Senate finance panel set for vote to extend tax-exempt provisions.

WASHINGTON -- The Senate Finance Committee is scheduled to vote Tuesday on extending tax provisions set to expire June 30, including the tax exemptions for mortgage revenue bonds and small-issue industrial development bonds.

During the meeting, the committee also plans to consider an energy bill passed by the House that contains provisions affecting the tax-exempt bond market.

Lobbyists and Senate aides said they had no idea how long the proposed extensions would be, though they did not expect the panel to suggest making any of the expiring provisions permanent. They speculated that the committee could approve a period anywhere from six months to 18 months for the provisions.

The lobbyists and aides also said they were surprised that the committee planned to consider the extensions as a stand-alone bill, rather than trying to attach them to another measure. The panel is scheduled to vote today on legislation that would extend expiring unemployment benefits, a logical vehicle for the extensions, lobbyists said.

In fact, the committee had been slated to also take up the energy bill and the extensions today, but announced late yesterday that it would delay consideration of those two items until Tuesday. The panel gave no explanation for the schedule change.

The committee's chairman, Sen. Lloyd Bentsen, D-Tex., may prefer to wait and attach the extensions to enterprise zone legislation later this summer, lobbyists said. Members of Congress and the Bush administration have been pushing for passage of legislation to create the zones as a way to rebuild businesses in riot-torn cities like Los Angeles.

Sen. Bentsen was asked by reporters earlier this week what other legislative vehicles there are for the extensions other than the unemployment bill. He answered that he hoped the committee would consider enterprise zone legislation "sometime in July, I would hope, after the [Independence Day] recess," which ends on July 17. But he said he had not decided whether to attach the extensions to that measure.

When pressed on his plans for the expiring provisions, Sen. Bentsen refused to be specific, except to say, "There are a great many senators, including me, that would like to see at least a majority of them extended."

The energy bill the panel plans to consider Tuesday includes two provisions that have been closely watched by the municipal market.

One is designed to increase bank purchases of municipals by easing rules enacted in 1986. Under current law, banks may deduct 80% of the cost of carrying tax-exempt bonds only if they are purchased from issuers that expect to sell no more than $10 million annually. The provision would raise that amount to $20 million.

The other bond provision would end the requirement that nuclear decommissioning trust funds invest only in Treasury securities or tax-exempt municipal bonds. The provision would also lower the funds' 34% tax rate to 20%.

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