WASHINGTON - The House yesterday easily approved a tax simplification bill the that includes three minor provisions to ease curbs on municipal bonds. The measure was approved by V3

voice as the House Ways and Means Committee prepared to begin drafting health care reform legislation.

The simplification measure was passed by the Ways and Means panel last November, but not before committee chairman Dan Rostenkwoski, D-Ill., stripped away some major bond items over the objections of supporters.

One of the three bond provisions remaining in the bill would ease requirements for bona fide debt service funds under the 1989 arbitrage rebate relief law. Another would clarify that transactions in which state or local governments prepay equipment purchases are eligible for tax-exempt financing if certain conditions are met.

The third provision would expand the six-month exemption from the arbitrage rebate requirement to an issuer that spends 95% of proceeds within that period and the other 5% in the following six months.

Removed from the bill were provisions to increase to $10 million the $5 million small-issuer exemption from the arbitrage rebate requirement and to repeal the so-called 5% unrelated-use test. Rostenkowski said the provisions had to be eliminated to minimize the bill's cost to the federal government.

Whether the bill will be enacted this year is unclear because the Senate has not yet drafted a simplification bill. But some municipal lobbyists have suggested that at some point the measure could be folded into the bigger health care reform bill.

The Ways and Means panel is scheduled to begin drafting a health care reform bill today, and will be struggling to reach a consensus on what approach to take. Originally, the committee planned to complete work on a bill by the Memorial Day recess, which begins May 27, but recently Rostenkowski said that the panel will probably have to extend its drafting sessions into next month.

As a starting point, the committee is expected to use a bill approved in March by the panel's subcommittee on health. The measure includes a provision that would permit federally guaranteed tax-exempt bonds to be issued for health care institutions serving urban areas with inadequate access to medical services.

As for other bond provisions, the Public Securities Association and a group of 501(c)(3) bond issuers are urging the full committee to add to the bill a trio of bond items that would help health care institutions make the transition to a new health care system.

The provisions would ease limits on health care advance refundings, bank deductibility, and the amount of bonds that individual health care institutions may have outstanding.

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