WASHINGTON — Congress should modernize a tax code requirement for small-issue industrial development bonds to accommodate new, high-tech types of manufacturing, a market group recommended in proposed legislation unveiled last week. The Council of Development Finance Agencies wants the definition changed because an expanded law will allow small, and mid-sized companies to finance expansion and job growth with private-activity IDBs — growth that would not be possible with higher-cost financing, it says. CDFA members and staff met with congressional leaders on Nov. 2 to discuss their recommendation, visiting the offices of House Ways and Means Committee chairman Charles Rangel, D-N.Y., and members from California, Illinois, Michigan, Minnesota, and Pennsylvania. The council’s legislative agenda, including the expansion of the manufacturing definition, was “positively received,” with the lawmakers expressing interest in working with the CDFA to enact the change, the group said. Current tax code rules limit the use of small-issue IDBs to a “manufacturing facility,” defined as a facility that is “used in the manufacturing or production of tangible personal property, including processing resulting in a change in the condition of such property.” The council’s proposed change would add intangible property to that definition, allowing “knowledge-based” companies to be eligible for access to tax-exempt financing, it said. CDFA legislative counsel John McMickle is working to get the proposed legislation introduced in the House and Senate. “CDFA plans on having strong support on both sides of the aisle on this issue as Congress looks for effective ways to stimulate the economy,” the council said in a statement last week. “Once the legislation is introduced, CDFA will be working to garner co-sponsors.” “We’d like to get it introduced as soon as possible, and see it move along some time before the end of this Congress,” CDFA research and policy associate Brian M. Anderson said Wednesday. “Since 1992, when the small-issue [IDB] program became permanent, state and local issuers have used this low-cost financing tool to create and retain jobs in manufacturing plants across America,” the council said. “The changing economy in the United States is providing new and exciting employment opportunities for our citizens in the area of software development and biotechnology ... [but] the tax-exempt bond finance programs ... do not extend to these important and growing sectors of our economy.”

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.