WASHINGTON — Senate Finance Committee chairman Ron Wyden, D-Ore. wants the committee to vote early next month on legislation that would renew tax provisions that expired at the end of last year, a committee spokeswoman said.
No final date has been set for the markup, the spokeswoman said on Thursday, declining to provide any other details.
Several of the expired tax provisions, or "tax extenders," are relevant for issuers and the municipal bond market. Under a bill that Senate Majority Leader Harry Reid, D-Nev., introduced in December that did not move forward, these provisions would be extended through calendar year 2014.
However, Wyden may propose a bill that does not go as far as Reid's bill. The provisions can be reauthorized retroactively.
Wyden, who became the finance committee chairman last month, has previously said that passing an extenders package would be one of his first priorities in this role. Extending expiring provisions could serve as "bridge" to comprehensive tax reform, he said at an event in California in February.
One of the provisions that expired would authorize a certain amount of qualified zone academy bonds that could be issued nationwide. QZABs are tax-credit bonds that can be used for renovating facilities, providing school equipment, developing course materials and training teachers and staff at public schools that meet certain criteria. They could also be issued as direct-pay bonds in 2010, where the Treasury makes subsidy payments to issuers in lieu of investors receiving tax credits.
The national volume cap for QZABs was $1.4 billion in 2009 and 2010 and $400 million each year from 2011 through 2013. QZABs have been allocated to the states each year based on the populations of their residents below the poverty line. Unused capacity within those limits can be carried over for two years.
Bill Daly, director of governmental affairs for the National Association of Bond Lawyers, called QZABs a "relatively small bond program."
Michael Decker, managing director and co-head of munis at the Securities Industry and Financial Markets Association, said that it is hard to do financing with QZABs because the program is complicated and has requirements that are difficult to meet.
There were only about 111 QZAB issues totaling $620 million in 2011 and 149 issues totaling $495 million in 2010, according to the latest statistics available from the Internal Revenue Service.
For public schools to be eligible to have projects financed with QZABs, they have to be located in empowerment zones or enterprise communities where at least 35% of the students are eligible for free or reduced-price lunches. They also have to have to be designed in cooperation with business and receive a private business contribution with a present value of at least 10% of the proceeds of an issue.
Additionally, they have to have an education plan, approved by their school districts, in which students are subject to the same standards as other students in their districts.
Another provision that expired would permit individuals to deduct state and local sales taxes in lieu of deducting state and local income taxes.
Without the deduction, the federal tax code is unfair to people that live in the states that do not have income taxes, the Texas Society of Certified Public Accountants wrote in a letter sent to Wyden and the other top congressional tax-writers last month. Also the deduction's expiration has led to uncertainty for taxpayers, the group said.
Two provisions that expired pertain to Puerto Rico: the deduction allowable with respect to income attributable to domestic production activities in the commonwealth, and the increased level of distilled spirit excise tax payments into the treasuries of to Puerto Rico and the Virgin Islands.
Decker said that these provisions, while not directly bond-related, are relevant to economic development issues in Puerto Rico.
Daly and other muni market participants worry that any time a tax bill moves through Congress, lawmakers may curb munis as part of an effort to raise revenue to offset or pay for other provisions in the bill that would lose revenue.
