H.R. 3967 - Municipal Bond Market Support Act of 2019

116TH CONGRESS
1ST SESSION

H.R. 3967

To amend the Internal Revenue Code of 1986 to permanently
modify the limitations on the deduction of interest by financial
institutions which hold tax-exempt bonds, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JULY 25, 2019

Ms. SEWELL of Alabama (for herself and Mr. REED) introduced the following bill;
which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to permanently modify the limitations on the deduction of interest by financial institutions which hold tax-exempt bonds, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the "Municipal Bond Market Support Act of 2019".

SEC. 2. PERMANENT MODIFICATION OF SMALL ISSUER EXCEPTION TO TAX-EXEMPT INTEREST EXPENSE ALLOCATION RULES FOR FINANCIAL INSTITUTIONS.

(a) PERMANENT INCREASE IN LIMITATION. — Subparagraphs (C)(i), (D)(i), and (D)(iii)(II) of section 265(b)(3) of the Internal Revenue Code of 1986 are each amended by striking "$10,000,000" and inserting "$30,000,000".

(b) PERMANENT MODIFICATION OF OTHER SPECIAL RULES. — Section 265(b)(3) of such Code is amended —

(1) by redesignating clauses (iv), (v), and (vi) of subparagraph (G) as clauses (ii), (iii), and (iv), respectively, and moving such clauses to the end of subparagraph (H) (as added by paragraph (2)), and

(2) by striking so much of subparagraph (G) as precedes such clauses and inserting the following:

"(G) QUALIFIED 501(c)(3) BONDS TREATED AS ISSUED BY EXEMPT ORGANIZATION. — In the case of a qualified 501(c)(3) bond (as defined in section 145), this paragraph shall be applied by treating the 501(c)(3) organization for whose benefit such bond was issued as the issuer.

"(H) SPECIAL RULE FOR QUALIFIED FINANCINGS. —

"(i) IN GENERAL. — In the case of a qualified financing issue —

"(I) subparagraph (F) shall not apply, and

"(II) any obligation issued as a part of such issue shall be treated as a qualified tax-exempt obligation if the requirements of this paragraph are met with respect to each qualified portion of the issue (determined by treating each qualified portion as a separate issue which is issued by the qualified borrower with respect to which such portion relates).".

(c) INFLATION ADJUSTMENT. — Section 265(b)(3) of such Code, as amended by subsection (b), is amended by adding at the end the following new subparagraph:

"(I) INFLATION ADJUSTMENT. — In the case of any calendar year after 2019, the $30,000,000 amounts contained in subparagraphs (C)(i), (D)(i), and (D)(iii)(II) shall each be increased by an amount equal to —

"(i) such dollar amount, multiplied by

"(ii) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year, determined by substituting 'calendar year 2018' for 'calendar year 2016' in subparagraph (A)(ii) thereof.

Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $100,000.".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to obligations issued after the date of the enactment of this Act.