WASHINGTON — House Ways and Means Committee Democrats introduced a bill on Thursday that would reinstate Build America Bonds, the higher small issuer limit for bank-qualified bonds, and six other bond, tax credit and loan guarantee programs.
The programs were created for state and local governments by the American Recovery and Reinvestment Act but expired on Dec. 31.
The bill, H.R. 992, called the Building American Jobs Act of 2011, would extend most of these programs through 2011 or 2012.
“These proven programs are vital in our effort to rebuild America’s economy,” former committee chairman Sander Levin, D-Mich., said in a release. “There are still far too many states and municipalities — in addition to the 14 million unemployed Americans — struggling to regain their footing after the great recession and this legislation gives them the tools to make long-needed investments.”
Twenty-two municipal market groups representing governments, dealers, and bond lawyers, as well as infrastructure, health care and education organizations, applauded the action, saying that the legislation would help state and local governments and authorities at a time when the market is volatile and they have fewer ways to access it.
But sources said the legislation faces an uphill battle as Republicans, who are the majority in the House, remain opposed to stimulus programs and particularly the Build America Bond program. Several Republican leaders, including committee chairman Rep. Dave Camp, R-Mich., have criticized BABs for providing lucrative fees to underwriters and encouraging states with lower credits to issue more bonds to collect higher federal subsidies.
The bill would extend BABs through 2012 at lower federal subsidy rates of 32% in 2011 and 31% in 2012. The earlier ARRA BAB program allowed state and local governments to issue taxable bonds in return for federal subsidy payments equal to 35% of their interest costs. This new legislation also would allow BABs to be used to current refund previously issued BABs. In addition, BABs could be used to finance levees and other flood-control projects.
The bill would reinstate the ARRA’s eased bank-qualified bond provision, allowing banks to deduct 80% of the cost of buying and carrying tax-exempt debt sold by issuers whose annual issuance is not more than $30 million, up from $10 million in existing law.
The measure would exempt all tax-exempt bonds from the alternative minimum tax this year. It would exempt water and sewer bonds from the private-activity bond cap.
State and local governments could continue issuing recovery zone bonds through this year and would receive an additional allocation. Recovery zone economic development bonds would receive a $10 billion allocation and recovery zone facility bonds would receive $15 billion. Federal Home Loan Banks would be able to guarantee tax-exempt bonds this year. The bill also would extend the ability of states to receive a portion of their low-income housing tax credit allocation as a direct payment through 2011.
Further, a new markets tax credit could be claimed against the AMT with respect to qualified investments made between March 15, 2010 and Jan. 1, 2012.
