[Congressional Record Volume 151, Number 24 (Friday, March 4, 2005)]
[Senate]
[Page S2085]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. HUTCHISON:
  S. 533. A bill to amend the Internal Revenue Code of 1986 to clarify 
that a NADBank guarantee is not considered a Federal guarantee for 
purposes of determining the tax-exempt status of bonds; to the 
Committee on Finance.
  Mrs. HUTCHISON. Mr. President, today I am pleased to introduce a bill 
to improve the effectiveness of the North American Development Bank 
(NADBank), which supports water and other important environmental 
projects along the border region. My bill enhances the capabilities of 
the NADBank by clarifying IRS rules in order to expand the ways it can 
help our communities.
  The NADBank was created with a mandate to improve the quality of life 
along the border by financing environmental related projects, such as 
wastewater treatment. The tools it was given have been limited, and as 
a result has restricted its effectiveness. To address this issue, the 
NADBank has evolved over the years with a wider array of products to 
offer. Legislation I sponsored in the Senate during the last Congress 
and which became law, for example, allows the NADBank to offer a new 
combination of grants and loans.
  We can do more to reform the NADBank and increase its effectiveness. 
One tool the NADBank can offer is loan guarantees, which communities 
could use for debt they issue. The guarantee would increase the credit 
rating of the debt and result in lower interest rates the issuer would 
need to offer, thereby making a project more affordable. Under current 
law, however, the NADBank's guarantee is considered a Federal subsidy. 
A general principle of Federal tax law is that one cannot receive more 
than one Federal subsidy. Since communities will always prefer to 
receive the benefit of a tax-exempt municipal status for their bonds, 
they never take advantage of the NADBank's loan guarantee. Due to this 
situation, the NADBank has never used its ability to guarantee a bond.
  It does not make sense to consider a guarantee from the NADBank, 
which is an international institution, as a United States federal 
government guarantee. Not only does it not make sense, it also inhibits 
the NADBank's ability to help border communities. My bill addresses 
this issue by clarifying the tax code to ensure a NADBank guarantee is 
not considered a federal subsidy. The NADBank guarantees will be 
treated like those from the Federal Housing Administration, the 
Veterans' Administration, and the Federal National Mortgage Association 
and other government-sponsored entities. This will give our border 
communities an important new tool to use as they address their 
infrastructure and environmental needs.
  It is to everyone's benefit to develop ways to improve the quality of 
life for our citizens. This is particularly important along our 
southern border, which faces numerous challenges. I hope my colleagues 
will support this bill and continue our efforts to make the NADBank as 
effective as possible.

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