WASHINGTON -- The $150 million volume cap on the outstanding tax-exempt debt of all 501(c)(3) organizations would be repealed under the massive health care bill approved Saturday by the Senate Finance Committee.

The bill, which was approved by a 12-to-8 vote, would also ease some of the current tax law restrictions on 501(c)(3) bonds and put them more on a par with tax-exempt governmental bonds.

The Senate leadership will have to combine the Finance Committee bill with another heath care reform measure, enacted by the Senate Labor and Human Resources Committee, to produce a single bill that can be sent to the Senate floor for a vote, sources said.

The Finance Committee's action came two days after the House Ways and Means Committee approved a health care reform bill that does not contain any major tax-exempt bond measures. Two Ways and Means Committee members had planned to offer an amendment designed to repeal the cap only for the outstanding bonds of 501(c)(3) health care organizations, but decided against it after the measure was found to be too costly.

If the Finance Committee's proposed repeal of the $150 million cap is retained by the Senate leadership and survives on the Senate floor, it is likely to face a tough test when House and Senate conferees meet to iron out a final health care bill because elimination of the cap is expected to carry a high price tag.

"We have to be very diligent as the process moves forward to ensure the provision remains intact," said John Vogt, the Public Securities Association's vice president of external affairs.

Although lobbyists have said the provision's cost could endanger its survival in the bill ultimately considered by the Senate, the exact cost is unknown because revenue estimates for it and other provisions have not yet been completed.

On the House side, the smaller amendment that had been prepared by the two Ways and Means members was estimated to cost the federal government up to $600 million over 10 years. The Senate committee's provision presumably would be much more expensive, because it would cover all 501(c)(3) organizations.

Lobbyists said they expect the full Senate to act on the legislation this month, before Congress adjourns for a month-long recess.

The bill approved by the Senate Finance Committee on Saturday incorporated a compromise measure between the committee's chairman, Sen. Daniel Patrick Moynihan, D.N.Y., and the so-called mainstream group of committee members. The compromise measure, which was put together late Friday, retained the repeal of the $150 million cap that was proposed in the bill offered by Moynihan last week before the committee began debate.

Under current tax law, nonhospital 501(c)3) organizations cannot have more than $150 million of tax-exempt bonds outstanding at any time. The Finance Committee bill would repeal the provision for health care and all other 501(c)(3) organizations.

The Finance Committee bill also retams a provision proposed by Moynihan that is similar to a proposal included in a tax simplification bill passed by Congress in 1992 but vetoed by President Bush, the sources said. The provision would remove some of the post-1985 restrictions that were placed on 501(c)3) bonds and put then more on a par with governmental bonds.

Under the proposal, the sources said, 501(c)(3) bonds would not be subject to a 2% limit on issuance costs or to a prohibition on the use of private-activity bonds for such things as skyboxes, airplanes, and gambling.

Restrictions on the private use and payments tests for 501(c)(3) bonds, however, would be eased from 5% to 10% so that they are treated more like governmental bonds.

Under the current tax law, 501(c)(3) bonds may be taxable if more than 5% of the proceeds are used by a private party--other than the 501(c)(3) organization -- and if more than 5% of the debt service is secured by, or derived from, payments from a private party.

The Finance Committee bill would retain several of the current law restrictions on 501(c)(3) bonds, including: low-income housing requirements for residential rental property acquired by 501(c)(3) organizations, the maturity limits applicable to 501(c)(3) bonds, the public approval requirements applicable to privateactivity bonds, and the penalties for a change to a nonqualified use of the tax-exempt bond-financed property of a 501(c)(3) organization.

The bill would also add new restrictions that nospitals and other health care organizations would have to meet to obtain tax-exempt status. The restrictions would be tougher than those proposed by the Clinton Administration, but less harsh than those in the bill approved by the House Ways and Means Committee.

To be tax-exempt, 501(c)(3) health care organizations would have to:

* Provide "qualified outreach services." These would be health care, educational, or social services that are provided in medically underserved areas at below cost to poor individuals or at specialty emergency care facilities that normally operate at a loss.

* Annually assess the heath care and qualified outreach service needs of the community and develop and disclose a written plan to meet those needs.

* Avoid discriminating in providing health care services to individuals who are covered by government-sponsored health plans such as Medicare and Medicaid.

* Provide emergency health care services that do not discriminate against a patient's ability to pay.

The bill would allow the Internal Revenue Service to impose excise taxes as an intermediate sanction, rather than revoking the tax-exempt status of a 501(c)(3) health care organization and its bonds, for certain transactions that result in the "inurement" or enrichment of an official or other so-called insider.

These would be transactions involving unreasonable compensation, transfers of assets at something other than fair market value, and revenuesharing arrangements.

The alternative sanction provisions in the bill are tougher than those proposed by the Treasury Department last March, but not as tough as the ones in the bill approved by the House Ways and Means Committee on Friday.

Joan Pryde contributed to this article.

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