American communities are in need of a permanent financing tool that they can access immediately after disaster strikes, and CDFA is actively working with members of Congress to pass legislation that will create a permanent tax-exempt bond program for disaster recovery. As part of our efforts to find a permanent financing solution for disaster recovery, CDFA will host a webinar on November 14th at 2:00 PM Eastern that highlights the available economic recovery tools for regions impacted by natural disasters. Register for the webinar here.

In this third quarter installment of the Quarterly Legislative Update, CDFA's Legislative Team provides a progress report on pending CDFA legislation, an update on Tax Reform 2.0 and other major Congressional initiatives, as well as what to expect from Congress in both the lead up and aftermath of the midterm elections. 

Democrats are planning to pursue a major U.S. transportation and infrastructure measure if they retake control of the U.S. House in the midterm elections. House Democrats could start hearings in late January if they take power, with the aim of crafting a bill that could pass by May.

H.R. 7037, introduced Oct. 5, would create a revolving loan fund program for states, to be run jointly by the Federal Emergency Management Administration (FEMA) and state governments. The program would provide the nation's first sustainable source of money for flood mitigation projects.

The federal policy making environment for bonds will be more favorable if Democrats win control of the U.S. House in the November election. With a Democratic majority, the new W&M Committee chair would be Rep. Richard Neal, who has historically supported bond issues like CDFA's Modernizing American Manufacturing Bonds Act.

The U.S. Senate passed the Water Resources Development Act by a vote of 99-1. The bill reauthorizes WIFIA, the Drinking Water State Revolving Fund, the Clean Water Act, and authorizes $6.1 billion for Army Corps of Engineers studies.

Congress passed a bill with disaster aid and a five-year reauthorization of the FAA that would provide airport authorities with new flexibility without increasing their funding. The legislation also includes disaster recovery reform measures that gives local governments more leeway to spend federal disaster aid on pre-disaster planning and mitigation.

The TCJA significantly lowered the corporate tax rate, which may have the unintended consequence of reducing the number of affordable apartments being built each year. Theoretically, investors will have less incentive to make equity investments in below-market-rate apartment complexes in return for credits that lower their federal tax bills.

Novogradac & Company highlights the 2018 CDFA Volume Cap Report with a post focused on 2017 multifamily housing bond issuance numbers. In 2017, the 50 states and the District of Columbia reported issuing a record $15.3 billion in multifamily rental housing bonds, representing a 9.3 percent increase from the previous record. 

The U.S. Department of the Treasury's CDFI Fund has opened the fiscal year 2019 application period for the CDFI Bond Guarantee Program. The CDFI Bond Guarantee Program responds to the critical market demand for long-term, low-cost capital that can be used to spur economic growth in low-income communities.

The Internal Revenue Service is publicly affirming that last year's tax law changes do not preclude the issuance of tax-exempt bonds to advance refund non-tax-advantaged, taxable bonds. The assurances were made in an IRS Chief Counsel Memorandum released on October 26.

The U.S. Environmental Protection Agency (EPA) is inviting 39 projects in 16 states and D.C. to apply for Water Infrastructure Finance and Innovation Act (WIFIA) loans. Together, the selected borrowers will receive WIFIA loans totaling up to $5 billion to help finance over $10 billion in water infrastructure investments and create up to 155,000 jobs.

The recently proposed Opportunity Zones guidelines require that businesses generate at least half their gross income within an Opportunity Zone. According to various investors and venture capitalists, the 50 percent requirement will hurt high-growth startups.

Clark Schaefer Hackett has released an overview of the IRS proposed regulations for Opportunity Zones. The Opportunity Zones provision allows taxpayers to defer tax on capital gains by investing their gains in qualified Opportunity Funds.

With Democrats hoping for a wave election that would roll back Republicans' power in Congress, analysts are gauging how the return of a divided government -- or a narrower Republican margin -- could ripple through various corners of Wall Street. Among them is the $3.9 trillion state and local government bond market.

Projects financed by private activity bonds are projected to fall by more than 27 percent over the next eight years, according to recent data from the Internal Revenue Service. There were 3,043 bond issues in 2017, a figure that is expected to decrease to 2,200 by 2025.

GASB is accepting comments through Nov. 2 on a proposal to clarify the definition of a conduit debt obligation and eliminate the option for government issuers rather than borrowers to recognize conduit debt obligations, thereby providing a single method of reporting. CDFA's Tim Fisher is quoted in the article.