WASHINGTON -- The Senate Finance Committee may add to its urban aid package a host of tax-exempt bond provisions that were approved earlier this year as part of the tax bill vetoed by President Bush, the panel's chairman said yesterday.
Sen. Lloyd Bentsen, D-Tex., told reporters that when his committee meets next week to draft an urban aid bill, he will recommend that it include a package of tax simplification proposals passed by the panel in March. Those proposals would, among other things, increase the supply of bank-qualified bonds, loosen restrictions on 501(c)(3) bonds, and ease the arbitrage rebate requirement.
Earlier in the day, in a speech to the National Association of Manufacturers, the senator said his committee's urban aid bill "will have much of what the House bill has, but we will also have some additional things." He would not elaborate on those other items.
The House's urban aid bill would ease current law governing tax-exempt qualified redevelopment bonds so they could be used in the zones. In addition, the bill would make permanent the tax exemptions for mortgage revenue bonds and small-issue industrial development bonds, which expired June 30.
But Senator Bentsen said he expects to offer a different plan for enterprise zones than that envisioned under the House bill. He said his proposal would focus more on aiding people who live in the zones than on providing incentives for businesses to move into the areas.
Both the Bush administration and the House have endorsed a variety of tax incentives that would entice businesses into blighted areas that would be designated as enterprise zones.
Though he is drafting an enterprise zone proposal, Sen. Bentsen told the manufacturers' group he has doubts about the concept.
"I'm not sure how effective enterprise zones will be," he said. The senator added he wanted a relatively small number of zones to operate for a few years while the government studies them to determine if they foster economic development.
Sen. Bentsen did not offer a timetable for the urban aid legislation, but tax aides and lobbyists have said they expect the Senate to act on the finance committee's measure before Congress adjourns for a four-week recess on Aug. 13. Senate leaders are likely to wrap into that bill another measure, passed by the finance committee last month, that would renew the mortgage bond and IDB exemptions and extend them through Dec. 31, 1993.
The provision on bank-qualified bonds included in the Senate committee's March tax bill would ease restrictions enacted in 1986. The tax reform act passed that year allows banks to deduct the cost of purchasing and carrying tax-exempt bonds only if they are bought from an issuer that expects to sell no more than $10 million of governmental bonds annually. The provision approved by the finance panel in March would have increased that amount to $25 million.
The provision on 501(c)(3) bonds would remove the $150 million limit on the amount of bonds that individual private, nonprofit entities other than hospitals may have outstanding at one time.
That provision would also reclassify 501(c)(3) bonds as governmental bonds. Under current law, they are considered private-activity bonds, even though they are exempt from the private-activity bond volume cap.
Other tax simplification provisions in the earlier Senate committee bill that are likely additions to the urban aid package would: * Expand the six-month exemption from the arbitrage rebate requirement to an issuer who has spent 95% of the proceeds within that period. * Ease requirements for bona fide debt service funds under the 1989 arbitrage rebate relief law. * End the requirement that two bond issues paid from substantially the same sources of funds be treated as the same issue if they are issued within 31 days of each other, as long as one of the issues is a tax and revenue anticipation note.