WASHINGTON -- Two Senate Finance Committee members introduced legislation last week that would expand the use of tax-exempt small-issue industrial development bonds in communities where military bases are scheduled to be closed.
The legislation by Sen. John B. Breaux, D-La., and Sen. William V. Roth, R-?Del., is designed to ease economic hardships expected to result from the closing of more than 30 bases around the country -- including ones in Louisiana and Delaware -- as recommended by President Bush and a federal commission. Congress is expected to give final approval to the base closings later this year.
Under current law, each tax-exempt small-issue IDB may total no more than $10 million. The proposed bill would raise that to $20 million for bonds issued to stimulate economic development in regions where military bases are shut.
In addition, the measure would allow each state to increase its annual allotment under the private-activity bond volume cap by $50 million, with the additional bond authority to be used for small-issue IDBs in regions where military bases are closed. The volume cap for each state is currently $50 per capita or $150 million, whichever is greater.
Chances for passage of the bill are extremely murky because easing IDB rules would lose revenue for the federal government. Congress this year is operating under "pay-as-you-go" rules that would require tax lawmakers to come up with revenue-raising items to offset the losses that would be caused by the finance panel members' bill.
Another problem for the bill is that the IDB exemption itself is scheduled to expire on Dec. 31, and it is still not certain Congress will pass a tax bill this year continuing that tax break.
In the past few years, tax lawmakers have been forced to write tax bills to comply with deficit-reduction requirements and have added to that bill various revenue-losing items, such as extensions of expiring provisions, including extensions in the use of IDBs.
But last year, Congress approved a five-year deficit reduction agreement, temporarily ending the annual search for revenues and leaving lawmakers without a vehicle on which to attach their favorite tax items.