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Build America Bonds (BABs) are taxable governmental bonds that carry special tax credits and federal subsidies for either the bond issuer or the bondholder.
There are three types of BABs:
a. BABs (Tax Credit);
b. BABs (Direct Pay); and
c. Recovery Zone Economic Development Bonds, (RZEDBs).
Each type has a different subsidy, a different purpose for which it may be issued, and other varying rules.