Senate Finance Committee chairman Max Baucus yesterday said that forthcoming economic stimulus legislation would allow state and local governments to issue additional private-activity bonds not subject to the alternative minimum tax for infrastructure projects.
The Montana Democrat also said he will oppose a bailout of automakers if it seeks to force the federal government to guarantee transit agencies' leaseback deals.
Baucus made the remarks at a press conference during which he detailed his agenda for the 111th Congress, which begins its session on Jan. 6.
The private-activity bond provisions would be part of a $350 billion tax package that would be included in the massive economic stimulus bill that lawmakers are drafting for Congress to approve and for President-elect Barack Obama to sign into law as soon as he is inaugurated.
Baucus also said he wants the stimulus bill to include many of the renewable energy tax incentives considered in earlier legislation.
In addition to that bill, Baucus said he hopes to push legislation for middle income tax cuts, including another "patch" to the AMT, as well as a health care reform bill. He also said that while the federal government will likely drive up the deficit in the coming months with costly legislation, the deficit should take a back seat to economic recovery measures right now. He said he will soon begin considering ideas to reduce the deficit in 2010.
Meanwhile, Baucus said he will oppose any automaker bailout bill that includes a provision that would require the federal government to guarantee so-called sale-in, lease-out and lease-in, lease-out deals that transit agencies entered into with private investors for equipment and that were approved by the Federal Transit Administration before 2006.
The proposed legislation, which the House was expected to vote on last night, contained SILO-LILO provisions that would benefit 31 transit agencies in 18 states. The agencies could face $2 billion to $4 billion in termination payments from the deals for equipment and rails that technically defaulted when the ratings of the insurers that guaranteed the deals were downgraded.
Under the provisions, the president would designate the federal government or some other entity to serve as guarantor for the deals. The guarantor would establish conditions for the guarantees no later than 14 days after enactment of the legislation. Guarantors would include "any guarantor, surety, and payment undertaker."
If the guarantor had to pay claims from the deals, the money would be recouped within three years from a "recoupment fee," but it is unclear if the fee would be levied against the lessee.
But both Baucus and Iowa Republican Sen. Charles Grassley, the ranking minority member of the Finance Committee, are opposed to the provisions because the Internal Revenue Service designated LILOs as abusive tax shelters in 2000 and ruled the same for SILOs in 2005.
Baucus said yesterday providing a federal guarantor for the deals would, "in effect, reinstate those scam transactions." He said he has spoken with Senate Banking Committee chairman Christopher Dodd, D-Conn. about the leaseback provisions in the automaker bailout bill. Dodd and House Financial Services Committee chairman Barney Frank, D-Mass., appear to support the provisions.