House of Representatives and Senate Finance Committee pass Tax Cuts and Jobs Act

The House of Representatives passed H.R. 1, the Tax Cuts and Jobs Act, on November 16, 2017, by a vote of 227 to 205. The House bill continues to contain the repeal of private activity bonds and advance refundings. The Senate Finance Committee passed its version of tax reform hours later, 14-12. The Senate bill is silent on private activity bonds but contains the advance refunding repeal. The full Senate is expected to consider its version after Thanksgiving. Read more >>

Federal Updates, Legal Developments

Senate releases its version of the Tax Cuts and Jobs Act

On November 9, the Senate Finance Committee released the "Chairman's Mark," which is a summary of what the Senate's version of the Tax Cuts and Jobs Act is expected to contain. Unlike the House's version of tax reform, the tax exemption for private activity bonds is not repealed. However, the repeal of authorization for advance refunding has been included in the Senate version. Especially with the appearance of the prohibition for advance refundings in both the House and Senates tax bills, modification of financing techniques that provide significant flexibility to governmental issuers and 501(c)(3) entities and help them take advantage of falling interest rates is likely on the horizon. Read more >>

Federal Updates, Legal Developments

H.R. 1 proposes significant limits on municipal bonds

On November 2, 2017, the U.S. House of Representatives Ways & Means Committee released its first draft of H.R. 1, known as the Tax Cuts and Job Act (the bill). If enacted in its current form, the bill would prohibit the use of a number of funding techniques that use tax exempt bonds. Specifically, the bill would no longer permit private activity bonds to be issued as tax exempt, would forbid the use of tax exempt advance refunding bonds, would eliminate tax credit bonds and would terminate tax exempt bonds for professional sports stadiums. Read more >>

Federal Updates, Legal Developments

Annual survey of top site selection factors: skilled labor tops list for 2016

What is the most important factor when companies are looking for a location to establish or expand their business? According to the results of  AreaDevelopment.com’s annual survey of corporate executives, the availability of skilled labor is the first thing they take into account. AreaDevelopment.com reports that “68 percent of the respondents say they consider whether there are businesses performing activities similar to those of their company in the area of search” as an indicator of whether the talent pool they need will already be established in that area. Other top site selection factors in the top ten are, in order: highway accessibility, quality of life, occupancy or construction costs, available buildings, labor costs, corporate tax rate, proximity to major markets, state and local incentives, and energy availability and costs. For more, read the full article on the survey results.

Federal Updates

Slow economic growth is the “new normal,” experts say

Business economists say that “Americans should get used to a ‘new normal’ of slow economic growth,” Cincinnati.com reports. “The median estimate from economists surveyed by the National Association for Business Economics surveyed calls for the American economy to grow 2.2 percent in 2017,” up from 1.6 percent forecasted this year, according to the article. From 1948 to 2015, economic growth in the United States averaged 3.1 percent a year, but 80 percent of economists surveyed believe the potential growth rate of the country’s economy “will remain at 2.5 percent or lower over the next five years.” However, they think the risk of recession is remote, and “90 percent expect the current economic expansion to continue until at least 2018.” Two-fifths of the economists said infrastructure spending increases “would be the best way to boost economic growth over the next four years,” while 36 percent of them said tax reform would best promote growth. For more, read the full article.

Federal Updates

IRS issues new safe harbor provisions for management contracts

The Internal Revenue Service has announced a new safe harbor for management contracts relating to certain bond-financed facilities.  Rev. Proc.  2016-44 aims to provide what it characterizes as a “more flexible and less formulaic approach” to the question of whether an arrangement with a service provider could adversely affect the tax-exempt status of governmental bonds and qualified 501(c)(3) bonds under the Internal Revenue Code of 1986, as amended.  The new safe harbor permits longer term arrangements between the beneficiaries of tax exempt bonds and service providers without adversely affecting the tax status of those bonds. For more, read the full article.

Federal Updates, Financial Incentives, Legal Developments

Federal guidance announced for residential PACE programs

On July 19, 2016, the White House announced the Clean Energy Savings For All Initiative, a new partnership among several federal agencies designed to increase access to solar energy and promote energy efficiency. The new initiative has a goal of bringing 1 gigawatt (GW) of solar to low- and moderate- income families by 2020 through collaboration with state and local groups. 

The White House also announced new steps that the federal agencies involved with the initiative are taking to promote energy efficiency financing. For example, the Department of Housing and Urban Development (HUD) and the Department of Veteran’s Affairs (VA) are releasing guidance regarding how Property Assessed Clean Energy (PACE) programs can be used in conjunction with residential mortgages insured by the VA or the Federal Housing Administration (FHA). The Department of Energy (DOE) is releasing an updated draft of its Best Practices Guidelines for Residential PACE Financing that includes protections to consumers who voluntarily opt into residential PACE programs, as well as lenders who hold mortgages on residential properties with PACE assessments. The DOE is also providing assistance to support the design and implementation of new PACE programs, and creating the Community Solar Challenge to promote the development of innovative models that increase access to solar and energy efficiency programs, particularly in low-income communities. 

For more, read the full White House press release.

Federal Updates, Financial Incentives

Port authorities say proposed federal regulations could hurt their operations

Port authorities from Ohio and Oregon and a wholesale electricity provider from Nebraska warn that rules proposed by the Internal Revenue Service and the Treasury Department “could hurt their standing as political subdivisions and their ability to issue bonds as well as complicate their governing structure,” The Bond Buyer reports. The new regulations would require that “political subdivisions serve a governmental purpose ‘with no more than an incidental private benefit’ and be governmentally controlled” to issue tax-exempt bonds, according to the article. Chris Burnham, president of the Development Finance Authority in Summit County, Ohio, said, “[m]any Ohio port authorities provide financing that can be construed as private benefit — we issue tax-exempt revenue bonds for parking garages and other public infrastructure through tax increment financing, which under state law, does benefit a private development project.” Cleveland-Cuyahoga County Port Authority chief financial officer Brent Leslie also said the proposed rules could be “problematic,” saying, “some additional clarity around the definition of control would make sure that ports, airports, and other special units/districts have the ability to continue to issue tax-exempt debt for the benefit of the citizens we represent.” A public hearing will be held June 6.

Federal Updates, Legal Developments, State Updates