The Senate late yesterday signed off on a tax package that, among other bond-related provisions, would authorize the use of qualified private-activity bonds without regard to a state PAB cap for seven counties in Texas and Louisiana hit by Hurricane Ike.
The hurricane provision was added to the package Thursday at the urging of Sen. Kay Bailey Hutchison, R-Tex., and other senators representing the afflicted areas. The bill would create a special category of qualified private activity bonds that Texas and Louisiana could issue through Dec. 31, 2010, to finance relief efforts in the wake of Ike. The Texas counties of Brazoria, Chambers, Galveston, Jefferson and Orange, as well as Calcasieu and Cameron parishes in Louisiana, could issue these bonds in amounts up to $2,000 times their population.
The bonds would be issued by states or municipalities and the proceeds would be allocated to areas based on the areas of greatest need. Interest on the bonds would not be subject to the AMT.
Through a series of votes, the Senate last night overwhelmingly approved the package, which would extend expiring tax law provisions, in several pieces. The package, in addition to hurricane relief, would include a one-year "patch" to the alternative minimum tax, tax-exempt and tax credit bonds to assist in flood relief efforts in the Midwest, and bond-related renewable energy tax incentives.
Now the Senate has to reconcile its tax package with a similar one passed by the House last week. It is not known at this time if the House would break up its package into separate bills, modify it, then send it back to the Senate, but Senate Majority Leader Harry Reid, D-Nev., warned against this tactic yesterday, saying the Senate would not be able to pass a House-tweaked measure.
The Senate package, which would be only partially offset with revenue-raising provisions, could meet resistance from House Democrats who are trying to strictly adhere to "pay-as-you-go" budgetary rules for all legislation.
However, Republicans in both chambers have made it clear that they will not support a package that includes a fully-offset AMT patch, arguing that a bill aiming to reduce taxes should not be offset with other tax hikes.
The package would also create a category of private-activity bonds called "Midwestern disaster area bonds" that could be issued by nine states in the Midwest outside of the volume cap over the same time frame. Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, and Wisconsin could each issue these bonds in an amount up to $1,000 times the portion of their state population located in a disaster area to finance relief projects.
In addition, the package would authorize Midwestern disaster states to issue debt service tax-credit bonds, which would provide the holders with tax credits in lieu of interest payments, so that states could give assistance to communities unable to meet their debt service payments as a result of disasters.
A state could issue up to $100 million of these tax-credit bonds if it had at least 2 million persons in a disaster area, and up to $50 million if it had a population of 1 million to 2 million in a disaster area. The bill would also relax mortgage revenue bond rules for both disaster areas.
The measure also includes an additional $400 million of state and local qualified zone academy bonds for 2008 and 2009.
The energy portion of the package would authorize $800 million of new clean renewable energy bonds, as well as $800 million in qualified energy conservation bonds, a new category of tax credit bonds that would be allocated to states, municipalities and tribal governments. In addition, the package would extend existing authority through 2012, but not provide additional funding, for qualified green building and sustainable design project bonds.