity bond under the Internal Revenue Code of 1986, as amended (the “Code”).  For an explanation of the financing structure and restrictions common to all qualified private activity bonds, see “Tax-Exempt Bonds: A Quick Guide to Qualified Private Activity Bonds.”

IDBs are available to help private parties finance the construction, expansion, or renovation of privately-owned manufacturing and other types of facilities that are designated as eligible for tax-exempt financing under the Code.  A type of “conduit” bond, IDBs may be issued by certain governmental units, with the bond proceeds then loaned to the private borrower entity.  Various types of issuers may have the authority to issue IDBs pursuant to state and local law; in Washington, IDBs will often be issued through the Washington Economic Development Finance Authority (“WEDFA”).  More information about WEDFA and its application process is available at its website,

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