Tax

The looming sequestration cuts, including those on Build America Bond payments, will likely be higher than estimated, several municipal bond market participants are warning.

The Internal Revenue Service on Thursday issued allocations for $400 million of qualified zone academy bonds for each of the 2012 and 2013 calendar years, showing the maximum amount of these bonds that can be issued in each state.

Internet- and sales tax-related bills recently introduced in the House and Senate would have impact state and local finances if enacted.

Chicago collected more than $100 million in hotel taxes last year, a record level, Mayor Rahm Emanuel said last week.

The proposed 28% cap on the value of tax exemption would be a far less dangerous threat to the municipal bond community than a top income tax rate of 25%, former congressional tax counsel John Buckley said at the American Bar Association's tax-exempt financing committee winter meeting in Orlando, Florida.

New Senate Budget Committee Chairman Patty Murray, D-Wash., insists tax expenditures must be cut and other revenues raised for the fiscal 2014 budget in a letter and memo that are raising alarm among municipal market participants.

The Internal Revenue Service is auditing $228 million of tax-exempt LIBOR floating rate bonds issued by the Oklahoma Student Loan Authority in 2010 as part of an expanded audit the agency had initiated last fall.

Almost $24.75 million of limited obligation revenue bonds issued in 2005 and 2010 for the Old Redford Academy charter school in Detroit could become taxable and have been downgraded by Standard & Poor's because the Internal Revenue Service revoked the school's foundation's tax-exempt status.

The Treasury and IRS have sent two separate letters to Sens. Lautenberg and Nelson regarding concerns over available financing for housing damaged by Hurricane Sandy and tax guidance on political subdivisions that would affect community development districts in Florida.

The House voted Wednesday afternoon to suspend the federal government's borrowing authority until May 19 to avoid a potential default and debt crisis.

House Speaker Rep. John Boehner, R-Ohio, told reporters Tuesday night that not one single Republican would vote to increase revenue by curbing tax expenditures right now and that their focus is solely on cutting spending.

The tax-exempt status of $8.5 million of bonds issued by the Delaware River Port Authority in 2003 for the LEAP Academy University Charter School, Inc., could be in jeopardy because the Internal Revenue Service revoked the charter school's tax-exempt status.

Standard & Poor's revised its growth forecast for 2013 on state and local governments to be slightly higher and Fitch Ratings gave most sectors a stable outlook for the year.

The President of the U.S. Conference of Mayors said Thursday that saving tax exemption is one of the highest priorities of the group.

Rhode Island Gov. Lincoln Chafee's proposed $8.2 billion budget includes a corporate tax cut and a $20 million local package to help distressed communities.

Most private activity and conduit bonds do not have a substantial risk of being called if the proposed 28% cap on the value of tax exemption is enacted, Barclays Municipal Research said in a report.

The United States could be slapped with another credit downgrade this year from a major rating agency if there is a delay in raising the country's statutory borrowing limit or if lawmakers don't agree to a credible deficit reduction package.

The ranking Democrat on the House Ways and Means Committee said Tuesday that the Obama administration's proposed 28% cap on tax expenditures should be considered as a source of additional revenue in upcoming fiscal fights, but warned it should be viewed with caution.

If the proposed 28% cap on the value of tax exemption were enacted, the municipal bond market would become more volatile and would likely significantly deter investors from buying munis, Loop Capital Market's analysts said Monday.

A retroactive 28% cap on the value of tax exemption could trigger the mandatory redemption of billions of dollars of bonds, according to market experts.