WASHINGTON Congressional attempts to tighten the so-called de minimis rule may continue next year as lawmakers search for revenue-raisers to offset the costs of pet projects, a congressional aide said Friday.

Such a move could harm both corporate demand for short-term municipal paper and tax-exempt leases, market participants said.

Using the de minimis rule under currein law, corporations have become major participants in the short-term municipal bond market. But if the deminimis rule were tightened, lobbyists have said that demand for taxexempt leases and short-term paper would dry up, harming large issuers who typically sell large amounts of municipal notes.

The de minimis provision in the tax law specifically relates to how much corporations can borrow to invest in tax-exempt debt. In 1972, the Internal Revenue Service ruled that corporations generally are prohibited from investing in municipal securities if they deduct the expense of purchasing the securities. However, the IRS ruling stated that the agency would not attempt to trace whether a firm had violated the role if the firm's holdings of tax-exempt debt totaled no more than 2% of its assets.

Corporations are "seen as the buyer of last resort" for municipalities' short-term paper, and any reduction in the de minimis amount would leave issuers with no corporate buyers, the congressional aide, who asked not to be named, said after a session at the annual fall conference of the Association for Governmental Leasing & Finance held in Coronado, Calif.

As the federal budget gets tighter, more lawmakers are digging into the tax-expenditure barrel looking for ways to fund their initiatives, the aide said. Last year, two or three members considered tightening the de minimis rule to free up some federal revenues for other projects, the aide said.

"What has happened overall is the easy revenue-raising provisions [those that make sense and have little opposition], they've all been enacted because we've been doing revenue-raising bills every year since 1982," the aide said.

Because the de minimis role is part of the tax code, altering the rule would require a tax bill, the aide said, adding that there may be many opportunities for Congress to draft a tax bill next year. "There will be some tax bill talk at least at the committee level" next year, the aide said.

For example, in October, Republican House members and candidates signed a "Contract With America" that called for a $500-per-child tax break for middle-class and lower-class families. Passing such a tax break would require lawmakers to make up the difference elsewhere in the budget, and a tightening of the de minimis rule is one way, the aide said.

Also, President Clinton's fiscal 1996 budget may include a tax cut for the middle class and increased infrastructure spending, both of which will have to be paid for. The most likely provisions to start the debate on a tax bill are such expiring provisions as the self-insured medical deduction, the research and development tax credit, and the targeted jobs tax credit, according to the aide.

House members have already shown they would be willing to tighten the de minimis rule. In a 1987 tax bill, the House adopted a reduction of the de minimis amount from 2% to the lesser of 2% or $1 million. However, the provision was dropped from the final version of the bill.

If Congress passed a reduction in the de minimis rule, the action "would put leasing out of business.

"It's not easy to still leave the market working and start clamping down. You really have to use a scalpel and start fine-tuning," the aide said.

The congressional aide said also to expect the tax simplification bill to be reintroduced in January, when Congress returns for its 104th session. The bill is already pretty scaleddown to make it passable, and any major provisions affecting the municipal bond industry have already been dropped, the aide said.

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