The Tax Bill introduced yesterday in the U.S. House would drastically curtail tax-exempt financing used by States and municipalities and eliminate all tax-exempt financing for charitable 501(c)(3) organizations beginning next year.  It also severely restricts the ability to refinance all OUTSTANDING tax-exempt debt by eliminating advance refunding bonds.

The Tax Bill proposes to eliminate ALL tax-exempt financing for charitable 501(c)(3) organizations (e.g., schools, hospitals, colleges, retirement communities, etc.).  It also eliminates or severely restricts the ability to use tax-exempt bonds to finance public infrastructure projects such as airports and utilities — even if owned by a State or municipality.  Also eliminated are bonds for single family housing and rental housing, charter schools, manufacturing facilities, student loans and many public-private partnership financing structures.

The Tax Bill’s changes would apply to ALL TAX-EXEMPT DEBT issued after 2017, and therefore potentially impacts refinancing or remarketing of existing tax-exempt debt as well as financings for new projects.

These proposals were unexpected by the municipal finance community and are inconsistent with assurances previously provided by congressional leadership. The legislation is on an extremely accelerated time schedule, with a final vote scheduled to occur prior to Thanksgiving. We urge you to immediately contact your representative to let them know your concerns.  A copy of a letter that can be used for this purpose is available here.

A summary of the key bond provisions and additional informational material can be found here: https://waysandmeansforms.house.gov/uploadedfiles/tax_cuts_and_jobs_act_section_by_section_hr1.pdf.

Please do not hesitate to contact your Gilmore & Bell lawyer if you have any questions or would like to discuss the potential impact to your tax-exempt bonds.

Posted: Nov 3, 2017