WASHINGTON — The Senate voted 81 to 19 Wednesday on tax legislation that contains neither an extension of the Build America Bond program nor the increased small issuer limit for bank-qualified bonds, both of which expire Dec. 31.
The legislation contains only a few municipal bond-related provisions. It will be sent to the House for a vote, which could come as soon as tonight.
The Senate vote came after lawmakers rejected three motions for suspension of the rules to allow amendments, but none of the amendments dealt with bonds. An amendment to extend the BAB program for one year at a 32% subsidy rate, filed by Sen. Ron Wyden, D-Ore., was withdrawn before voting began.
The legislation was introduced Thursday night by Senate Majority Leader Harry Reid, D-Nev., after Republicans, the Obama administration, and some Democrats agreed to it. It would extend the Bush administration tax cuts for two years and unemployment benefits for 13 months, and reinstate the inheritance tax, but with an exemption for estates of $5 million or more for individuals.
The legislation contains few bond provisions and would not extend other muni bond-related tax incentives such as the alternative minimum tax exemption for private-activity bonds, recovery zone bonds, or the authority for federal home loan banks to issue letters of credit for tax-exempt debt.
The bill would extend qualified zone academy bonds through 2011 and authorize $400 million more for them, but only as tax-credit bonds without any direct-pay option similar to BABs.It would not prevent muni issuers from continuing to sell qualified school construction bonds, qualified energy conservation bonds, and clean renewable energy bonds already allocated with the direct-pay option, even after 2010.
QSCB issuers get payments from the federal government equal to the lesser of the bonds’ actual interest rate or the tax credit rate. QECB and CREB issuers get payments equal to 70% of their interest cost.
The bill also contains a two-year extension, through 2012, for an arbitrage-rebate exception for school construction bonds and allows issuers to sell private-activity bonds outside of state volume caps for certain qualified education facilities.
The authority to issue New York Liberty Zone bonds and Gulf Opportunity Zone bonds would be extended through 2011, along with certain tax incentives associated with them. The ability to deduct state and local sales taxes in lieu of state and local income taxes also would be extended through 2011.
