Group Urges Congressional Tax-Writers to Eliminate AMT Penalty for Airport PABs

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The American Association of Airport Executives is urging leaders of the House and Senate tax-writing committees to permanently eliminate the alternative minimum tax penalty on airport-issued private-activity bonds.

Todd Hauptli, president of AAAE’s government division, made the plea in separate letters sent this week to Senate Finance Committee chairman Max Baucus, D-Mont., ranking minority member Sen. Orrin Hatch, R-Utah, House Ways and Means Committee chairman Rep. Dave Camp, R-Mich., and ranking minority member Rep. Sandy Levin, D-Mich.,  as they engage in efforts to reform the federal tax code.

Because PAB interest is subject to the AMT, a tax imposed on the wealthy, issuers have to offer higher interest rates on the bonds in order for them to appeal to investors.

The American Recovery and Reinvestment Act lifted the AMT on PABs issued in 2009 and 2010. The law also exempted from the current refundings done in 2009 and 2010 on PABs were issued after 2003. In current refundings, the bonds being refunded must be redeemed within 90 days. 

Seventy airports issued around $15 billion in bonds that benefited from those provisions, resulting in $1.8 billion in gross savings for the airports, according to Federal Aviation Administration data cited in the AAAE letter.

“Permanently eliminating the AMT penalty on airport private-activity bonds will reduce the cost of airport construction projects and allow airports to invest more money in necessary infrastructure, supporting high-paying jobs for workers across the country,” Hauptli wrote.

The letter also asked lawmakers to close a tax loophole that allows U.S. air carriers to avoid paying federal excise taxes on revenue from ancillary charges such as baggage fees.

Baucus and Hatch have called for a “blank slate” approach to tax reform that eliminates all existing tax deductions, exemptions and credits. They have asked their Senate colleagues to submit detailed proposals explaining which tax breaks should remain.

The AAAE letter is the latest of several in which muni market participants have asked congressional members to either ease, or avoid imposing, tax restrictions on municipal bonds. Last week, more than 100 House of Representatives members from both parties wrote a letter to House leaders urging them to reject proposals to eliminate or cap the tax exemption for municipal bonds.

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