WASHINGTON - A permanent extension of the authority to issue mortgage revenue bonds topped a long list of items beneficial to the municipal market in the tentative agreement House and Senate negotiators reached late Saturday on the urban aid tax package.

But continuing uncertainty over whether President Bush would sign the $28 billion measure dampened the enthusiasm of municipal bond proponents, who said they feared that tax increases in the bill could force a veto.

The negotiators also completed work late Saturday on tax items in the energy bill. They eliminated a provision that would have benefited high-speed rail bonds, while keeping one that would broaden investment options for nuclear decommissioning trust funds. The House gave final approval to that measure yesterday by a vote of 363 to 60.

The agreement on the urban aid bill, meanwhile, would make the low-income housing tax credit permanent and extend the tax exemption for small-issue industrial development bonds through Sept. 30, 1993. Those tax breaks and the mortgage bond exemption expired June 30.

The urban aid bill negotiators also tentatively agreed to a House proposal for easing restrictions on qualified redevelopment bonds issued in enterprise zones. In addition, the agreement would increase the supply of bank-qualified bonds, loosen curbs on 501(c)(3) bonds, and ease the arbitrage rebate requirement.

But the agreement also includes two items opposed by the municipal bond community: the so-called mark-to-market provision and a proposal that would expand the use of Series EE U.S. Savings bonds to finance a college education.

By late yesterday, tax committee staff members were still ironing out details of the agreement, which a finance panel spokesman said would probably be made final by the end of the day. The House and Senate were expected to vote on the package last night or today, in one of their last actions before adjourning for the year.

House Ways and Means Committee Chairman Dan Rostenkowski, D-Ill., and Senate Finance Committee Chairman Lloyd Bentsen, D-Tex., met behind closed doors on Saturday for nearly 12 hours to hammer out the agreement on the urban aid measure. Rostenkowski emerged from the meeting saying he and Bentsen had crafted a plan they hoped Bush would be willing to sign.

Rostenkowski noted that the negotiators had removed two provisions opposed by the President: one that would phase out the amount of itemized deductions that could be claimed by taxpayers in upper-tax brackets, and another that would phase out the personal exemption for those taxpayers.

"There's a good possibility the President would have a difficult time vetoing this bill," Rostenkowski told reporters.

But lobbyists and congressional aides said that given the President's recent statement that he would "never, ever" raise taxes again, they were not sure how he could sign the bill. The revenue increases in the bill mean that the possibility of a veto "is very real," one tax aide said..

Bush's Democratic opponent in the presidential race, Arkansas Gov. Bill Clinton, told the Associated Press over the weekend that a veto would be consistent with the President's recent statements.

"There's no question that if he signs it, it's inconsistent with his position, which is that he's not going to raise any new taxes, even though we all know he has already raised a slew of them," Clinton said.

Two major bond changes that would be made by the tax bill agreement would broaden two small-issuer exemptions enacted as part of the Tax Reform Act of 1986. One, the $5 mill ion small-issuer exemption to the arbitrage rebate requirement, would be raised to $10 million.

The other involves bank-qualified bonds. Under the 1986 act, banks are allowed to deduct 80% of the cost of carrying tax-exempt bonds if they are purchased from issuers who expect to sell no more than $10 million annually. The Senate bill would have raised that level to $25 million, but negotiators scaled that back to $20 million and dropped an identical proposal from the energy bill. The provision in the urban aid bill would be effective for bonds issued after Dec. 31.

The conferees on Saturday had rejected a Senate proposal that bank deductibility be extended to pool issues in certain circumstances, but that decision was under review late yesterday.

Another major bond change in the agreement would eliminate the $150 million cap on the amount of tax-exempt bonds that private, nonprofit organizations other than hospitals may have outstanding at any time. The provision would also reclassify 501(c)(3) bonds as governmental debt.

The overall urban aid package was built around a proposal to create enterprise zones, economically depressed areas in which tax incentives would be offered to encourage start-up companies or lure existing firms from other areas. The conferees adopted the House version of enterprise zones, which would create 50 zones and ease curbs on qualified redevelopment bonds in them.

Current law allows redevelopment bonds to be used in so-called blighted areas, but with tight curbs. For example, the proceeds would have to be repaid through tax revenues, and the bonds are subject to the private-activity bond volume cap. Proceeds may be used only for clearing land, rehabilitating buildings, or improving infrastructure.

Under the agreement, an issuer would not have to pledge tax revenues to repay the bonds, but could provide its own guarantee or obtain a letter of credit or bond insurance. In addition, only 50% of an issue would need a volume cap allocation. The proposal would also allow the proceeds to be used to make loans to businesses within the zones. Loans would be capped at $2.5 million per business.

In agreeing to make the mortgage bond exemption permanent, the negotiators also approved a provision to allow mortgage bond proceeds to be used for home-improvement loans in Florida, Louisiana, and Hawaii, the states recently devastated by hurricanes.

As tentatively approved on Saturday night, the provision on extending authority for industrial development bonds included a proposal to increase the $10 million capital expenditure limit to $20 million. But the decision on the limit was an open question late yesterday.

The negotiators also approved items that municipal market participants have warned would harm demand for tax-exempts.

One would expand the use of Series EE U.S. savings bonds to finance college educations. Currently, taxpayers below a certain income level are permitted to exclude from gross income the full amount of interest earned on savings bonds if they redeem the bonds to finance their own children's college expenses.

The negotiators agreed to a Senate proposal that would waive the income limitation and allow taxpayers to use bond proceeds to finance college expenses of students other than their own children. Municipal market participants have warned that the provision would weaken demand for so-called college saver bonds that state and local governments market to parents.

Another provision would require securities firms to report, for tax purposes, the market value of municipal bonds and other securities they hold in their inventories.

In the energy bill, a provision would end the requirement that nuclear decommissioning trust funds invest only in U.S. Treasury securities or tax-exempt municipal bonds. The conferees agreed to a House proposal that would lower the funds' tax rate to 20% from 34%.

In negotiations on the energy bill, conferees dropped a Senate provision that would have eliminated the requirement that issuers of high-speed rail bonds obtain an allocation under the private-activity volume cap for 25% of each issue.

Among other municipal bond provisions in the urban aid package, one would allow New York City to issue tax-exempt bonds to expand the offices of the United Nations and keep the organization from moving some of its agencies out of the city.

Another would require the Congressional Budget Office to study how state and local governments have used bond banks and pool bonds since passage of the 1986 tax act.

The agreement also includes one project-specific provision, offered as an amendment to the Senate bill by Sen. Ernest F. Hollings, D-S.C. The provision would designate a 1986 issue sold for a project on the Charleston, S.C., waterfront as bank-eligible, clearing up confusion over whether the issue had been grandfathered in under the 1986 act.

The final version of the energy bill also contains a rifle shot. Proposed by Sen. Bob Packwood, R-Ore., the provision would create a category of exempt-facility bond that would be used for environmental improvements of hydroelectric facilities.

Packwood has said he offered the amendment to make it easier for the Mid-Columbia River Power Project in Washington State to comply with federal environmental laws.

Bond simplification items included in the urban aid agreement would:

* Expand the six-month exemption from the arbitrage rebate requirement to an issuer who has spent 95% of an issue's proceeds within that period;

* Ease requirements for bona fide debt service funds under the 1989 arbitrage rebate relief law;

* End the requirement that two bond issues paid from substantially the same source of funds be treated as the same issue if they are issued within 31 days of each other, as long as one of the issues is a tax and revenue anticipation note.

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