WASHINGTON — President Obama Thursday signed a $17.6 billion jobs bill that enables municipal issuers to receive direct, Build America Bond-style payments from four types of tax-credit bonds.
But Obama said the new law is “by no means enough” and “there’s a lot more that we’re going to need to do,” just one day after the House Ways and Means Committee cleared a second jobs bill.
That bill would extend the BAB program through April 1, 2013, at a reduced subsidy rate. It also would exempt all private-activity bonds issued through 2011 from the alternative minimum tax, exempt all PABs sold for water and sewer facilities from state volume caps, allow tribal governments to sell such PABs, and double the size of recovery zone bond programs to $50 billion.
“With this law, we’ll make it easier for [state and local governments] to raise the money they need to do what they want to do by using a model that we’ve called Build America Bonds — one of the most successful programs in the Recovery Act,” Obama said.
The Hiring Incentives to Restore Employment Act allows issuers of qualified school construction bonds, qualified zone academy bonds, new clean renewable energy bonds and qualified energy conservation bonds to opt to receive direct subsidy payments from the federal government instead of offering investors a tax credit.
The bonds, originally created as taxable tax-credit bonds, have struggled to gain a foothold in the muni market, in part because the recession lowered investor interest in tax credits.
Issuers of the school bonds that opt for the direct-pay mode will receive payments equal to the lesser of the actual interest rate of the bonds or the tax-credit rate for muni tax-credit bonds, which the Treasury sets daily. Issuers of the energy bonds will receive payments equal to 70% of that amount.
Those rates mirror the amount of tax credits issuers can provide investors for each program under the tax-credit mode.
The HIRE Act also extends authorizations for highway and transit programs through the end of the calendar year and transfers $19.5 billion in interest foregone since 1998 from the general fund to the Highway Trust Fund, which will keep it solvent into next year.
The jobs bill approved by the House’s tax-writing committee Wednesday would extend BABs through April 1, 2013, with a gradual lowering of the current 35% direct-pay subsidy rate to 33% in 2011, 31% in 2012, and 30% for the first three months of 2013.