[Congressional Record Volume 141, Number 15 (Wednesday, January 25, 1995)]
[Extensions of Remarks]
[Pages E174-E175]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


INTRODUCTION OF TAX LEGISLATION TO REPEAL THE $15 MILLION LIMITATION ON 
                     TAX EXEMPT PUBLIC OUTPUTBONDS

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                          HON. RICHARD E. NEAL

                            of massachusetts

                    in the house of representatives

                       Wednesday, January 25, 1995
  Mr. NEAL of Massachusetts. Mr. Speaker, today I am reintroducing 
legislation to amend the Internal Revenue Code of 1986 to repeal the 
special $15,000,000 limitation on the amount of a tax-exempt bond issue 
which may be used to provide an output facility. The intent of this 
legislation is to treat public power in the same manner as other public 
facilities.
  Traditionally, States and local governments and other public entities 
have relied on the issuance of municipal tax-free bonds to finance 
construction of a wide range of essential public facilities, including 
schools, roads, water and waste water treatment systems, electric and 
gas utilities, hospitals, health centers, prisons, and public transit. 
The Tax Reform Act of 1986 included numerous provisions restricting the 
use of tax exempt bonds. These provisions were enacted in order to curb 
abuses in the bond community and to increase revenue to reduce the 
Federal budget deficit.
  One of the changes made in 1986 was the extent to which private 
parties could benefit from the use of facilities financed by tax-exempt 
bonds. Pre-1986, up to 25 percent of facilities constructed through the 
issuance of tax-exempt bonds could benefit from the use of facilities 
financed by tax-exempt bonds. The Tax Reform Act of 1986 reduced this 
restriction to 10 percent for all Government bonds. However, a further 
limitation was imposed on public power and public natural gas 
transmission facilities. The private use test for public power is the 
lesser of 10 percent of $15 million. No other entities are subject to 
the $15 million private-use test.
  The removal of the $15 million cap would place public power on equal 
footing with other 
[[Page E175]] public facilities. The additional restriction on public 
power hampers the ability of these entities to buy and sell power in 
the open market. In addition, the restriction constrains public power 
entities from building units of a size which allow them to gain 
economies of scale.
  In 1989, the Anthony Commission on Public Finance, chaired by former 
Rep. Beryl Anthony issued a report entitled ``Preserving the Federal-
State-Local Partnership: The Role of Tax-Exempt Financing.'' The 
Commission recommended the elimination of the $15 million public power 
limit. The bottom line is that this restriction is not only 
discriminatory, but it drives up the cost of power to consumers of 
public systems.
  On June 23, 1993, the U.S. Department of Treasury testified before 
the Subcommittee on Select Revenue of the Ways and Means Committee and 
addressed this legislation. Leslie B. Samuels, Assistant Secretary for 
Tax Policy said, ``There does not appear to be a reason to treat 
(these) output facilities more harshly than other output facilities. As 
a practical matter, the $15 million output limit of current law may 
have little effect other than to create an incentive for public power 
issues to operate inefficiently.''
  The legislation will remove the $15 million cap and treat public 
power like other public facilities and I urge my colleagues to join me 
in cosponsoring this legislation.


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