We have been working very closely with ML Strategies for the last 2 months and have already noticed the impact we are making having them on our side. The Advocacy Committee has been working with them to develop a Strategic Plan. Find the Strategic Plan here.
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We are pleased to share this Advocacy Report for December 2016 and January 2017, updating NAHEFFA on developments related to tax reform on Capitol Hill, the new Trump Administration, and how we are working with NAHEFFA(in close coordination with Chuck Samuels) to defend non- profit tax exempt bonds (TEBs).
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. On Thursday, the US Conference of Mayors met with President Elect Trump. As you will see from the clips below, they believe that their message on tax-exempt bonds was well received.
https://www.c-span.org/video/?c4638082/trump-shows-support-tax-exempt-status-municipal-bonds https://www.c-span.org/video/?420221-103/mayors-speak-reporters-trump-tower As we discussed on the webinar, we need to take President-elect Trump’s and his advisers’ pronouncements both seriously and literally.
In that regard, two of his major economic advisers, who could very well end up in high places in the Administration, wrote this paper on infrastructure. It's worth your reading as finance professionals. They propose heavy tax credit incentives to obtain massive private investment paid for by the repatriation of corporate profits now being held abroad. It contains somewhat favorable references to conventional tax exempt financing albeit with some criticisms with respect to the purported inefficiencies of government financed construction (not really relevant to nonprofit financing) and even the need to follow a shorter construction schedule as required by the tax laws. It also states that there are limitations to muni bonds where revenue flows from the project are weak. Presumably that means that the tax credits will be used to over subsidize private investment. In any case, one of muni community’s tasks will be to integrate this type of proposal with the maintenance of the well-functioning conventional financing structure. Wow. One hardly knows what to say and certainly virtually everybody in Washington needs to take an enormous dose of humility, particularly in our prognostications.
There will be time for lots of commentary and evaluation—join us on the November 16 webinar!! - but here are at least a few thoughts: In terms of what happened yesterday, it appears that Mr. Trump – and now that he is President-elect, a much more respectful tone is required – will receive fewer votes than Sen. McCain or Gov. Romney did when they lost. The Democrats did not get out the votes. African-American, Latino and younger voters failed to show up at the polls in sufficient numbers Tuesday to propel Clinton into the White House. While she won the key demographic groups her campaign targeted, she underperformed President Obama across the board, even among women. Trump mobilized enormous margins among rural and exurban voters, and crushing advantages among blue-collar whites. In several cases, he prevented Clinton from making as many gains among college-educated white voters as seemed possible. The Republican voters came back to the roost. That allowed Trump to overcome Clinton’s strong performance among minority voters and college-educated white women. Trump’s victory also upended long-standing political wisdom favoring candidates who raise more money and outspend their rivals. Trump was outraised and outspent by Clinton. But however you feel about all this, you still have authorities to run. So what does this mean for us? My initial take is whether or not Ryan survives as Speaker, the Republican control of the government will allow tax reform to move ahead. Both Mr. Trump's and Mr. Ryan's speeches last night emphasized that. Nobody's thinking that House Ways and Means Chairman Kevin Brady's position is threatened, and he's been saying over and over that he is operating under the assumption that a House vote on tax reform bill in 2017 will be premised on the reforms that the GOP released in June. You recall that that blueprint probably is best interpreted to have eliminated tax-exempt bonds. Mr. Trump remolded his original tax plan to move toward House Republicans. His plan for massive infrastructure investments seems to be hinged on tax credits for private investment. Whether that would be in lieu of traditional municipal financing or not is unknown. Of course, the same committees that work on this issue would have to figure out what they're going to do about Obama care which they now own whether they like it or not. Tomorrow, I meet with the Public Finance Network of state and local government groups and issuers and part of the agenda certainly will be how to influence the transition planning as well as the new key administration officials, as they become known. There also is the very significant area of Mr. Trump’s stated commitment to unwind major portions of the Dodd Frank Act. What that would mean for the provisions that affect munis, such as the MA rule and some of the restrictions on investments by banks and mutual funds, also is unknown. So that's just a couple thoughts. There will be much, much more, and I hope you will join us on the November 16 webinar with my colleagues from ML Strategies who will attempt to sort this out with a bit more time to reflect. Trump's Tax, Infrastructure Plan Jeopardize Tax Exemption for Munis
By Evan Fallor and Jack Casey and Lynn Hume November 9, 2016 Both Donald Trump and House Republicans are pushing for tax reform plans that would lower individual and corporate tax rates and broaden the tax base, repealing or restricting tax deductions and exemptions. RELATED Muni Pros Bemoan Lack of Detail in Tax Plans for Infrastructure, Muni Exemption Tax Credits Drive Trump's $1 Trillion Infrastructure Plan WASHINGTON -- Donald Trump's presidency and the Republican-controlled Congress set the stage for historic tax reform and increased spending on infrastructure next year, which has the potential to jeopardize the tax exemption for municipal bonds, according to market participants. Both Trump and House Republicans are pushing for tax reform plans that would lower individual and corporate tax rates and broaden the tax base, repealing or restricting tax deductions and exemptions. "The win, because it means that the GOP will control the executive office and both houses of Congress, almost surely means the next Congress will act on major tax legislation focused on cutting rates," said Frank Shafroth, director of the Center for State and Local Government Leadership at George Mason University. "I would guess it will be the most significant, early bill signed into law by the new president." "They're going to strike while the iron is hot," agreed Chuck Samuels, a partner at Mintz Levin. The end of every Congress brings a plethora of new bills introduced for the purpose of political impact and symbolism not the serious intent that they become law. HR 6048 was introduced by several African-American members of Congress. It appears that it would prohibit state and local governments from taxing bonds for historically black colleges and universities and would provide these governments with substitute federal funding.
Interestingly, the legislation was drafted to amend the securities laws as well as the tax laws. I assume this legislation will be reintroduced next year. If you are interested in our association engaging on this legislation in some way, please let Martin Walke or me know. CQ News
Oct. 12, 2016 Wyden, foreground, was Finance chair in 2014. (Bill Clark/CQ Roll Call) Sen. Ron Wyden says scrutiny of Donald Trump's personal income taxes could help build consensus for a tax overhaul early next Congress - one of his top priorities as Finance chairman if Democrats win back the Senate majority in the elections. The Oregon Democrat told CQ Roll Call that the flap over Trump's refusal to release his tax returns and his use of write-offs for large business losses could help drive the debate for the tax committee next year. "The events of the last month have shown how broken the American tax code is," Wyden said in an interview Tuesday. "It shows that the complexity of all this is hugely helpful to the powerful special interests. So, we've got a new argument for simplicity and clarity." Trump acknowledged during the presidential debate Sunday that he used a $916 million loss that he reported on his 1995 tax returns to avoid paying federal income taxes. His comment came after The New York Times reported the nearly billion-dollar loss could have been large enough for the real estate developer to avoid paying federal income taxes for up to 18 years. As a follow up to both the cover article in last month's newsletter and the panel discussion at the Fall Conference, please see the Election Forecast prepared by ML Strategies.
Citi Response to Tax Foundation and CBO 2010 Analysis of High Impact of Infrastructure Investment8/19/2016 At a meeting I participated in with the staff of Congressman Randy Hultgren from Illinois, Co-chair of the House Municipal Finance Caucus, two important analyses were discussed which are worth circulating.
First, Citi has an excellent critique of the recent Tax Foundation report critical of muni bonds which I circulated and was the subject of my interview in the Bond Buyer. It deals head-on with some of the basic criticisms of TEB’s and we all should have it in our arsenal. Second, I was reminded of an earlier CBO study which indicated that infrastructure spending is one of the top options for immediately accelerating job and economic growth. This, of course, is consistent with our national study of nonprofit bonds and the studies many of you have done on a state basis. Please let me know if you have any questions or comments. Of note, there is a focus by the muni bond community at this point in supporting legislation to reverse the restrictions on money market funds that have resulted in the closing of tax exempt bond funds. I've seen lists of the holdings of these funds and they include a number of our bonds. We are supporting the effort although it mainly affects state and local governments for which the bonds are not just a source of investors but also a place to invest themselves on a short-term and flexible basis. |
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December 2019
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