American Bar Association Section of Taxation Tax-Exempt Financing Committee Boca Raton, Florida January 21, 2011

Transcription

1 American Bar Association Section of Taxation Tax-Exempt Financing Committee Boca Raton, Florida January 21, 2011

2 Rick Ballard John Cross Perry Israel Moderator: Arthur Anderson 2

3 3

4 Too much of the benefit, particularly from BABs, flows to "prolifigate states" --the political... irnptaus1511ify6fneofaska-ancltexasoiiilin-g out California and Illinois Stimulated the incurrence of large amounts of new, shaky debt "Crowding out" private investment Implicit or explicit federal "guarantee" (?) 4

5 Needed to induce infrastructure investment and joo c-ieatioii Re-energized municipal bond market Brought new investors into the municipal bond market--such as pension fllnds and foreign buyers, which have no use for tax -exempt interest 5

6 Cost and Proliferation of Stimulus: ----February20D9~ARRA ~ $_7-8-7 Biloon - March HIRE ACT - $32 Billion - August Emergency State Fiscal Aid - $26.1 Billion - September Additional Infrastructure and NIB - $50 Billion - September Obama Budget Proposes Permanent Extension ofbabs with 28% Subsidy - Cost of December 2010 White House/Republican Tax Compromise - $858 Billion 6

7 The Issue Price Controversy Reports of BABs Audits / Subsidy Withholding Florida and Iowa PullOut of BABs Market BAB Issuers Receive IDRs Seeking Identities of ",-J\ffiliated Purchasers (Pension Funds) 7

8 Senator Grassley vs. Wall Street Illinois is named the least creditworthy state in the Union; Sells $300 million of GO BABs at 7.1 % Governor Schwarzenegger Vetoes BABs Subsidy Securitization Bill 8

9 Huge Republican Gains on November 2 Timing of Release of Tax Reform Proposals 9

10 Selected Provision Bank Qualified rules AMT rules 2% de minimis rule BABs/RZEDBs RZ Facility Bonds Manufacturing Facilities QSCBs QZABs NewCREBs QECBs _. Pre-Stimulus Act Only tested at issuer level; $10M annual cap for each issuer Bond interest was an AMT preference item for non-501(c)(3) private activity bonds (exeept-fur-temporary exception for- certain housing -bonds); A -Emay be included in corporate AMT calculation for all bonds 2% rule does not apply to allow an interest deduction for carrying costs of bonds held by financial institutions None None Intangible property cannot be financed; Tight limits on non-core manufacturing facilities None Tax credit available; Limited volume cap Tax credit available; Limited volume cap Tax credit available; Limited volume cap 10

11 u Selected Provision Bank Qualified rules. AMlrutes 2% de minimis rule BABslRZEDBs RZ Facility Bonds Manufacturing Facilities QSCBs QZABs NewCREBs QECBs Change from Pre-Stimulus to HIRE ACT Could be applied at borrower level; $30M annual cap for each borrower or Issuer an),oonas; A:CErior U. Borfolntere-st nocan-amt]5refefenceifem-roi included in corporate AMT calculation for any bonds 2% rule does not apply to allow an interest deduction for carrying costs of bonds held by financial institutions 35% / 45% direct subsidy for qualifying bonds Tax-exemption available as exempt facility bond Intangible property may be financed; No limit on financing same-site functionally related and subordinate property Tax credit / direct subsidy available Direct subsidy also available; increased volume cap Direct subsidy also available; increased volume cap Direct subsidy also available; increased volume cap 11

12 Selected Provision Bank Qualified rules AMT rules 2% de minimis rule BABslRZEDBs RZ Facility Bonds Manufacturing Facilities QSCBs QZABs NewCREBs QECBs Revert to pre-stimulus Post-Stimulus Revert to pre-stimulus; Not clear how refundings of stimulus era bonds are. treated -lmtprebablyde--net~ preferential AMTtreatment Does not apply to new money bonds but can be carried over in a refunding None None Revert to pre-stimulus No longer authorized except both tax credit and direct subsidy are available with use of carryover allocation New authorization for 2011; direct subsidy only available with carryover of 2009 and 2010 allocations, not with 2011 allocation Direct subsidy still available; no new volume cap Direct subsidy still available; no new volume cap 12

13 Tax Reform (See Handouts A, B and C) - Deficit Reduction Commission - Rivlin / Domenici - Nina Olson - Dave Camp Federal Debt Ceiling 13

14 - - _.. -BtttlinePreparedby~ - Arthur E. Anderson II McGuire Woods LLP