[Congressional Record Volume 157, Number 68 (Tuesday, May 17, 2011)]
[Senate]
[Pages S3058-S3059]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BINGAMAN (for himself, Mr. Crapo, Mr. Kerry, Ms. Snowe, 
        Mr. Cardin, and Mr. Grassley):
  S. 1016. A bill to amend the Internal Revenue Code of 1986 to 
permanently modify the limitations on the deduction of interest by 
financial institutions which hold tax-exempt bonds, and for other 
purposes; to the Committee on Finance.
  Mr. BINGAMAN. Mr. President, I rise today to introduce the Municipal 
Bond Market Support Act of 2011. This bill is

[[Page S3059]]

similar to ones that Senator Crapo and I introduced in the 110th and 
111th Congresses. I am grateful for Senator Crapo's continued 
leadership on this issue, as well as the cosponsorship of our Finance 
Committee colleagues, Senators Kerry, Snowe, Cardin, and Grassley.
  Municipal bonds have long played an essential role in financing the 
construction, expansion, and repair of schools; highways, roads, and 
bridges; affordable housing; hospitals; public transit; water and 
sewage systems; and community-owned utilities. Since the enactment of 
the Federal income tax in 1913, Congress has supported the municipal 
bond market by exempting municipal bond interest from taxation. Tax 
exemption confers Federal assistance on State and local capital 
investments; it also recognizes that decisions about which projects to 
fund are most appropriately made at the State or local level.
  Historically, banks were significant purchasers of tax-exempt debt. 
But the Tax Reform Act of 1986 severely curtailed banks' participation 
by automatically disallowing deductions for interest expense whenever 
municipal bonds are purchased. The 1986 Act left an exception only for 
bonds purchased from smaller municipalities, those selling no more than 
$10 million of bonds each year. But because the $10 million level was 
not indexed to inflation, its purchasing power has eroded significantly 
since 1986, leaving many smaller governments and non-profit educational 
and health care facilities either to defer projects to comply with this 
low limit or find non-bank purchasers.
  I was very pleased that the American Recovery and Reinvestment Act 
incorporated a bill that Senator Crapo and I introduced, the Municipal 
Bond Market Support Act of 2009, raising the $10 million small issuer 
exception to $30 million. Additionally, the Recovery Act included a 
provision ensuring that the small issuer is made applicable at the 
ultimate borrower level, so that bonds benefiting non-profit 
universities and hospitals will not exceed the limitation merely 
because they issue bonds through statewide authorities.
  Taken together, those steps significantly enhanced demand for debt 
issued by small municipal governments, enabling municipalities across 
the Nation, and particularly those in small and rural communities, to 
finance the critical infrastructure projects that play an important 
role in growing our national economy.
  In 2009, the dollar amount of bank qualified issuances reached $32.7 
billion, double the prior year's level, with more than 6,000 issuances. 
Beneficiaries included a broad range of counties, cities, and school 
districts in all corners of my home state of New Mexico. For instance, 
the proceeds of a $17 million bond issued by Santa Fe County financed 
roads, trails and parks for open space, a fire facility, a solid waste 
transfer station, water rights acquisition and water projects. The City 
of Artesia completed two bank-qualified transactions, to finance 
building a public safety complex and a new waste water treatment 
facility. The Bloomfield School District placed $19 million in bank-
qualified debt to finance capital expenditures. Similarly, in 2010, 
issuances climbed even further, to $36.8 billion, with more than 6,700 
issuances representing a similarly diverse array of counties, cities, 
school districts, infrastructure districts, and hospitals across my 
home state of New Mexico and the country.
  The ARRA-enacted provisions helped small communities across New 
Mexico and the country finance critical infrastructure needs and create 
jobs. The higher bank-qualified limit is a great success and deserves 
to be made permanent. The bill that Senators Crapo, Kerry, Snowe, 
Cardin, Grassley, and I are introducing today would do just that, 
ensuring that smaller governments and non-profit educational and health 
care facilities can finance their capital needs, particularly in 
periods of tight credit, and save taxpayer dollars.
  At least 14 national organizations representing issuers of tax-exempt 
bonds are supporting the Act. These include the American Hospital 
Association; American Public Power Association; Council of Development 
Finance Authorities; Council of Infrastructure Financing Authorities; 
Government Finance Officers Association; International City/County 
Management Association; International Municipal Lawyers Association; 
National Association of College and University Business Officers; 
National Association of Counties; National Association of Health and 
Educational Facilities Finance Authorities; National Association of 
State Auditors, Comptrollers, and Treasurers; National Association of 
State Treasurers; National League of Cities; and the U.S. Conference of 
Mayors. I urge my colleagues to join these organizations in supporting 
our bill, to ensure that small municipalities across the country are 
able to finance critical infrastructure projects at reduced costs to 
their residents.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 1016

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Municipal Bond Market 
     Support Act of 2011''.

     SEC. 2. PERMANENT MODIFICATION OF SMALL ISSUER EXCEPTION TO 
                   TAX-EXEMPT INTEREST EXPENSE ALLOCATION RULES 
                   FOR FINANCIAL INSTITUTIONS.

       (a) Permanent Increase in Limitation.--Subparagraphs 
     (C)(i), (D)(i), and (D)(iii)(II) of section 265(b)(3) of the 
     Internal Revenue Code of 1986 are each amended by striking 
     ``$10,000,000'' and inserting ``$30,000,000''.
       (b) Permanent Modification of Other Special Rules.--
     Paragraph (3) of section 265(b) of the Internal Revenue Code 
     of 1986 is amended--
       (1) by redesignating clauses (iv), (v), and (vi) of 
     subparagraph (G) as clauses (ii), (iii), and (iv) of such 
     subparagraph, respectively, and
       (2) by striking so much of subparagraph (G) as precedes 
     such clauses and inserting the following:
       ``(G) Qualified 501(c)(3) bonds treated as issued by exempt 
     organization.--In the case of a qualified 501(c)(3) bond (as 
     defined in section 145), this paragraph shall be applied by 
     treating the 501(c)(3) organization for whose benefit such 
     bond was issued as the issuer.
       ``(H) Special rule for qualified financings.--
       ``(i) In general.--In the case of a qualified financing 
     issue--

       ``(I) subparagraph (F) shall not apply, and
       ``(II) any obligation issued as a part of such issue shall 
     be treated as a qualified tax-exempt obligation if the 
     requirements of this paragraph are met with respect to each 
     qualified portion of the issue (determined by treating each 
     qualified portion as a separate issue which is issued by the 
     qualified borrower with respect to which such portion 
     relates).''.

       (c) Inflation Adjustment.--Paragraph (3) of section 265(b) 
     of the Internal Revenue Code of 1986, as amended by 
     subsection (b), is amended by adding at the end the following 
     new subparagraph:
       ``(I) Inflation adjustment.--In the case of any calendar 
     year after 2011, the $30,000,000 amounts contained in 
     subparagraphs (C)(i), (D)(i), and (D)(iii)(II) shall each be 
     increased by an amount equal to--
       ``(i) such dollar amount, multiplied by
       ``(ii) the cost-of-living adjustment determined under 
     section 1(f)(3) for such calendar year, determined by 
     substituting `calendar year 2010' for `calendar year 1992' in 
     subparagraph (B) thereof.

     Any increase determined under the preceding sentence shall be 
     rounded to the nearest multiple of $100,000.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to obligations issued after the date of the 
     enactment of this Act.

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