WASHINGTON - Senate Finance Committee chairman Max Baucus Friday unveiled a $275 billion economic stimulus tax package that contains many of the same municipal bond provisions as the bill approved by the House Ways and Means Committee the previous day, but with some changes.

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The House is expected to vote on the Ways and Means bill Wednesday.

The Senate Finance Committee is expected to vote on Baucus' package tomorrow. The Montana Democrat's package goes further than the one pending in the House by proposing to temporarily expand the definition of manufacturing facilities that can be financed with small-issue industrial development bonds to include facilities that produce intangible products. The provision would become effective during 2009 and 2010, but would expire in 2011.

Toby Rittner, president and chief executive officer of the Council of Development Finance Agencies, which lobbied for the provision, said it would allow IDB financing for "things like software, biotech, and biopharmaceuticals."

"We want to look at what new manufacturing is, and we want to be competitive ... in keeping these high-tech manufacturers that make things that are less tangible than a brick-and-mortar product that you can hold in your hand," he said.

If the temporary provision is enacted, the CDFA will work on getting Congress to make it permanent, Rittner added.

Baucus' package also contains far less money for qualified school construction bonds, taxable tax credit bonds that can be used for the construction of new schools. It would only authorize $10 billion over 2009 and 2010, whereas the House package would authorize $22 billion during the same period. But both bills would authorize an additional $1.4 billion of qualified zone academy bonds for 2009 and 2010. QZABs, also tax-credit bonds, can only be used to finance the renovation or rehabilitation of schools, but not new construction.

Both the Baucus and Ways and Means packages contain similar provisions that could move muni issuers toward issuing more taxable bonds. Baucus calls it the Build America Bonds proposal and the Ways and Means panel calls it the tax credit bond option for state and local governments. Both proposals would allow tax-exempt issuers to offer taxable debt in exchange for a cash subsidy or tax credit for the investor.

Under the Baucus measure, an issuer of general obligation bonds struggling to find buyers in the tax-exempt market could sell taxable debt that in 2009, 2010, and 2011 and receive a direct payment from the federal government equal to the credit available to investors for tax credit bonds.

Beginning in 2012, issuers would no longer get cash payments, but investors would receive tax credits for the bonds. The House committee version would function the same way, but the bonds would only provide direct payments to issuers in 2009 and 2010 and tax credits to investors thereafter.

Baucus' package also differs from the one pending in the House in that it would simply defer for one year to 2012 the implementation of a 2005 law that would require state and local governments to withhold 3% of any payments made for property or services for tax purposes. The House panel bill would permanently repeal the law, which government groups have strongly opposed, calling it an unfunded mandate on state and local governments.

Both packages also would create two new categories of recovery zone bonds to finance projects in areas hit particularly hard by unemployment, home foreclosures, and poverty. They would authorize $10 billion of recovery zone infrastructure tax credit bonds and $15 billion of recovery zone facility private-activity bonds that could be issued in 2009 and 2010.

However, Baucus would allocate those bonds to states based on total unemployment, and the bill in the House would allow them to be used for any areas of distress. The remaining bond provisions in the Baucus package mirror those in the bill pending in the House.

Both packages would exempt all tax-exempt bonds issued in 2009 and 2010 from the corporate and individual AMT. Currently only housing bonds and 501(c)(3) bonds are exempt from the individual AMT and only housing bonds are exempt from the corporate AMT.

The AMT is designed to ensure that individuals and corporations do not escape paying taxes because of tax breaks and the interest earned from bonds must be taken into account in determining liabilities under the tax.

However, in both packages the AMT provision would be limited with regard to refundings. It would only apply to refundings of bonds that were issued in 2009 or 2010.

Both packages also would encourage banks to begin purchasing muni bonds by changing the 2% de minimis" rule for financial institutions and the "small issuer exception" for so-called bank deductible bonds.

Under the temporary change to the de minimis rule, a bank would be able to deduct 80% of the cost of buying and carrying tax-exempt bonds issued in 2009 and 2010 to the extent that their tax-exempt holdings do not exceed 2% of their assets. This would expand the de minimis rule because it currently does not apply to banks. It only applies to corporations, allowing them a 100% interest deduction if they meet the 2% restriction.

In addition, the packages would expand the small issuer exception for bank deductible bonds. Under current law, banks can deduct 80% of the cost of buying and carrying the tax-exempt bonds sold by issuers whose annual bond issuance is less than $10 million. The proposals would expand the annual issuance limit to $30 million and would apply that limit to individual borrowers, rather than the issuer, in conduit financings.

The packages would each authorize an additional $2.4 billion of energy conservation tax-credit bonds to finance projects to reduce greenhouse gases, as well as an additional $1.6 billion of clean renewable energy bonds, also taxable tax-credit bonds, to finance renewable energy projects.

Tribal governments would be authorized to receive an additional $2 billion of bonds in 2009 and 2010 under the packages and would not have to limit the use of the bonds to projects providing an "essential government function," with the exception of casinos and projects off the reservation. If enacted, tribal governments would be able to issue these bonds under rules more similar to those that apply to state and local governments.

Meanwhile, House Republicans on Friday presented President Obama with their alternate economic stimulus plan, which contained provisions for deeper tax cuts and less government spending but none related to municipal bonds.

The meeting came one day after Republicans on the Ways and Means Committee made repeated but unsuccessful attempts to modify the committee's stimulus proposals, which were sponsored by chairman Charles Rangel, D-N.Y.. One of the Republican proposals would have provided a one-year "patch" to the AMT.

Senate Finance Committee ranking minority member Charles Grassley, R-Iowa, said Friday he plans on introducing an amendment during Tuesday's vote that would provide a year-long AMT patch.

"I'll be fighting in the Finance Committee to include an AMT patch in this legislation," he said in a release. "Beyond that, the more that the provisions of the bill stimulate activity in the private sector and the less that they run up the deficit with slap-dash government spending and a big entitlement expansion, the better."

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