Group Sends Updated Solid-Waste Recommendations to Treasury

The Tax-Exempt Bonds Recycling Coalition has again sent updated recommendations to Treasury Department officials working on regulations governing the use of solid-waste bonds. Regulations floated in 2004 would change the way “solid-waste disposal” is defined for purposes of tax-exempt bonding. In the face of extreme confusion caused by those rules’ proposed “no-value” test, it is crucial that the final regulations contain an official and definitive end to the concept, the coalition said in a letter sent in late October but released by Treasury recently.Under current tax code rules, state and local governments can issue tax-exempt debt to finance solid-waste disposal facilities that process material with no market value at the place it is processed and at the time bonds are issued.The proposed regulations, drafted in May 2004, would eliminate the no-value test and would not explicitly define what constitutes solid waste for municipal bond purposes. They would instead define the types of facilities that qualify for tax-exempt financing based on the recycling and disposal processes used.The coalition — a group of state and local government issuers, companies, trade associations, and environmental groups — wants Treasury to revise that definition to insure that future scientific and technological developments in solid-waste processing could be covered by the rules. It supports the elimination of the no-value test but recommends that garbage, refuse, or discarded materials that are useless, unused, or unwanted are included in a definition of solid waste.In the past, the coalition has said the solid-waste disposal function should be defined as the “collection, separation, sorting, storage, treatment, disassembly, handling, or processing of solid waste in any manner designed to dispose of the [material], including processing the solid waste into a useful energy source or a useful product.”Such processing may be accomplished by any biological, engineering, industrial, or technological method, and ends at one of three points: the point of “final disposal” of the material, the point at which the material is incinerated or otherwise processed to generate heat — and the resulting heat is put into a form that can be sold or used — or the point at which the material is converted into a product that can be sold, regardless of whether it is actually sold right away, the group has said.Responding to concerns about the definition of the extent of the recycling process, the coalition said in its most recent letter that it believes the regulations should allow tax-exempt financing for paper recycling facilities “until the point at which the fiber is reconstituted into paper through paper machine processing.”The letter was written by David Koenig, the American Forest & Paper Association’s director of tax policy, on behalf of the coalition. It also urges Treasury to retain the 65% safe harbor rule for waste materials in the solid-waste disposal process — consistent with current practice, rather than the year-by-year, 80% test in the proposed regulations — to alleviate the need for any special rules for particular types of solid-waste materials in the recycling process.