Skip to Main Content
Services Talent Knowledge
Site Search


Our attorneys stay on top of changes in legislation, agency regulations, case law, and industry trends—then craft timely legal alerts to keep clients up to date on legal developments important to their business.

February 13, 2013

The Impending Sequester And Direct-Pay Bonds

As part of the American Taxpayer Relief Act of 2012 enacted last month, a 2013 sequester order for $85 billion in spending cuts is set to be issued on March 1 and implemented on March 27.

Sequester is the formal term for mandatory cuts to federal programs. Essentially, Congress had authorized certain money to be spent but is now prohibiting such money from being spent. Sometimes called "across the board" cuts, spending accounts are divided into four categories, and within each category programs must be cut by the same percentage.

Direct-pay bonds are in a category currently estimated to be cut by 5.3 percent. Direct-pay bonds include the Build America Bonds (which were issued under the American Recovery and Reinvestment Act), qualified school construction bonds, qualified zone academy bonds, qualified energy conservation bonds and new clean renewable energy bonds.

In practice, the cuts would not be "across the board." Payments that have already been made cannot be cut, so those payments not yet made would then have to be cut by a greater amount so that the set percentage cut for that category is met. As a result, the amount by which an issuer's payment would be cut depends on when that issuer and all other issuers receive their payments and further depends on when the Office of Management and Budget issues the sequester order and the Treasury Department's guidance on how the order will be implemented. Those issuers who would receive payments between March 1 and September 30 can expect payment cuts above 5.3 percent.

On February 6, President Obama called on Congress to pass a budget by March 1 that would permanently replace the sequester or to take action to put together a smaller package of spending cuts and tax reforms to delay the sequester until a permanent solution can be found.

The expiration date for the continuing resolution that funds the operation of the government is also set for March 27, so it is also possible that the cuts in the sequester order will be renegotiated during March.

If you would like further information or have any questions with respect to the impact of a sequester on direct-pay bonds, please feel free to contact Connie Cahill at (518) 429-4296 or, Garrett DeGraff at (518) 429-4235 or, Jean Everett at (202) 582-0601 or, or Susan Katzoff at (315) 425-2880 or


Click here to sign up for alerts, blog posts, and firm news.

Featured Media


OMIG's Abbreviated Self-Disclosure Process: What Providers Need to Know


Massachusetts High Court Ruling Raises Standard of Care, Stakes for Broker-Dealers


New York State Passes Law Barring Employers From Mandating Employee Attendance at Captive Audience Meetings


Second Department Declines to Expand Scope of Arons


NYS DOH Issues New Notice Requirement for Facility Fees


Massachusetts Proposes Adoption of 2022 UCC Amendments for Hybrid Transactions

This site uses cookies to give you the best experience possible on our site and in some cases direct advertisements to you based upon your use of our site.

By clicking [I agree], you are agreeing to our use of cookies. For information on what cookies we use and how to manage our use of cookies, please visit our Privacy Statement.

I AgreeOpt-Out