WASHINGTON - House Ways and Means Committee Chairman Dan Rostenkowski said yesterday that his panel may decide within two weeks whether to draft a second tax bill that would include proposals to ease curbs on municipal bonds.
In response to a question about the prospects for such a bill, the Illinois Democrat said "that's a decision the committee will make." When asked following a hearing what the committee's timetable is for deciding, Rostenkowski said "maybe in the next week or so."
For the municipal market, an attempt to draft a second tax bill would mean an opportunity to pass bond proposals Congress approved last year in legislation that was vetoed by then-President George Bush. They include increasing to $10 million from $5 million the small-issuer exemption to the arbitrage rebate requirement and easing limits on bank deductibility.
Rostenkowski's remarks come in the wake of recent statements by tax lawmakers that a second tax bill is very unlikely. Following a Sept. 13 speech to the Public Securities Association, Rep. Charles B. Rangel, D-N.Y., said "no way" when asked if a second bill were possible.
Originally, bond proponents expected the proposals would be added to President Bill Clinton's tax package, which was signed into law in August. But to speed passage of the measure through the House, Rostenkowski prevailed on committee members to avoid adding extraneous amendments. In return, he promised to try to draft a second tax bill later in the year.
Since then, at Rostenkowski's request, the Ways and Means Committee's subcommittee on select revenue measures has held a series of hearings on more than 100 tax-related items, including 23 proposals to ease curbs on tax-exempt bonds.
But whether the Ways and Means panel would take the next step and attempt to draft a bill has been a matter of speculation among municipal lobbyists ever since, because Rostenkowski has given no clear indication that he wants to proceed with one.
One factor working against a second tax bill is the committee's busy agenda for the rest of the year. The panel has begun debating the North American Free Trade Agreement, which Congress must vote on before adjourning for the year. The committee has also begun to hold hearings on Clinton's health-care package.
Rostenkowski's remarks yesterday about a second tax bill come on the heels of a letter sent to Congress by a coalition of 15 public interest groups urging lawmakers to draft bond legislation this year.
The coalition is seeking passage of legislation introduced by Rostenkowski in January, H.R. 13, which contains a number of bond items. In addition to proposing an increase in the small-issuer- arbitrage exemption to $10 million, the bill would repeal the so-called 5% unrelated use test.
Another provision in the bill would ease requirements for bona fide debt service funds under the 1989 arbitrage rebate relief law. In addition, the bill would allow transactions in which state or local governments prepay equipment purchases to be eligible for tax-exempt financing under certain conditions.