Senate Majority Leader Harry Reid, D-Nev., plans to seek a cloture vote Tuesday that would limit debate on a modified version of the jobs bill that was recently proposed by President Obama.

Reid would need 60 votes to limit debate on the American Jobs Act of 2011. Lobbyists and market participants doubt he can obtain enough votes to push the bill forward.

The bill would exempt from the alternative minimum private activity bonds issued in 2011 and 2012 as well as authorize the creation of a national infrastructure bank.

But the biggest modification is that the bill would be paid for with a so-called millionaire’s surtax instead of cuts to spending and tax preferences, including tax-exempt interest.

The initial bill proposed by Obama last month would have capped at 28% the value of tax-exempt interest, as well as other tax preferences and deductions. Muni market participants warned that the cap would reduce demand for munis and raise issuer’s borrowing costs.

The modified bill would impose a 5.6% surtax on those with incomes of $1 million or more. The surtax would take affect in 2013 and would raise $450 million, which would cover the $447 million cost of the bill. The surtax would increase the benefit of municipal bonds because it would raise the top income tax rate.

The modified jobs bill would create an American Infrastructure Financing Authority identical to the one proposed in Obama’s initial bill. The proposal came from Senate members in the first place. It’s based on the Building and Upgrading Infrastructure for Long-Term Development Act introduced by Sen. John Kerry, D-Mass., and Sen. Kay Bailey Hutchison, R-Texas, in March.

The AIFA would help develop “projects of regional or national significance,” according to a summary of the bill introduced by Reid. The bank would work with private investors to finance projects through cheap long-term loans or loan guarantees.

It would be capitalized with a total of $10 billion for its first two years. Projects would have to be a minimum of $100 million, or $25 million in rural areas. The loan or loan guarantee could finance no more than 50% of the project’s cost. The base interest rate on a direct loan would be at least the rate on Treasury debt with a similar maturity. AIFA loans or guarantees could run as long as 35 years and repayment would have to come “in whole or in part from tolls, user fees, or other dedicated revenue sources.”

The bill would encourage a diversity of project financing, including transportation, water, and energy. The AIFA could assist highways, airports, seaports, dams, drinking water, energy generation, and transmission projects.

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