[Congressional Record Volume 142, Number 8 (Tuesday, January 23, 1996)]
[Extensions of Remarks]
[Pages E53-E54]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




INTRODUCTION OF THE NONPROFIT ORGANIZATIONS TAX-EXEMPT BOND ACT OF 1996

                                 ______


                         HON. ROBERT T. MATSUI

                             of california

                    in the house of representatives

                       Tuesday, January 23, 1996

  Mr. MATSUI. Mr. Speaker, I am pleased to join with my good friend 
from New York, Congressman Houghton, in the reintroduction of this 
important legislation. This bill will remove the $150 million limit on 
outstanding bonds that can be issued by 501(c)(3) nonprofit 
organizations and will allow bonds issued by 501(c)(3) organizations to 
be treated similarly to those issued to finance direct State or local 
government activities.
  Nonprofit organizations such as colleges and health care providers 
have traditionally used tax-exempt financing for the construction, 
renovation, and modernization of facilities used for activities related 
to the nonprofit's mission. Prior to the 1986 Tax Reform Act, this 
financing was generally available to all qualified 501(c)(3) 
organizations in recognition of the public purpose they serve.
  Placing a $150 million cap on these nonprofits has had unintended and 
unforeseen consequences. For example, the restriction on tax-exempt 
financing has prevented private colleges and universities from 
improving their educational facilities and research capabilities. 
Currently, the capital renewal and replacement needs of colleges and 
universities exceed $60 billion of which one-third is urgently needed 
for repairs and renovation. The National Science Foundation has 
reported that for every $1 spent to maintain research facilities, an 
additional $3.50 was deferred. Our Nation needs to improve its 
educational and research facilities given that our work force and 
businesses must compete in an everchanging global economy.

[[Page E54]]

  Health care providers are also subject to the $150 million cap. A 
growing number of health care providers are delivering medical services 
in a cost-effective manner outside of the hospital setting. Yet, 
providers like community health clinics, skilled nursing facilities, 
and ambulatory care facilities are limited by the $150 million cap per 
institution in outstanding tax-exempt bonds.
  Additionally, as alternative health care facilities and hospitals 
form integrated health care delivery systems, the $150 million cap 
hinders the consolidation of these entities. The cap actually acts as a 
barrier to these mergers. After a merger, the surviving institutions 
would have a single, $150 million limit.
  Any bond issuance which exceeded this limit could become taxable 
retroactively to their date of issuance, an event that would constitute 
a default under the typical covenants governing nonhospital 501(c)(3) 
bonds.
  I have sponsored or cosponsored similar legislation in past 
Congresses but I remain hopeful that with the bipartisan support the 
legislation enjoys that it can move forward in this Congress.

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