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The White House would sign off on a tax overhaul even if it means gutting private activity bonds, a key tool for financing the administration’s $1 trillion infrastructure plan, White House official DJ Gribbin told a public-private partnership conference Nov. 30.
Private activity bonds (PABs) offer tax-exempt interest for projects such as airports, highways, and waterway facilities. The tax-exempt interest option makes borrowing less costly for state and local governments and airport authorities, among other qualifying entities.
The House tax bill (H.R. 1) would eliminate exemptions for PABs, while the Senate bill would retain them.
“The administration wants a tax reform bill and it’s highly unlikely—highly unlikely—that we would allow private activity bonds to influence our decision on whether we get tax reform or not,” Gribbin, the special assistant to the president for infrastructure policy, said during a keynote speech at the P3 Federal Conference in Washington.
Gribbin said he is hopeful that tax legislation emerges from conference with PABs, so they can be coupled with Transportation Infrastructure Finance and Innovation Act (TIFIA) and Water Infrastructure Finance and Innovation Act (WIFIA) loans to pay for infrastructure.
“Hopefully, conference comes back and Congress sends to the president something that allows private activity bonds for infrastructure, but that’s probably not a hill we are going to die on,” Gribbin said.
The administration’s fiscal year 2018 budget proposal called for $200 billion in direct federal spending on infrastructure to leverage $800 billion in state, local, and private investment.
The White House called for the cap on PABs to be lifted in the same budget document that set forth its early thinking on the $1 trillion infrastructure plan. The Department of Transportation has a $15 billion cap on the tax-exempt bonds it is allowed to issue on behalf of private entities.
Gribbin told the conference he was confident the administration could identify infrastructure funds in the next budget.
“We found $200 billion in our last budget, highly probable we will find in the next one,” he said.
“We do run into a scoring challenge if Congress is not happy with the cuts we are proposing and will need to find ways to offset,” he said with regard to paying for infrastructure.
But he added: “I think that at the end of the day we’re not going to have problems finding opportunities to pay for infrastructure.”
The House decision on PABs was less of a philosophical issue with those bonds than a necessary pay-for, according to Sean O’Neill, senior director of congressional relations for the Associated General Contractors of America.
“It would be our hope that ... their tax-exempt status remains,” O’Neill told Bloomberg Government.
Even if they do lose that status, he said he is hopeful that PABs could be revisited in an infrastructure bill.
The Senate was voting on amendments to its tax bill Nov. 30.
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