CDFA Legislative Front
June 2008
Expanded Definition of Manufacturing for IDBs Continues to Gain Support
-CDFA 2007 National Volume Cap Report Shows Increased Issuance Due to Past Legislation-
CDFA’s legislation to expand the use of industrial development bonds (IDBs) continues to gain momentum. S. 2885 was introduced in the Senate in April, and CDFA staff and members are working towards the finalization of an introduction in the House of Representatives.
The legislation allows for more high-tech companies to use IDBs. S. 2885 would amend the tax code to allow companies that produce “intangible,” as well as tangible, products to use IDBs. Current law only allows the financing of tangible goods with IDBs.
Once a bill is introduced in the House, CDFA’s grassroots campaign will reach out to both chambers of Congress with particular emphasis on the Senate Finance and House Ways and Means committees.
Last year saw a dramatic increase for IDB usage with over $2.9 billion of IDBs issued (compared to $1.2 billion in 2006). This drastic increase in IDB usage shows the important show role this financing tool can play in stimulating the economy. The expanded definition of manufacturing would also allow for continued growth in the use of IDBs.
The full CDFA 2007 National Volume Cap Report is available online. >>>READ THE REPORT
The CDFA legislative page has more information concerning all of CDFA’s legislative efforts.>>>LEARN MORE
Supreme Court Rules in Favor of Kentucky in Bond Case
The United States Supreme Court came back with a ruling on a long awaited case concerning municipal bonds. The Court ruled that states can continue to treat income from municipal bonds issued in their state as tax-exempt but treat income from municipal bonds from other states as taxable.
The justices ruled in favor of the current practice in the case of Kentucky v. Davis. The decision overturns an appellate court decision that ruled the state could not give preferential treatment to one type of bonds.
Currently, 42 states follow this practice concerning the treatment of in-state bonds and bonds in other states.
Farm Bill Enacted Over President’s Veto
Both the House and Senate were successful in overriding the President’s veto to pass the long debated Farm Bill, which contains a number of bond provisions.
Prominent changes include an increase in the maximum size of aggie bonds to $450,000 (an increase of $200,000). Aggie bonds are targeted at helping first-time farmers and ranchers acquire land. Restrictions were also eased regarding the amount of land a first-time farmer may acquire through the program.
The bill also contains provisions for $500 million of timber conservation bonds.
It appears that due to an incomplete bill being sent to the White House after it was passed, Congress will have to re-vote on and send the complete bill back to the White House. It is unclear if the complete version would be vetoed since Congress already has the votes to override the veto.
Ways and Means Passes Bill with $5.4 Billion of Tax Credit Bonds
HR 4069, the Energy and Tax Extenders Act of 2008, passed the House Ways and Means Committee last month. The legislation contains $3 billion in qualified energy conservation bonds to help states reduce greenhouse gas emissions. The bill also authorizes another $2 billion in clean renewable energy bonds for facilities that produce electricity from renewable resources.
A similar Senate bill is still in the Senate Finance Committee. Both bills also attempt to patch the alternative minimum tax for another year.