Twelve organizations representing the nonprofit bond community submitted comments to a House Ways and Means Committee tax reform working group, urging it to protect tax-exempt bond financing.
"One of the many ways in which the federal government invests in human capital and innovation in the U.S. is by granting tax-exempt status to hospitals, health clinics, colleges, universities, drug and alcohol treatment centers, and other charitable institutions whose health, public service, education and research missions provide a wide-range of societal benefits," the groups wrote.
In 2012, higher education bond sales reached $27.77 billion and tax-exempt health care bond sales totaled $34.36 billion. The twelve organizations noted that they use municipal bonds to acquire, construct, and expand capital infrastructure such as hospitals, academic buildings and athletic facilities.
"We believe a cap on the income tax exemption of tax-exempt municipal bond interest, or even a partial tax, will cause investors to demand higher returns, again leading to higher infrastructure costs," they wrote. "Higher borrowing costs can result in diminished investments in infrastructure, fewer jobs, reduced public services, and increased charges and fees."
The groups also stressed that they oppose a handful of proposals under consideration by Congress and the Obama administration that would eliminate or curtail tax exemption.
They said that qualified 501(c)(3) private-activity bonds provide favorable terms for private nonprofit institutions, such as colleges, universities and hospitals, which results in significant cost savings.
"Low-cost access to capital helps keep these institutions strong, enabling them to keep infrastructure expenditures low so that they can focus on the work they do for the public good making our lives, our economy, and our nation stronger," the groups wrote.
Separately, the American Public Power Association and the Large Public Power Council also submitted comments to a Ways and Means tax reform working group emphasizing that municipal bonds are a critical investment tool for public power utilities.
"Changes to the current law treatment of tax-exempt bonds will increase the price that public power customers pay for electricity, especially affecting the small businesses and low- and fixed-income households, and reduce the ability to fund necessary public power infrastructure improvements," the groups wrote.
Lawmakers on the tax reform working groups should consider changing existing tax law to expand opportunities for financing infrastructure investments through taxable, direct-payment bonds and an easing of tax law restrictions on public power utilities' flexibility to finance infrastructure investments, the APPA and the LPPC said.