WASHINGTON -- The House Ways and Means Committee is close to approving Rep. Dan Rostenkowski's tax simplification bill, but may have to jettison some of its bond provisions and other items to minimize the cost, congressional aides said yesterday.

The bill, introduced by the Illinois Democrat in January, contains a number of provisions to ease curbs on tax-exempt bonds. For example, it would increase to $10 million the $5 million small-issuer exemption from the arbitrage rebate requirement and repeal the 5% unrelated-use test.

The Ways and Means Committee, which Rostenkowski chairs, was scheduled yesterday to vote on the bill, known as H.R. 13. But the members were forced to cancel the session when unexpected problems in funding proposals for the North American Free Trade Agreement arose, aides to committee members said.

A committee spokesman said he had no idea when the drafting session would be rescheduled, but the aides to committee members said they expect the meeting to occur this week or next week.

When panel members finally vote on, or "mark up," the bill, they will be forced to scale it back, aides to members said. In its current form, the bill would lose $1 billion in revenue for the federal government. The aides said that Rostenkowski plans to propose about $500 million in revenue-raising items to offset the cost, which would leave $500 million in items that would have to be stripped out of the bill.

"H.R. 13 is not going to be marked up in full," one aide said. "The whole trend is to cut back."

In addition to the bond provisions on arbitrage rebate and the 5% unrelated-use test, the bill contains a number of smaller items designed to simplify bond curbs and make them more workable. For example, the bill would ease requirements for bona fide debt service funds under the 1989 arbitrage rebate relief law. Aides to committee members said they did not know which sections of the bill might be eliminated.

Municipal bond proponents had been hoping that the simplification bill would become the basis for a more comprehensive package, one that would include members' favorite proposals to ease tax curbs. When the panel drafted President Clinton's tax package in May, Rostenkowski prevailed on panel members not to add amendments in return for his promise of a second tax bill later in the year.

But prospects have dimmed for a bill bull of those amendments, for two reasons. One is the members' distaste for approving the revenue-raising items that would be needed to pay for the amendments. The other is that the committee has little time and energy to put into a comprehensive bill, with debate on Nafta and health-care reform taking up most of its time.

The committee is carrying on its work amid news reports that the federal investigation into the House Post Office scandal is widening to include a broad range of activities carried on by Rostenkowski.

In July, former House postmaster Robert V. Rota pleaded guilty to helping two unnamed congressmen embezzle money from the House Post Office. One of the two is widely understood to be Rostenkowski, though he has denied any wrongdoing.

Lobbyists and tax aides expect that any decision to indict Rostenkowski would have to be made by the end of October, when the grand jury investigating the scandal is scheduled to expire. But yesterday's Washington Times quotes unnamed federal sources as saying that U.S. Attorney Eric Holder plans to expand the investigation into other issues, such as possible irregularities in Rostenkowski's payroll records.

Widening the probe, according to the paper, would delay well beyond this month any decision on whether to indict Rostenkowski. The article said it was not clear whether Holder, who was recently appointed by Clinton, would seek an extension of the grand jury or allow it to expire and start over with another grand jury.

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