Democratic lawmakers on the House Ways and Means Committee have introduced a new bill intended to finance infrastructure investments to create jobs.
H.R. 992, the Building American Jobs Act, includes a variety of bond and tax provisions, extending the Build America Bonds program, which helped finance an estimated $181 billion in infrastructure projects in the last two years. The bill would extend the BAB program through 2012, with a 32 percent subsidy rate in 2011, and 31 percent subsidy rate in 2012. BABs spur job creation and unleash private-sector investments by helping state and local governments finance infrastructure projects—building schools, hospitals, transit systems, and water systems.
The bill would make an additional allocation of Recovery Zone bonds to ensure that each local municipality receives a minimum allocation equal to at least its share of national unemployment in December 2009. The bill would also extend the authorization for issuing Recovery Zone bonds through 2011.
In addition, the bill would exempt water and sewer projects from the private activity bond cap. The bill would exclude bonds financing facilities that furnish water and sewage facilities from state volume caps. The bill would also exclude bonds financing facilities that furnish water and sewage facilities from certain limitations on tribal government issuances.
The bill would also eliminate costs imposed on state and local governments by the alternative minimum tax when issuing bonds. The AMT can increase the cost to state and local governments of issuing tax-exempt private activity bonds. In general, interest on tax-exempt private activity bonds is generally subject to the AMT. This limits the marketability of these bonds and, therefore forces state and local governments to issue these bonds at higher interest rates. The American Recovery and Reinvestment Act excluded private activity bonds from the AMT if the bond was issued in 2009 or 2010, and allowed AMT relief for current refunding of private activity bonds issued after 2003 and refunded during 2009 and 2010. The bill would extend both of these ARRA provisions for one year, exempting them from AMT tax-exempt private activity bonds issued in 2011 and current refunding of private activity bonds issued after 2003 and refunded during 2011.
In addition, the bill would allow the New Markets Tax Credit to be claimed against the AMT with respect to qualified investments made between March 15, 2010 and Jan. 1, 2012.
The bill would extend the ability of federal home loan bank bond guarantees to guarantee tax-exempt bonds through 2011. It would also provide a small issuer exception for bank-qualified bonds, extending the ability of financial institutions to purchase tax-exempt bonds of up to $30 million per issuer (from $10 million) through 2011.
A Low-Income Housing Tax Credit exchange program provision would extend the ability of states to receive a portion of their LIHTC allocation as a direct payment through 2011.
“These proven programs are vital in our effort to rebuild America’s infrastructure—and economy,” said Ways and Means ranking Democratic member Sander Levin, D-Mich., in a statement. “There are still far too many states and municipalities – in addition to the 14 million unemployed Americans—struggling to regain their footing after the Great Recession and this legislation gives them the tools to make long-needed investments.”
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