Senate Tax Bill Preserves Private Activity Bonds, Repeals Advance Refunding BondsPublications - Client Alert | November 10, 2017
On November 9, 2017, the Senate Finance Committee Republican majority released a detailed description of its tax reform proposal (the “Senate Proposal”). The Senate Proposal differs in several significant respects from the Republican House of Representatives tax reform proposal (the “House Proposal”) which was introduced on November 2, 2017. During the weeks to come it is anticipated that both proposals will undergo significant change. Senate and House Republicans hope to have a final tax bill approved by December 31, 2017. The major provisions, differences, and similarities related to tax-advantaged public financing mechanisms are outlined below:
The Senate Proposal preserves all provisions related to private activity bonds (PABs). This includes bonds benefiting 501(c)(3) nonprofit community service projects, multifamily low-income housing, student loans, single family bond and mortgage credit certificate programs, airports and other critical infrastructure projects. Because PAB provisions are not repealed under the Senate Proposal, current refundings of PABs would still be available. The House Proposal eliminates the tax exemption relating to all PABs issued after December 31, 2017, including any PABs issued as refunding bonds after such date.
The Senate Proposal and the House Proposal eliminate all types of advance refunding bonds, which include governmental and 501(c)(3) advance refunding bonds. This provision for both proposals would be effective after December 31, 2017.
The Senate Proposal preserves tax credit bonds such as qualified forestry conservation bonds, new clean renewable energy bonds, qualified energy conservation bonds, qualified zone academy bonds and qualified school construction bonds. The House Proposal eliminates all such tax credit bonds issued after December 31, 2017.
The Senate Proposal does not prohibit the issuance of tax-exempt governmental bonds for professional sports stadiums, which would be subject to the same limitations currently applicable to such bonds. The House Proposal eliminates the tax exemption relating to any such bonds issued after November 2, 2017, including any professional stadium refunding bonds issued after such date.
The Senate Proposal preserves Low Income Housing Tax Credits (LIHTCs). Under the House Proposal, 4% LIHTCs are effectively eliminated without the existence of PABs for multifamily residential rental projects after December 31, 2017.
The Senate Proposal preserves the 2018 and 2019 rounds of New Markets Tax Credits (NMTCs). Under the House Proposal NMTCs are eliminated after December 31, 2017.
The Senate Proposal to eliminate the alternative minimum tax and simultaneously preserve PABs could be beneficial to airport and port facility bonds, as well as other types of exempt facility bonds.
The Senate Proposal leaves present law with respect to mortgage credit certificates (MCCs) undisturbed. The House Proposal eliminates MCCs after December 31, 2017.
Kutak Rock continues to work with the National Association of Bond Lawyers and other industry associations to closely monitor developments relating to tax legislation 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 about this pending legislation and its effect, you may contact any member of Kutak Rock’s 103 Tax Group below as well as any member of its National Public Finance Group:
Adam R. Baird
Kevin L. Barney
(312) 602 4100
Mitchell J. Bragin
(202) 828 2400
David A. Caprera
(303) 297 2400
Larry L. Carlile
(303) 297 2400
Matthias M. Edrich
Robert B. Henderson
David S. Lu
Shawn M. Willette
(303) 297 2400