Congress OKs Stopgap Bill, Extensions Wait

WASHINGTON — Lawmakers early Thursday approved a stopgap measure that would fund the federal government at current levels until Dec. 3, before breaking for an election recess. Their action sets the stage for a lame-duck session during which municipal market participants hope they will take up legislation to extend Build America Bonds and other expiring or expired bond-related programs authorized by the stimulus law.

Work on the continuing resolution continued late into Wednesday night before it was passed by both the House and Senate just after midnight. The House approved the bill by 228 to 194 after the Senate passed it 69 to 30.

Once the CR is signed into law by President Obama, it will buy Congress just over two months to pass another continuing resolution or individual appropriations bills to fund the federal government in fiscal 2011, which starts Friday. Lawmakers thus far have failed to pass any of the 12 appropriations bills that typically fund government operations.

During the lame-duck session, muni market participants will focus their attention on a so-called extenders package that would extend several stimulus law bond provisions beyond their expiration dates at the end of the year.

Similar extenders bills have been introduced in the Senate and the House by top tax-writers, and the House previously passed the provisions as part of a larger bill that ultimately was not approved, so market participants are hopeful that the tax package can be swiftly dealt with by the lawmakers when they return to work.

The extenders bill could even be wrapped into a tax bill expected to be introduced to extend all or some of the tax cuts from the George W. Bush administration.

“The main hope, post-election, is that once the results have [been] sorted out there may be more interest in cooperation from both parties,” said Charles Samuels, a lawyer with Mintz Levin Cohn Ferris Glovsky & Popeo PC and counsel to the National Association of Health and Educational Facilities Finance Authorities. “On taxes, perhaps an agreement on extending the so-called Bush individual tax cuts could include the extenders.”

Both pending extenders bills would allow the BAB program to continue for one to two years at reduced subsidy levels. The bill in the Senate would only extend it for one year, while the House measure has a two-year extension. Under the Senate bill, issuers selling BABs in 2011 would receive subsidy payments equal to 32% of interest costs, while the House bill contains that same rate and would lower it to 30% for BABs sold in 2012.

Both bills also would extend by one year several other stimulus provisions set to expire at the end of the year, including increasing the small-issuer exemption for bank-qualified bonds to $30 million from $10 million, the alternative minimum tax exemption for all tax-exempt bonds, and the two recovery zone bond programs.

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