Senate Finance Committee leaders unveiled a tax-extender bill last week that contained several bond provisions, as four lawmakers introduced a separate measure that would expand the usage of industrial development bonds, and conferees from both the House and Senate pushed for another week to negotiate a compromise farm bill.
The tax-extender bill, introduced by Sens. Max Baucus, D-Mont., Finance Committee chairman, and Charles Grassley, R-Iowa, the panel's ranking minority member, would extend the qualified zone academy bond program to the end of 2009, add $400 million to the clean renewable energy bond program, and increase individuals' exemption amounts under the alternative minimum tax.
The bill also would extend to the end of 2009 a provision allowing qualified mortgage bonds to be used to finance mortgages for veterans who served in the "active military" without regard to the first-time homebuyer restriction. In addition, it would extend for the same period of time a provision allowing taxpayers to elect to take an itemized deduction for state and local general sales taxes in lieu of the standard deduction.
However, the bill does not contain any revenue-raising measures to pay for it, and that may be a major hurdle as House Democrats have pressed for pay-as-you-go legislation.
Susan Gaffney, director of the Government Finance Officers Association's federal liaison center, said, "We appreciate the chairman's and ranking minority member's support of these important provisions for state and local governments. In the past there has been bicameral and bipartisan support for these and we expect that to continue."
Qualified zone academy bonds are taxable bonds used by municipalities to finance renovations and repairs to existing school facilities. Congress has authorized $400 million for the QZAB program each year for the past decade. But the program expired on Dec. 31, 2007. The bill would extend the program for another two years.
Clean renewable energy bonds are taxable bonds that provide holders with income tax credits in lieu of tax-exempt interest payments. Congress created the CREB program in 2005 and it has so far authorized $1.2 billion for such bonds. The Baucus-Grassley bill would add $400 million of CREBs after Dec. 31, 2008.
The alternative minimum tax, which applies to interest earned on private activity bonds and some governmental and 501(c)(3) bonds, is designed to target high-income households that are eligible for so many tax breaks they pay little or no taxes. However, the AMT is not indexed to inflation, so more taxpayers become subject to it each year.
Currently a taxpayer receives an exemption of $33,750 under the AMT, and married couples filing jointly receive an exemption of $45,000. The bill would increase the exemptions, for the 2008 tax year, to $46,200 for individuals and $69,950 for married couples filing jointly.
Also on Thursday, Sens. Olympia Snow, R-Maine, John Kerry, D-Mass., Sherrod Brown, D-Ohio, and Gordon Smith, R-Ore., introduced S. 2885, which would permit small-issue tax-exempt industrial development bonds to be used more broadly. Currently, the tax law allows these bonds to be used to finance manufacturing, but defines that term to include only "tangible" property or products.
The Council of Development Finance Agencies has been pushing for a broader, more modern definition of manufacturing that would allow IDBs to be used for high-tech and biotech facilities, software, and other intangible processes. The bill would expand the definition of manufacturing to include such facilities and products.
The bill would "remed[y] the challenges that state and local finance agencies face when trying to utilize IDBs to help finance manufacturers working in the high-tech and innovation industries," CDFA executive director Toby Rittner said.
Meanwhile, President Bush on Friday was expected to sign a one week extension of farm legislation enacted in 2002 to give House and Senate conferees more time to resolve differences between the farm bills approved by the two chambers last year. A recent compromise measure proposed by Senate conferees would authorize $280 million of tax-exempt "aggie bonds" that could be used by first-time ranchers and farmers to purchase land.
That measure appeared to have dropped earlier Senate proposals that would have authorized $1.5 billion of tax-exempt timber conservation bonds and created a new category of taxable tax-credit bonds for projects such as distance learning, telemedicine programs, telephone and broadband access and community facilities in rural areas. The bill would have authorized $400 million of such tax credit bonds.