NABL urges Congress to preserve private activity bonds, bring back advance refundings
WASHINGTON — The National Association of Bond Lawyers is urging Congress to continue supporting the municipal market municipal bonds by preserving tax-exempt private activity bonds, bringing back advance refundings and expanding limits on bank qualified bonds.
The letter, addressed specifically to Senate Majority Leader Mitch McConnell, Speaker of the House Nancy Pelosi and Minority Leaders Kevin McCarthy and Chuck Schumer emphasized the need to support tax-exempt bonds as a way to fund infrastructure. Tax-exempt advance refundings were disallowed by the 2017 Tax Cuts and Jobs Act, with PABs almost being nicked as well.
Dee Wisor, NABL president, is concerned about what approach Congress takes on an infrastructure bill, by either deciding on a $3 trillion spending plan or increasing federal borrowing, he said.
“My concern about that is really how they’re going to approach the infrastructure bill,” Wisor said. “Are they going to do infrastructure on Uncle Sam’s credit card or are they going to try and actually pay for it?”
Wisor is also worried Congress will go after private activity bonds issued for nonprofit hospitals, in order to do more private activity bonds for ports and docks, for example.
During the debate of the Tax Cuts and Jobs Act, then- Ways and Means committee Chairman Kevin Brady, R-Texas, said private activity bonds had drifted from their original purpose and that they should be focused on infrastructure, Wisor said.
“I disagree with that premise because private activity bonds today finance lots of capital projects important to our communities like airports, ports, hospitals, housing and educational facilities,” he said. “But it is for this reason that NABL suggests preserving and enhancing private activity bonds.”
NABL also wants to expand the limits of bank-qualified bonds to encourage banks and other financial institutions to purchase securities that benefit nonprofit organizations or governmental entities. Banks can only deduct the carrying cost of these qualified small issuer bonds that can come only from issuers who issue less than the cap amount in a year. The current cap is set at $10 million and Wisor wants it increased to $30 million.
In the 2009 American Recovery and Reinvestment Act economic stimulus bill, the cap was set to $30 million and said PABs could be used for 501(c)3 entities with a separate $30 million cap, Wisor said. The bill also said if an issuer did a PAB for a 501(c)3, that the bank-qualified calculation would be done at the borrower level.
“We think going back to the stimulus bill would make most sense to expand the bank-qualified bond issue so that banks and other financial institutions are willing to provide funding for infrastructure projects at lower rates than they would otherwise,” Wisor said.
Other lobbyists groups have communicated with Congress — the Bond Dealers of America said they discussed increasing bank-qualified bonds last month with the with the Democratic policy staff on the Ways and Means committee.
Increasing the cap on bank qualified bonds to $30 million is one of their top legislative priorities this year, said Justin Underwood, BDA federal policy adviser.
In late January, the Government Finance Officers Association asked House lawmakers to sign onto a bipartisan letter, addressed to House Ways and Means Committee Chairman Richard Neal and ranking member Brady, seeking assurance that any infrastructure legislation enacted this year won’t jeopardize the tax exemption for municipal bonds.
GFOA’s goal is to get more than 218 House members, a majority of the chamber, to sign on to the letter, written by House Municipal Finance Caucus co-chairs Reps. C.A. “Dutch” Ruppersberger, D-Md., and Steve Stivers, R-Ohio.
Emily Brock director of GFOA’s federal liaison center told members of the debt committee in January that muni tax exemption should be their starting point in discussion with lawmakers.