ORLANDO -- Congress appears unlikely to retain a provision in the pending energy bill that would increase the supply of bank-qualified bonds, according to the chief lobbyist of the Government Finance Officers Association.
"I'm not convinced we have a real good opportunity to get it," Catherine L. Spain, director of the association's federal liaison center, said Saturday during the group's annual conference here.
Ms. Spain, who spoke to the group's committee on governmental debt and fiscal policy, was referring to a provision in the pending comprehensive energy bill that would ease tax code restrictions on bank deductibility.
Under current law, banks may deduct 80% of the cost of carrying tax-exempt bonds, but only if they are purchased from issuers who expect to sell no more than $10 million annually.
The provision in the energy bill, proposed by Rep. Beryl Anthony, D-Ark., and added by the House Ways and Means Committee, would raise that limit to $20 million. The Senate Finance Committee failed to include that provision in its version of the energy bill, which the full Senate may vote on this week.
When the House and Senate eventually meet to reconcile their two versions of the energy bill, the provision on bank-qualified bonds "is one of those things that can easily be dropped because of the argument that, 'this is an energy bill and we shouldn't be dealing with this in an energy bill,''' because it is not directly related to energy issues, Ms. Spain said.
Finance Committee chairman Lloyd Bentsen, D-Tex., refused to allow the bank provision in the finance panel bill for that reason, lobbyists have said.
Although the provision is not energy-related, it was added to the House bill to offset the potential negative effect on the municipal market of another energy bill provision. That measure would remove investment restrictions on nuclear decommissioning trust funds, which under current law can invest only in Treasury securities or tax-exempt municipal bonds.
Ms. Spain also said the Ways and Means panel's willingness to add the bank provision points up the importance of having an advocate for municipal bonds on the committee. In this case, that advocate is Rep. Anthony.
"This illustrates the importance of having someone in those closed-door sessions or in those late-night sessions, who understands the importance of some of these provisions," Ms. Spain said.
But Rep. Anthony has lost his bid to be reelected to his House seat, and Ms. Spain said she was pessimistic that the municipal bond community will be able to find someone as helpful and committed as he has been.
"I think we're going to have to work very hard to find someone," Ms. Spain said. "I'm not sure we can find another Congressman Anthony."
Rep. Anthony will not return to Congress next year because he failed to win a majority of votes in a three-way primary race May 26 and then lost the runoff June 9. First elected to Congress in 1978, he is in his seventh term.
At the same time, however, Ms. Spain said the shake-up in Congress because of the anti-incumbency mood in the electorate could work to the advantage of municipal bond proponents.
"There will be a lot of new members" on the Ways and Means panel because at least 12 of the 39 members will not be back next year, she said. "So we will have a real opportunity to educate some of the new members of the Ways and Means Committee and try to find another champion for tax-exempt bonds."
