WASHINGTON -- House and Senate tax negotiators, who begin work today, will make their final decisions on municipal bond provisions in the urban aid package and the tax section of the energy bill simultaneously, according to the Senate's top tax writer.
The urban aid package, commonly referred to as HR 11, and the energy measure have so many provisions in common that it would be impossible to treat the two separately, said Senate Finance Committee Chairman Lloyd Bentsen, D-Tex.
"I would assume that we would be negotiating the tax provisions in HR 11 at the same time we are negotiating the tax provisions in the energy bill, because there's some cross-fertilization between those two," Sen. Bentsen told reporters Tuesday night after the Senate passed its version of the urban aid bill by a vote of 70 to 29. The House approved urban aid legislation on July 3.
The urban aid and energy bills contain many of the same revenue-raising provisions, including one that would affect the municipal bond market. That proposal would require securities firms to report for tax purposes the market value of municipal bonds and other securities they hold in their inventories. The House and Senate urban aid bills and the Senate's energy bill all contain the so-called mark-to-market measure.
"You can't address one [bill] in isolation," Sen. Bentsen said. "I think that you'll find that you'll be trading back and forth to be sure that you are not using the same tax raiser in two different places."
Aside from revenue raisers, the House's energy bill and the Senate's urban aid bill include similar versions of a key bond provision. Under current law, banks are allowed to deduct 80% of the cost of carrying tax-exempt bonds if the bonds are purchased from an issuer that expects to sell no more than $10 million annually. The Senate's urban aid bill would raise that level to $25 million, while the House energy bill would increase it to $20 million.
The Senate urban aid bill would also enable pooled financing bonds to qualify for the bank deduction under certain conditions.
Given Congress' timetable, the conference committee of negotiators will have to move quickly to reconcile differences, Sen. Bentsen said, though he did not predict how long it would take. "Obviously, the time limitations on this mean that it will not be long. It will be arduous," he said.
Capitol Hill watchers are saying Congress will probably adjourn for the year on Monday or Tuesday.
The two urban aid bills follow the same general outline, but vary widely in their details. For example, both contain enterprise zone proposals, but the Senate's bill would create 125 zones to the House's 50. The Senate bill proposes creating a new category of exempt-facility bonds to make loans to small businesses in enterprise zones, while the House bill would ease existing rules on qualified redevelopment bonds so they could be issued in the zones.
The House bill would make permanent the tax exemptions for mortgage revenue bonds and small-issue industrial development bonds, and the low-income housing tax credit. All three expired June 30. The Senate bill would continue them through Sept. 30, 1993.
The energy tax provisions to be debated in the conference are part of a comprehensive energy package designed to set U.S. energy policy well into the next century. Members on the House and Senate energy committees have already begun trying to reconcile other parts of the mammoth bill, but have reportedly been making slow progress.
The two energy bills contain a municipal bond provision in common that is not included in either of the urban aid packages. The Senate and House both are proposing to end the requirement that nuclear decommissioning trust funds invest only in Treasury securities or tax-exempt municipal bonds. The House bill would also lower the funds' 34% tax rate to 20%.
In addition, the Senate energy bill proposes removing the requirement that issuers of high-speed rail bonds obtain an allocation under the private-activity volume cap for 25% of each issue.
