UPDATE: RECENT DEVELOPMENTS IN TAX REFORM
In addition to the start of a new congress and a new administration, this year marks the 30th anniversary of the Tax Reform Act of 1986, a landmark bill that is recognized as the single largest reform of the U.S. tax code in the nation’s history. There seems to be broad consensus across the political spectrum that the time has once again come for an overhaul of the tax code. The election of a new Republican president who will work alongside a House and Senate with Republican majorities seems to have created the perfect scenario for comprehensive tax reform in 2017 – most likely through budget reconciliation, which is an accelerated process that would permit the GOP to more easily pass tax reform legislation without a potential Senate filibuster.
One of the initial items taken up by the new congress was a first-step in the repeal of Obamacare via the Fiscal Year 2017 budget resolution. The resolution includes tools to allow repeal legislation to move through a fast-track process and pass with a simple majority in the Senate, as in the House; and reconciliation instructions to accommodate legislation to ultimately repeal and replace Obamacare, and to accommodate patient-centered health care reform legislation in the future.
- Congressional Republicans have not yet staked out a position on TEBS in tax reform, although it is the general view that the Republican “Blueprint” for tax reform would remove the exemption. On December 14-15, 2016 Republican members of the House Ways & Means Committee met at the Library of Congress for a policy conference to discuss the way forward on tax reform and health care. Coming out of the conference members were split on how to go about achieving reform of the tax code. As a result, MLS activated NAHEFFA’s members via a Call to Action focused on GOP Ways & Means members, urging them to protect the municipal TEB exemption. MLS is hearing from key contacts that the current focus in the House with regard to tax reform is on the GOP’s border adjustment proposal, which is a controversial issue for some but has the support of Speaker Ryan and House Ways & Means Chairman Brady and is therefore likely to have the support of Republican Ways & Means members.
- Rep. Richard Neal (D-MA), the new Ranking Member of the House Ways & Means Committee, publicly stated earlier this month that the tax exemption for municipal bonds should be preserved. He also called for Build America Bonds (BABs) to be reinstated. BABs were created as part of the American Recovery and Reinvestment Act (ARRA) in 2009. The program expired at the end of 2010, but Ranking Member Neal has introduced legislation in the ensuing years to reinstate the BABs program.
While that second budget resolution had been expected sometime in the spring, it now appears to be slipping into the summer and possibly autumn, giving us additional time to advocate for the protection of the municipal TEB exemption. However, the additional time makes action no less imperative, and MLS will be hard at work throughout the year making the case for preservation of TEBs in tax reform.
TRUMP ADMINISTRATION
As reported in our last advocacy report, President Trump indicated in a meeting with the U.S. Conference of Mayors in December that he supports the continuation of the tax exemption for municipal debt.
President Trump’s nominee to serve as Secretary of the Treasury spent 17 years of his career at Goldman Sachs during which time he was in charge of mortgages, U.S. government bonds, and municipal securities. The Senate Finance Committee held a hearing on January 19 to consider the nomination of Mr. Mnuchin to serve as Treasury Secretary, and ML Strategies shared an embargoed copy of Mr. Mnuchin’s prepared testimony with the Advocacy Committee ahead of the hearing.
Following the Senate Finance confirmation hearing, Mr. Mnuchin responded to several questions for the record on issues of importance to NAHEFFA:
With regard to municipal bonds Mr. Mnuchin responded:
“The President is committed to rebuilding America’s infrastructure. If confirmed I will work with Congress to determine the role of tax exempt financing vehicles under that plan and as part of broader tax reform.”
With regard to private activity bonds, Mr. Mnuchin responded:
“Private activity bonds are a valuable way to incentivize private investment in America’s infrastructure. There are areas where we can improve private activity bonds, including changing volume caps for certain types of projects. If confirmed, I plan to review ways to enhance private activity bonds with the goal of driving more private investment into American infrastructure.”
These are very helpful comments but please don’t be lulled into complacency. It is unclear how much impact the new Administration will have on legislative details.
UPDATE ON RECENT ADVOCACY EFFORTS
- On December 15, 2016, MLS coordinated meetings for President Murr and Advocacy Chair Walke with:
- Republican and Democratic staff at the House Ways & Means Committee
- Staff for Sens. Bill Cassidy (R-LA) and Maria Cantwell (D-WA), both members of the Senate Finance Committee
- Staff for Sen. Patty Murray (D-WA), Ranking Member of the Senate Health, Education, Labor and Pensions Committee, as well as a member of Senate Democratic leadership
- Rep. Dave Reichert (R-WA), a member of the House Ways & Means Committee
On January 6, MLS had Advocacy Chair Walke back to Washington in January for meetings with:
- Republican and Democratic staff at the Senate Finance Committee.
These were all critically important meetings. Ranking Member Wyden’s staff, in particular, expressed support for TEBs and stated that the Senate position was likely to be more favorable toward TEBs than that of the House.
We have been coordinating with a number of authorities in their contacts with their congressional delegations. If you need help shaping your message or making contact please let Neal Martin know. His email is [email protected].
- NAHEFFA also joined with 28 other organizations earlier this month to send a letter to Congress sharing how municipal bonds remove barriers to commerce and make communities livable. The letter offered the signatory organizations, as well as the Congressional Municipal Finance Caucus staff, as a resource on tax-exempt municipal bonds.
- ML Strategies and Chuck Samuels have continued to represent NAHEFFA at meetings of the Public Finance Network, the “Don’t Mess with Our Bonds Coalition”, and Municipal Bonds for America (MBFA). These meetings are proving extremely valuable in ensuring that our advocacy efforts are complementary to those of our industry partners.
NEXT STEPS FOR FEBRUARY & MARCH 2017
While much is unknown about what to expect for TEBs in tax reform, what we do know is that NAHEFFA must be seriously engaged in the coming months in order to defend nonprofit municipal bonds, and we are already hard at work educating key congressional staff about how TEBs are making a positive impact in their district or state.
- NAHEFFA member organizations received a Call to Action last December asking that they reach out to their Republican members of congress serving on the House Ways & Means Committee.
- MLS is now expanding that Call to Action to include outreach to all Senators, Republican and Democratic, serving on the Senate Finance Committee, urging their support for preservation of TEBs in comprehensive tax reform.
- ML Strategies will be coordinating in DC to follow up on those outreach efforts, and asks that you alert Neal Martin ([email protected]) when contacts are made and share any feedback received.
- MLS will brief staff for Senate Majority Leader McConnell (R-KY) and Senate Ranking Member Charles Schumer (D-NY) on NAHEFFA’s position regarding TEBs in tax reform.
- NAHEFFA’s Spring Conference to be held April 3-5 in Alexandria, VA.
- ML Strategies will be assisting NAHEFFA members to coordinate Capitol Hill visits during the Spring Conference in April by providing assistance in scheduling meetings and preparing leave behind material.
- NAHEFFA member authorities active on Twitter are encouraged to use the hashtag #BuiltByBonds when tweeting about projects built by bonds.
- ML Strategies and Mintz Levin will continue to represent NAHEFFA at meetings of the Public Finance Network, the “Don’t Mess with Our Bonds Coalition”, the MBFA, and other coalition groups.
Please don’t hesitate to contact us regarding this critical effort.