House GOP members push for PAB protection in tax reform bills
- Some House Republicans are pushing back against a tax reform bill that eliminates the option for nonprofits, as well as for state and local governments, to help finance their projects with tax-exempt private activity bonds (PABs), according to Reuters.
- The House bill, which passed earlier this month, would also prevent states, cities and other bond issuers from trying to trim interest costs by refinancing bonds with tax-exempt issues when those bonds are more than 90 days from their call date. In a letter to House and GOP leaders signed by more than 20 congressional representatives, lawmakers said PABs used for both new projects and refinancing paid off in new jobs and allowed public entities to save billions in interest expenses.
- The letter could come into play when the Senate and House meet up in conference committee to hammer out a compromise between their two bills. The Senate version which passed in the early-morning hours of Dec. 2, also eliminates PAB-based debt refinancing but retains their use for new projects.
According to The Bond Buyer, however, House Ways and Means Committee Chairman Kevin Brady said he might allow PABs with some restrictions as a compromise — a concession that could put the Senate bill's provision leaving the use of tax-free bonds for new projects as is on the chopping block.
Brady told The Bond Buyer that the use of PABs had drifted into projects other than those of regional and national importance, possibly indicating a point where the two bodies could begin negotiations. The potential for a protracted timeline in refinancing bond debt has already caused a rush on the market.
President Donald Trump in his 2018 budget request touted PABs as one of the ways to finance his $1 trillion infrastructure program, details of which have yet to emerge. The White House advocated for lifting of cap on PABs in order to spur the $800 billion of private investment that would be needed to supplement the $200 billion in direct federal spending the administration proposed.
But in recent months, the president has indicated a shift away from private-sector involvement in his infrastructure program, telling a group of House Democrats in late September that it would no longer play a significant role in his $1 trillion agenda.
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