The Biden government is proposing to approve $ 50 billion in direct-paid qualifying school infrastructure bonds and double the cap on tax-exempt private transportation infrastructure activity bonds to $ 30 billion.
The Treasury Department’s so-called Green Book published on Friday on proposed changes to tax law also calls for an improvement in the low-income housing tax credit, which is often used for bond-financed apartment buildings.
President Joe Biden during a visit to Northern Virginia Friday afternoon after his administration released details of its proposed 2022 budget earlier in the day, including approving $ 50 billion directly paid qualifying school infrastructure bonds.
The document proposes a total net increase in taxes of $ 2.4 trillion over a 10-year period, most of which was previously outlined by President Biden. Highlights include an increase in corporate tax to 28% and an increase in the highest individual tax rate to 39.6%.
However, the administration’s list of tax relief measures does not mention Tax Change # 1 – a reinstatement of the early debt redemption tax exemption – being sought by state and local governments.
There is also no mention of another top priority for local governments and nonprofits – raising the tax-exempt bank-qualifying debt limit to $ 30 million for nonprofit borrowers.
Both provisions are likely to be considered by the House Ways and Means Committee and the Senate Finance Committee as they look at ways to fund infrastructure legislation.
Indeed, they enjoy bipartisan support.
More discouraging could be efforts by some Northeastern lawmakers to lift the $ 10,000 federal withholding limit on state and local taxes. The Biden tax plan does not mention SALT.
The Proposal for Qualified School Infrastructure Bonds, also known as QSIBs, revives a proposal that House Democrats put forward in their unsuccessful infrastructure legislation last year that never received a Senate vote.
QSIBs were also part of the American Recovery and Reinvestment Act, enacted in February 2009.
This new round of proposed taxable QSIBs is similar to Build America direct-paying bonds and can be issued over a three-year period from 2022 to 2024 with an annual limit of $ 16.7 billion per year.
The Treasury Department said the QSIBs “will attract new sources of capital to invest in our country’s schools”.
“The division of this borrowing authority among states would be based on the proportion of funding each state receives under Title I, Part A of the Elementary and Secondary Education Act of 1965,” the Treasury Department said.
“Either the bondholders’ interest would be paid in the form of a tax credit equal to 100% of the interest on a QSIB, or the bondholders would receive cash from the bond issuer and the federal government would make appropriate direct payments to the bond issuer. Said the Treasury.
Each state would have to use at least 0.5% of its QSIB allocation for remote areas and at least 0.5% for schools funded by the Bureau of Indian Education.
Priority would be given to using the proceeds to reopen schools and eligible uses would include expanding access to high speed broadband for digital learning.
The administration did not propose revitalizing the BABs for other public infrastructures, but their support for QSIBs is likely a sign that the administration would not speak out against it.
Sens. Michael Bennet, D-Colo., And Roger Wicker, R-Miss., Are primary sponsors of the American Infrastructure Bonds Act of 2021, which would create a new series of direct payment bonds that, unlike BABs, would exempt federal budget cuts – Sequesters.
The Bennet-Wicker bill provides for eight bipartisan Senate sponsors, split evenly between Democrats and Republicans.
These taxable bonds would be marketable to pension funds and foreign investors, while municipal issuers would receive 28% direct payments from the Treasury.
Senate Finance Committee chairman Ron Wyden, D-Ore. Said he intends to ensure that direct pay bonds become part of infrastructure legislation passed by the Senate.
The $ 15 billion transportation PABs would be allocated by the Department of Transportation. Public transport, passenger transport and zero-emission vehicle infrastructure would be added as qualified activities for which such bonds can be issued.