WASHINGTON — Groups representing student loan bond issuers, port authorities, and airports are asking Congress to permanently exempt private-activity bonds from the alternative minimum tax and allow all current PABs to be refinanced to obtain the exemption.
The Airports Council International-North America, Education Finance Council, and American Association of Port Authorities made the request in a two-page letter sent this week to House Ways and Means Committee chairman Charles Rangel, D-N.Y., Senate Finance Committee chairman Max Baucus, D-Mont., and other congressional leaders.
The letter comes after Congress permanently exempted all housing bonds, which are PABs, from the AMT in the Housing and Economic Recovery Act of 2008. It also exempted all bonds issued during 2009 and 2010 from the AMT under the American Recovery and Reinvestment Act of 2009.
The groups said the two-year AMT exemption for non-housing PABs has been an immediate boon for the parties they represent, and has stimulated the economy while creating jobs.
“Prior to the passage of this legislation, the credit markets were essentially frozen with many industries unable to find buyers for PABs,” the letter stated. “Issuers of student loan, airport, and seaport bonds have all benefited from this exemption, which has enabled them to both locate buyers for their bonds and to take advantage of lower interest rates.”
Although the exemption is slated to run through the end of 2010, Congress could include a permanent extension in the large “extenders” bill it will write and take up later this year to extend a number of expiring tax breaks.
The ARRA also exempted from the AMT any bond issued during 2009 and 2010 to refund debt issued during the last five years. But the groups’ letter urges that the refunding provision be expanded to cover all outstanding PAB debt.
The letter states that because Broward County, Fla., was able to issue $83.2 million of AMT-exempt bonds in July to fund a port project, it saved $10 million over the 20-year life of the bonds while creating an estimated 2,000 jobs.
In the student loan sector, the Maine Education Loan Authority was able to issue $210 million of fixed-rate bonds and save $17.1 million from the AMT exemption, the letter added. Those savings will be passed to student loan borrowers, since the authority can now offer loans that are 81 basis points less than the rate it would have had to charge without the exemption.
In addition, a terminal enhancement project at McCarran International Airport in Las Vegas was salvaged thanks to the refinancing provision. Roughly $550 million of bonds issued for the project were refinanced to be AMT-exempt in July, generating significant savings. Without those savings, the project would have been shut down, eliminating 1,600 jobs, according to the letter.
The groups also pointed out that the cost to the federal government of making the exemption permanent is “minimal.” They cite the Joint Tax Committee’s estimate that the AMT exemption for PABs would cost the federal government only $27 million in 2009.
“The savings to industries that issue PABs and reinvest that savings will far exceed the cost to the federal government, while creating jobs through construction and helping to finance students’ higher education,” the groups wrote.
Staff from the two tax-writing committees could not be reached for comment.