Lawmakers Ask House Committee to Back Muni Exemption

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Che Odom

More than 150 members of Congress asked the House Ways and Means Committee leadership to preserve the tax-exempt status of municipal bond interest.

“A combination of local control and local responsibility makes municipal bonds an incredibly effective and efficient tool,” the members said in a March 8 letter to Chairman Kevin Brady (R-Texas) and ranking member Richard E. Neal (D-Mass.).

The lawmakers are concerned President Donald Trump and congressional leaders will undermine a popular means of financing the construction of bridges, roads and other public projects by ending the exemption.

The letter-writing was led by Rep. C. A. Dutch Ruppersberger (D-Md.) and Rep. Randy Hultgren (R-Ill.), who together started the House Municipal Finance Caucus last year “to ensure that states and local government have access to robust financing tools.”

Recurring Issue

The controversy over municipal bonds comes up every few years, Charles S. Henck, a Ballard Spahr LLP partner who practices in public finance and tax law, told Bloomberg BNA.

This time the concern stems from the sweeping tax changes expected from the GOP-controlled Congress and President Trump’s call for $1 trillion worth of infrastructure spending.

Trump has said infrastructure projects should be financed in part through tax credits to investors and construction companies, as well as various private-public partnerships.

Sources close to GOP House leadership, however, have told Bloomberg BNA that the exemption is safe in their eyes.

Praise for Letter

The letter drew praise from the National Association of State Treasurers and the National Governors Association, which recently met with lawmakers in Washington to discuss a number of issues important to states, including municipal bonds.

In December, Trump told mayors during a December meeting at Trump Tower in New York that he didn’t plan to target the exemption.

Still, state officials plan to maintain pressure on Congress.

Elena Waskey, associate communications director for the NGA, said they support the letter and efforts to continue to push for the exemption.

Safe Investments

State officials worry elimination of the tax-exempt status would make municipal bonds less attractive to investors, making the financing of projects more difficult.

The March 8 letter, signed by Democratic and Republican members of Congress, said that “millions of Americans depend on municipal bonds for their economic security, and invest in them because of their low-risk nature.”

To contact the reporter on this story: Che Odom at COdom@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

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