Bloomberg News
Advocating for maintaining the tax-exempt status for municipal securities will be “a priority” for the Securities Industry and Financial Markets Association going forward, SIFMA’s President and CEO Kenneth E. Bentsen, Jr. said Tuesday.
“Obviously, we have a forward-looking view with respect to public finance,” Bentsen said during SIFMA’s State of the Industry Briefing. “We’ve advocated for many years for Congress to restore advanced refunding authority, to address and update the small issue rules and to look at bringing back what used to be called the Build America Bonds.”
However, the current environment also warrants taking “a more defensive view” as Congress considers extending expiring provisions of the Tax Cuts and Jobs Act of 2017 and how potentially to pay for that, he said.
“And I know there have been some reports that have suggested that Congress may look at going back and thinking about the tax treatment of municipal bonds broadly or perhaps more narrowly with respect to private activity bonds or some derivative of that,” Bentsen said.
For SIFMA and its members, those are “major issues,” he said.
“We will certainly be advocating for maintaining the tax-exempt status for municipal securities,” Bentsen said. “This is a key financing tool for state and local governments, nonprofits, hospitals, universities and the like and it’s a key funding of infrastructure in the United States, so this will be a priority for us going forward.”
The House Ways and Means Committee is weighing the total elimination of tax-exempt bonds according to a list of targeted programs, policies and plans for a reconciliation bill obtained by The Bond Buyer on Friday. While the list is wide-ranging and tentative, it represents a nightmare-come-true for the municipal bond market, which for months has fretted that its treasured tax exemption could be in jeopardy.
Eliminating the exclusion of interest on state and local bonds would yield $250 billion in savings over the 10-year timeframe required by a reconciliation bill, according to the list.
“This option would end the exclusion, making income from municipal bond interest taxable,” the document said.
Doing away with “tax preferences” for private activity bonds, Build America Bonds, and other non-municipal bonds would generate $114 billion in 10-year savings, the document said.