Proposed Tax Bill Threatens Essential Community Services and Infrastructure ProjectsPublications - Client Alert | 11/3/2017
Proposed Tax Bill Threatens Essential
Community Services and Infrastructure Projects
On November 2, 2017, Republicans in the U.S. House of Representatives released proposed legislation, H.R. 1 (the “Bill”), that eliminates or otherwise fundamentally impacts tax-advantaged financing for providers of vital community services and infrastructure projects throughout the United States. The Bill proposes to eliminate most, if not all, tax-exempt bond financings for hospitals, community health and mental health centers, charter schools, private K 12 schools, nursing homes, colleges and universities, airports, low-to-middle income rental housing projects, first-time single family home buyer programs, supplemental student loan programs, port projects, first time farmer programs and sewage and solid waste infrastructure projects. The Bill would also severely impact vital community projects that have relied on funding from new markets tax credits, historic tax credits and energy tax credits.
The Bill is expected to undergo markup by the United States House Committee on Ways and Means on Monday, November 6, 2017. House leadership has stated its intention for the House of Representatives to vote on final legislation by Thanksgiving. The United States Senate is expected to present its proposed tax bill the week of November 6. Senate and House Republicans hope to have a final tax bill approved by December 31, 2017.
All Americans may feel the effects of deteriorating infrastructure and fewer community services, as well as higher costs of paying for such services, if the Bill is passed in its current form. Click here for the text of a section-by-section summary of the current version of the Bill prepared by the Committee on Ways and Means. Major provisions of the Bill relating to public financing mechanisms are outlined below:
Termination of Private Activity Bonds
All private activity bonds (“PABs”) are eliminated (this includes, for example, bonds benefitting 501(c)(3) nonprofit organizations, multifamily low-income housing operators, student loan providers, organizations providing single family bonds, airports and critical infrastructure providers)
Proposed legislation prohibits both tax exempt new money and refinancing
Termination applies to bonds issued after December 31, 2017
Repeal of Tax Credit Bonds
Tax credit bonds are all generally repealed, with no possibility for future refinancings
Tax credit bonds include qualified forestry conservation bonds, new clean renewable energy bonds, qualified energy conservation bonds, qualified zone academy bonds and qualified school construction bonds
Repeal applies to bonds issued after December 31, 2017
No Tax Exempt Bonds for Professional Stadiums
The tax code is amended to prohibit the financing of stadiums for professional sports exhibitions
Prohibition applies to bonds issued after November 2, 2017
Repeal of Advance Refunding Bonds
Future advance refundings of all types of bonds (including governmental use bonds) are prohibited
Interest on governmental current refunding bonds is still tax exempt
Repeal applies to bonds issued after December 31, 2017
Other Major Provisions
4% low income housing tax credits (LIHTCs) are effectively eliminated without the existence of PABs for multifamily residential rental projects
Mortgage credit certificates (MCCs) appear to be prohibited after December 31, 2017
The Bill currently does not include any form of transition rule that may ease its significant impact on infrastructure and community services projects
New markets tax credits (NMTCs) are repealed effective after December 31, 2017
As a recognized leader in the areas of public finance and tax credits, Kutak Rock and members of our National Public Finance Group are standing by and available to counsel and assist. More than 100 of Kutak Rock’s lawyers devote all or a major portion of their practice to the field of public finance, and the firm has participated in every kind of tax-exempt bond financing currently available. In addition, the firm has a 10-member Section 103 Tax Department specializing in federal tax exemption matters.
Kutak Rock is working with the National Association of Bond Lawyers and other industry associations to closely monitor developments relating to the Bill and to engage in dialogue with members of Congress and others. The firm will continue to closely monitor the proposed legislation and provide updates as developments emerge. For more information, you may contact the attorneys below or any member of our National Public Finance Group.
Matthias M. Edrich
Mitchell J. Bragin
Larry L. Carlile
Adam R. Baird
Jack K. McGill
This memorandum was prepared for the general informational use of the clients and attorneys of Kutak Rock LLP and reflects our understanding of the matters set forth herein as of the time of its release. The views on the topics presented may change as our experience with the matters discussed herein deepens. Therefore, this memorandum is not intended as tax advice for any specific transaction and is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any transaction or matter described or addressed herein. This communication may be considered advertising in some jurisdictions. The choice of a lawyer is an important decision and should not be based solely upon advertising.