WASHINGTON - Sen. John Chafee once described the tax exemption for mortgage revenue bonds and the low-income housing tax credit as "two horses linked together, pulling the same wagon."

So the Rhode island Democrat and other mortgage bond supporters were concerned last year when Congress approved legislation that would have made the housing credit permanent but extended the mortgage bond exemption for only one year.

Chafee saw the legislation as an unsettling precedent. "It's a little disquieting, because I like to see these move in tandem," he told a meeting of the National Council of State Housing Agencies shortly after Congress passed the bill in March 1992.

The fact that lawmakers had treated the two tax breaks differently became a moot point when President Bush vetoed the measure. Then, on June 30, 1992, the housing credit and the mortgage bond exemption expired together, along with I 0 other tax breaks.

But now, the possibility of decoupling the two horses has been raised again. The Senate's version of President Clinton's budget and tax package would make the housing credit permanent, but extend the mortgage bond exemption only through June 30, 1994.

One might ask what difference it would really make if the housing credit got a longer-term extension than the mortgage bond exemption. Politically, it could mean plenty.

That's because, among the dozen or so tax breaks that perennially come up for renewal in Congress, the housing credit and the credit for research and experimentation are believed to have the most support. They are considered the engine that drives legislation to extend the entire group.

Thus, proponents of mortgage bonds and IDBs have long feared that if legislation were enacted making only the housing credit and the research credit permanent, the others might be in danger of expiring for good.

A proposal like the Senate's puts supporters of mortgage bonds in a quandary, because they tend to be the same people who support the housing credit. They can't say they oppose a permanent housing credit, but they also know deep down that they want the fortunes of the mortgage bond exemption to remain linked to those of the housing credit.

During the Senate Finance Committee's debate on the tax package on June 17, Sen. Donald W. Riegle, D-Mich.emphasized that the fact the two were treated differently should not be taken as a sign that support is lacking on the panel for the mortgage bond exemption.

Riegle, the chief sponsor of legislation to make the mortgage bond exemption permanent, said the different treatment for the housing credit and mortgage bonds "was not meant to create a discrimination between those two."

Rather, the panel just did not have enough money to grant all the permanent extensions that it wanted to. The tax exemption for small-issue industrial development bonds and eight other tax breaks that expired June 30, 1992, also would be extended through June 30, 1994, under the Senate bill. Riegle promised to fight for a permanent mortgage bond exemption, which the House proposed in its version of the budget and tax package.

The good news for mortgage bond supporters is that there is still ample reason to believe that the final version of the tax package will keep the housing credit and the mortgage bond exemption together in lockstep.

First, House conferees can be expected to push for their proposal for a permanent extension. Second, Senate Finance Committee Chairman Daniel P. Moynihan, D-N.Y., will walk into the conference armed with a nonbinding Senate resolution supporting a permanent extension.

A third reason involves money. The housing credit is one of the two most expensive of the tax breaks that Congress is considering renewing, the other being the research credit.

If Congress has enough money to make the housing credit permanent, the thinking goes, then it won't cost much more to bring mortgage bonds and the other extensions along for the ride. By the same token, if lawmakers need to cut corners, scaling back the housing credit will net them more savings than any of the other extensions.

If you ask mortgage bond proponents, they will say the exemption has enough support in both houses of Congress that it doesn't necessarily need to be linked to the housing credit. But it's still a safe bet that they would prefer to see the two move in tandem.

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