Two senators have introduced a bipartisan bill identical to one in the House that would raise the limit and ease tax restrictions on bonds used by small and mid-sized manufacturers to build new facilities.
The Modernizing American Manufacturing Bonds Act (MAMBA), S. 773, was offered by Sens. Sherrod Brown, D-Ohio, and David Perdue, R-Ga., on March 29 and is the same as H.R. 1115, which was introduced in the House on Feb. 16 by Reps. Randy Hultgren, R-Ill., and Richard Neal, D-Mass.
Brown described his bill in a release, saying, “A simple update to the way manufacturers can use private activity bonds will be a huge help to manufacturers and entrepreneurs as they work to hire Ohioans and grow out economy,”
Perdue said, “We now have the opportunity to revive America’s leading role in manufacturing thanks to U.S. innovation and capital formation.”
The bills would triple the maximum size to $30 million from $10 million of so-called qualified small issue bonds or small issue industrial development bonds, which are tax-exempt private activity bonds. The senators said the limit is “outdated” and “not indexed to inflation” so it loses value every year
The measures would also expand the types of projects that could be financed with these bonds. They would expand the definition of manufacturing facility to include intangible property, such as software, in addition to tangible property. The would include facilities that are functionally related and subordinate to manufacturing plants, such as warehouses that temporarily store materials or laboratories that test raw materials.
In addition, up to 25% of the bond proceeds could be used to finance facilities directly related and ancillary to a manufacturing plant, as long as they are located on the plant site.
The bills would also double the capital expenditure limit to $40 million from $20 million. There is currently $20 million limit on the amount of capital expenditures that a manufacturer can incur in the same jurisdiction over a period of six years – three years before and three years after the bonds are issued.
In one limitation, the bills would prohibit taxable bonds used for intangible property under the new definition of manufacturing from being refunded with tax-exempt bonds.