Trump Infrastructure Plan Would Expand Use of Private Activity Bonds
February 13, 2018
On February 12, 2018 the Trump Administration released its long-awaited Infrastructure Plan. A copy of the legislative outline for the Plan can be accessed here. The Plan calls for $1.5 Trillion in new infrastructure investment over the next ten years – although only $200 Billion of that will be in the form of new federal spending.
Included in the $200 Billion of new federal spending is a $6 Billion expansion of tax-exempt Private Activity Bonds (“PABs”). The Plan would:
- Broaden the types of projects which qualify for financing through PAB’s:
The Plan would add several new types of projects which would qualify for tax-exempt financing, including stormwater and flood control projects, rural broadband service facilities, and environmental remediation projects for Brownfield and Superfund sites, as well as expand the types of projects permitted to be financed under existing project categories.
- Liberalize governmental ownership requirements:
Under current law, certain PAB-financed projects must be owned by the government; an existing safe harbor permits certain leases with a term of up to 80% of the economic life of the project. The Plan would modify the safe harbor to permit leases with a term of up to 95% of the economic life of the project.
- Remove volume caps:
The Plan would remove existing volume caps on PAB issuance imposed under Sections 142 and 146 to permit unlimited volume of PAB’s issued for public purpose infrastructure projects.
- Add new remedial action provisions:
The Plan would amend the change-in-use provisions contained in Section 150 of the Code (and apparently overturn existing Treasury regulations on remedial action) to preserve the tax-exempt status of governmental bonds, specifically with regard to leases of projects financed by governmental bonds.
- Eliminate the AMT penalty for purchasers of PAB’s:
The Plan would eliminate PAB’s as an item of tax preference for purposes of the Alternative Minimum Tax imposed on individuals.
The Plan put forth by the Administration is simply an outline of what it would like to see in legislation that has yet to be drafted. There is no guarantee that all of the above-described proposals will make their way into an actual bill, let alone be approved by Congress. We expect that there will be much discussion and debate in the coming weeks and months as Congress considers the Administration’s Plan and prepares formal legislation on the topic.
Stay tuned for more updates as the story unfolds!
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