WASHINGTON - Senate Finance Committee leaders yesterday announced a bipartisan agreement on a tax package that would extend expired tax provisions, patch the alternative minimum tax, provide bond-related incentives for alternative energy, and create new categories of tax-credit and tax-exempt bonds for Midwestern states hit by disasters.
The package, which was put together by Montana Democrat Max Baucus and Iowa Republican Chuck Grassley, is expected to be voted on by the full Senate this week. If approved by the Senate, it would then have to be reconciled with an extenders bill approved by a vote of 236-189 in the House late Tuesday.
The Senate measure would authorize the creation of a new category of qualified private-activity bonds, called "Midwestern disaster area bonds," that could be issued by nine states in the Midwest outside of their PAB volume caps through Dec. 31, 2010. Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, and Wisconsin could each issue these bonds in an amount up to $1,000 times the portion of their state population located in a disaster area, to finance projects that would provide relief. The disasters would include tornadoes, severe storms and flooding. These bonds are expected to cost $2.203 billion in lost revenue over 10 years.
In addition, the package would authorize Midwestern disaster states to issue debt service tax-credit bonds, which would provide the holders with tax credits in lieu of interest payments, so that states could give assistance to communities unable to meet their debt service payments as a result of disasters.
A state could issue up to $100 million of these tax-credit bonds if it had at least 2 million persons in a disaster area, and up to $50 million if it had a population of 1 million to 2 million in a disaster area. This provision is estimated to cost $152 million in lost revenue over 10 years.
The package includes a one-year patch of the alternative minimum tax for 2008, for a potential revenue loss of $61.817 billion over 10 years, which the senators do not expect to be offset.
The measure also includes an additional $400 million of state and local qualified zone academy bonds for 2008 and 2009, at an estimated cost of $379 million over 10 years.
Further, two provisions would ease restrictions on mortgage revenue bonds for disaster victims.
The energy portion of the package would authorize $800 million of new clean renewable energy bonds to finance facilities that generate wind, biomass, geothermal, qualified hydropower, landfill gas, and other renewable energies. The CREBs would be split evenly between public power providers, electric cooperatives, and governments at the state, local and tribal level. The bill would extend the termination date for existing CREBs by one year. The estimated cost of the provision is $267 million over 10 years.
The Senate agreement also would create a new category of tax-credit bonds to finance state and local government projects to reduce greenhouse emissions. The $800 million in qualified energy conservation bonds would be allocated to states, municipalities and tribal governments. This proposal is estimated to cost $267 million over 10 years.
In addition, the package would extend existing authority through 2012, but not provide additional funding, for qualified green building and sustainable design project bonds. The cost estimate is $45 million over 10 years.
The energy tax bill that was passed in the House on Tuesday would create a new category of "energy security" tax-credit bonds and would authorize $1.75 billion of them for state governments to finance installation of natural gas fuel pumps at retail gas stations.
In addition, the House legislation would authorize $2.625 billion of qualified energy conservation tax-credit bonds that state and local governments could use to pay for greenhouse gas emissions reduction projects.
The House measure also would authorize $1.75 billion of clean renewable energy bonds and would extend them through 2012, as proposed in the Baucus-Grassley agreement. Those bonds are currently set to expire at the end of fiscal year 2009.
