WASHINGTON -- Sen. John Breaux yesterday introduced legislation that would make the tax exemption for small-issue industrial development bonds permanent.

The move makes him the first Senate Finance Committee member to propose legislation to extend the use of IDBs since the Tax Reform Act of 1986 was passed.

The Louisiana Democrat said in a statement that he decided to sponsor the bill because he has seen IDBs work successfully in his state during the 1980s, when Louisiana experienced tough economic times and needed a financing tool to foster job creation. An aide to the senator said he planned to introduce the measure on Monday.

"We have already extended this program several times, without changes, in the past that Congress is now satisfied with how the program operates," Sen. Breaux said. "It is now time to provide certainly and predictability to the system and extend it permanently."

Sen. Breaux's decision to offer the legislation "is yet another demonstration of the growing recognition on the part of key policymakers in Congress of the importance of IDBs to maintain a vibrant small-manufacturer sector," said Guy Land, a lobbyist for the Council of Industrial Development Bond Issuers.

In March, Rep. Williams J. Coyne, D-Pa., a member of the House Ways and Means Committee, introduced a measure that would extend the exemption for small-issue IDBs for five more years. The IDB exemption is scheduled to expire Dec. 31, along with the mortgage revenue bond tax exemption and the low-income housing tax credit.

Prospects for legislation to extend any of the expiring provisions are still unclear. Municipal lobbyists lnd some tax aides have said there may be no impetus for Congress to draft a tax bill this year and thus no vehicle on which to attach extensions of expiring provisions.

For the past several years, the tax bill has been part of a deficit-reduction package, but last year Congress approved a multiyear deficit agreement. That presumably ended the need, for the time being, for the tax committees to write a tax bill that includes revenue-raising measures to lower the deficit.

That has left supporters of the IDB and mortgage bond exemptions hoping for some other vehicle on which Congress could attach extensions of expiring provisions. One such vehicle could be tax simplification legislation that House Ways and Means Committee Chairman Dan Rostenkowski, D-III., is slated to introduce soon, but Mr. Rostenkowski has said he would prefer that the bill remain free of extraneous amendments.

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