Moynihan bill would scrap limit on nonprofits' outstanding bonds.

WASHINGTON -- The $150 million limit on the amount of bonds individual non-hospital 501(c)(3) organizations can have outstanding would be eliminated under health care reform legislation proposed late last week by Senate Finance Committee Chairman Daniel Moynihan.

The New York Democrat's proposal is broader than that suggested by the Public Securities Association and a group of 501(c)(3) issuers, who had urged the cap be lifted on health care institutions other than hospitals, which are already exempt. Moynihan's measure would also apply to universities, museums, housing authorities, and all other private non-profit organizations with the 501(c)(3) designation.

In a separate development, the House Ways and Means Committee release details of the health care bill proposed last week by acting Chairman Sam Gibbons, D-Fla. The bill did not include a federal guarantee for certain types of tax-exempt hospital bonds.

Moynihan's bond proposal, lobbyists said, was prompted by his long-standing support for 501(c)(3) organizations, especially universities. The Finance Committee is expected to beging considering Moynihan's health care pacakge in closed-door sessions throughout this week. Committee members have said they hope to complete work on a package before Congress adjourns July 1 for the Independence Day recess.

Health care issuers are arguing for and end to the $150 million limit, saying it would impede mergers and consolidations that may be needed under health care reform. In many cases, under any new system, health care institutions may be created that would not conform to the definition of a hospital and thus not be exempt from the limit, they said.

A summary of Moynihan's bill shows that the measure does not appear to include two other provisions supported by the PSA and 501(c)(3) bond issuers. One would ease limits on health care advance refundings. The other would permit bank deductibility to apply to the debt of small health care institutions that participate in pooled issues sold by larger issuers whose bonds are not bank eligible.

Gibbons also has not proposed those two items, and in additional he has not proposed lifting the $150 million cap. But until final details of his plan were released over the weekend, it was unclear whether he had included in his bill a provision that would permit federally guranteed tax-exempt bonds to be issued for health care institutions in medically underserved urban and rural areas.

The provision had been included in a health care reform bill approved in March by the Ways and Means subcommittee on health, in a section that would create an Essential Community Provider program to help areas with insufficient access to health care services.

To set up the facilities, the federal government would offer loands and loan guarantees, and would also provide interest rate subsidies for projects involving tax-exempt financing. The legislation proposed to amend the internal Revenue Code so that the bonds would be exempted from a law enacted in 1984 that generally does not allow tax-exempt debt to be guaranteed.

Gibbons' bill leaves nearly all of the Essential Community Provider program provision intact, but eliminates the sentence that would exempt the bonds from the 1984 prohibition against federal guarantees. Thus, the only bonds that could be guaranteed under the program would be taxable bonds.

Like the finance committee, the Ways and Means panel is planning to work through the week in an effort to make process in drafting a health care plan acceptable to at least a majority of the Democrats on the panel.

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