Client Alert – Tax Cuts and Jobs Act (H.R. 1)

On November 2, 2017, the Republican leadership of the United States House of Representatives introduced the Tax Cuts and Jobs Act (H.R. 1), which would make significant changes to tax rules that apply to tax-exempt bonds and related matters. Set forth below is a brief summary of the principal proposed changes.

Termination of Tax-Exempt Private Activity Bonds 

• The Bill would prohibit the issuance of any tax-exempt private activity bonds after December 31, 2017.  Private activity bonds include bonds issued for § 501(c)(3) schools and universities, hospitals, and other exempt organizations.

• The Bill does not yet include any transition rules for refundings.  Accordingly, the Bill would prevent a tax-exempt refunding (or reissuance), after December 31, 2017, of any currently outstanding private activity bonds issued under the general rules of the Tax Reform Act of 1986. 

• The Bill would appear to eliminate tax-exempt treatment of any rolls and bond take-outs of outstanding private activity commercial paper that occur after December 31, 2017.

• The Bill would appear to eliminate the ability for a borrower of outstanding private activity bonds issued on a drawdown basis to take any additional draws after December 31, 2017.

• The Bill would repeal the provisions allowing for tax-exempt advance refundings, prohibitying any tax-exempt advance refunding bonds from being issued after December 31, 2017.

Although the Bill is expected to be taken up by the full House the week of November 13, the House is expected to pass the Bill with very few changes. As the Senate Finance Committee finalizes its tax reform bill, we urge you to contact the following Senate Finance Committee Staff along with the Office of Senators Blumenthal and Murphy asking that they preserve the exemption for private activity bonds.  Below is their contact information.

 Senate Finance Committee 

Senate Finance (Majority) – Mark Prater, Deputy Staff Director/Chief Counsel – mark_prater@finance.senate.gov 

Senate Finance (Minority) – Tiffany Smith, Chief Tax Counsel – tiffany_smith@finance.senate.gov 

Senators Blumenthal and Murphy

Office of Senator Blumenthal – Maya Kalonia, Legislative Assistant (Tax) – maya_kalonia@blumenthal.senate.gov 

Office of Senator Murphy – Cynthia Pullom, Legislative Counsel – cynthia_pullom@murphy.senate.gov

Attached below is a script which you can use for a phone call, or as the basis of an email. You will see that we primarily refer to “public charities” as it will help to drive home the message that by eliminating the exemption for private activity bonds, Congress is harming charitable organizations and not entities engaged in private business transactions.

Sample Script