[Congressional Record Volume 147, Number 83 (Thursday, June 14, 2001)]
[Senate]
[Pages S6320-S6321]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. JEFFORDS (for himself and Mr. Leahy):
  S. 1038. A bill to amend the Internal Revenue Code of 1986 to improve 
access to tax-exempt debt for small nonprofit health care and 
educational institutions; to the Committee on Finance.
  Mr. JEFFORDS. Mr. President, today I am introducing the Health and 
Higher Education Facilities Improvement Act of 2001. This legislation 
will help small non-profit health and educational institutions more 
effectively finance the cost of essential services, and lead to new 
facility construction. By modifying the laws that restrict 
deductibility or ``bank financing for small non-profit organizations 
that need it the most: small local hospitals and colleges.
  The Tax Reform Act of 1986 unintentionally discriminated against 
small non-profit educational and health care facilities that want to 
sell small amounts of tax-exempt debt to community banks. Before 1986, 
banks and financial institutions could deduct the interest incurred to 
carry tax-exempt bonds. This allowed banks to purchase tax-exempt bonds 
at attractive rates. The 1986 tax act repealed bank deductibility, but 
an exception was retained for small governmental issuers that issue 
bonds of $10 million or less each year.
  This exception was designed to preserve bank deductibility for small 
local governments, but does not help small non-profit institutions. The 
small issuer exception to be of little value in many States, like 
Vermont where statewide health care and higher education bond issuing 
authorities typically issue many millions of dollars of debt each year. 
The legislation I am introducing today will modify the small issuer 
exception by granting bond issuers the right to apply the small issuer 
exception at the level of the ultimate beneficiary of the funding. 
Consequently, a small college or health

[[Page S6321]]

care facility borrowing less than $10 million in tax-exempt debt in any 
one year could elect tax-exempt status for that debt, even if it is 
issued by a statewide authority. This would make the debt more 
attractive to local banks, and could result in significant savings for 
beneficiary institutions over the life of the bond.
  The Health and Higher Education Facilities Improvement Act of 2001 
focuses the benefit of the small issuer exemption on smaller non-
profits, without regard to whether the bond issuer is a government 
entity issuing more than $10 million in bonds per year. Small non-
profits are important community institutions; they stand to benefit 
from greater access to tax-exempt debt. Wall Street and large money 
center banks may have little interest in small amounts of debt from 
small institutions. The bank across the street from a local college or 
health care clinic, however, may have greater confidence and insight 
into the community value of the institution. This bill would allow 
those banks to carry tax-exempt debt at attractive rates and maintain 
commitments to the people and institutions in their local communities.
  I urge my colleagues to support this bill.
                                 ______