WASHINGTON - The Clinton administration does not support legislation that would permit state student loan agencies to transform themselves into taxable corporations while retaining the tax exemption for their outstanding debt, a top Treasury official said yesterday.

But the administration is amenable to a proposal that would require local governments to report to the Internal Revenue Service the amount of deductible property taxes paid by home owners, said the official, Treasury assistant secretary for tax policy Leslie Samuels.

Samuels testified on those and dozens of other tax-related items at a hearing before the House Ways and Means Committee's subcommittee on select revenue measures. The hearing is the latest in a series that began in July as a first step toward drafting a second tax bill this year.

The outlook for drafting a second tax bill, however, is uncertain, in large part because the committee will be preoccupied this fall with the North American Free Trade Agreement and President Bill Clinton health-care package.

In his testimony, Samuels indicated that the Treasury would prefer no second tax bill, in light of the fact that congress just passed major legislation with significant tax changes.

"We would urge the subcommittee in its deliberations on the miscellaneous revenue proposals to consider the importance of stability in the tax law," Samuels said.

"An argument can be made that additional change to the Internal Revenue Code should be minimized for a period of time sufficient to allow taxpayers and their advisers to absorb the significant changes that have just been made."

The plan for student loan agencies designed to allow them to continue to exist after the federal government switches completely to a system of so-called direct student loans that will be made by colleges.

Under current law, the federal government guarantees loans made to college students by commercial banks, which in turn sell the loans to state education authorities. Those authorities, designated in the Internal Revenue Code as "qualified scholarship funding corporations," often finance those purchases with tax-exempt bonds.

The budget and tax package enacted last month phases out that system in favor of direct loans, although the final decision on a complete switch will have to be made by Congress in five years. If that change is made, education authorities would have to find a new reason for their existence, because there would be no more bank loans for them to buy.

Larry O'Toole, the president of the New England Loan Marketing Corp., said the 21 scholarship funding corporations around the country want to diversify into other education-related activities, but under the tax code their only permissible function is to buy Guaranteed Student Loans.

The legislation, sponsored in the House by Massachusetts Democrats Joe Moakley and Richard Neal, would allow the state agencies to shed their student loan portfolios and their status as scholarship funding corporations by creattng taxable corporations that would hold the loans.

The agencies would be required to operate as if they were 501(c)(3) educational organizations, but they would not have the right to issue tax-exempt bonds. As taxable corporations they would, however, have the ability to issue stock or taxable debt.

The proposal would allow student loan bonds issued before the date of an agency's changeover to remain tax-exempt, and any refundings of exempt.

In his testimony, Samuels said the administration would not support the proposal because "it appears that the proposal would enable taxable, for-profit corporations to obtain the benefit of tax-exempt financing." The benefit would derive from the spread between the rate on the outstanding tax-exempt bonds and comparable taxable interest rates, he said.

"For-profit entities should not be entitled to such arbitrage," Samuels said.

The reporting-requirement proposal would force cities, towns, and counties to notify taxpayers and the Internal Revenue Service, beginning in 1996, of the amount of property tax paid by residents annually that is deductible for federal income tax purposes. It is designed to stop taxpayers from illegally deducting nondeductible portions of their property tax bills, such as user fees.

Thus, the proposal "would improve compliance with, and enforcement of, our tax laws," Samuels said in his testimony.

City and county officials, concerned that such a requirement would be an unwarranted administrative burden, managed to derail a similar proposal made last year in the House. In July 1992, Rep. Bill Coyne, D-Pa., attached it to a bill he had introduced to remove volume cap restrictions on bonds for highspeed rail projects. Coyne added the reporting requirement proposal because it would raise revenue for the federal government and offset the revenue loss expected from his high-speed rail proposal.

But because municipal officials mobilized opposition in Congress to the reporting requirement, Coyne's bill was defeated in the House by a Vote of 369 to 48.

In his testimony yesterday, Samuels conceded the contention of local governments that the requirement would be burdensome. He said Treasury officials are concerned "about the ability of local taxing jurisdictions to comply with this proposal. This concern should be addressed in the general design ... of the proposal." Samuels did not offer specifies.

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