The reinstatement of a type of tax-exempt bond popular with state and local governments should be a part of Congress’s response to the coronavirus pandemic, according to a group of bond lawyers.
In an April 9 letter to congressional leaders, the National Association of Bond Lawyers (NABL) recommended seven legislative actions, with permanent restoration of advance refunding bonds among them.
The bonds were eliminated by the Tax Cuts and Jobs Act.
The move would help state and local governments recover from the COVID-19 crisis by allowing them to save money, access low interest rates, and restructure debt service, NABL said.
“Many state and local governments and other obligors of tax-exempt bonds are experiencing dire financial situations and are having difficulty paying scheduled principal and interest on their outstanding debt,” the group said. “It would greatly benefit such entities to be able to refinance their debt at today’s interest rates.”
Lawmakers have already considered reinstating advance refunding bonds this year. House Ways and Means Committee Chair Richard E. Neal, D-Mass., included it in an infrastructure proposal introduced January 29.
Similar to Build America Bonds
NABL asked Congress to create a new category of state and local bonds called American infrastructure bonds, modeled on the Build America Bonds that expired in 2011 but with several differences specific to the coronavirus pandemic.
“As the COVID-19 crisis is almost certainly going to result in dire cash flow problems for state and local governments, it is important that American infrastructure bonds be available for any purpose for which tax-exempt governmental bonds could otherwise be issued,” NABL said.
House Democrats have said they want a fourth coronavirus relief bill to assist with recovery, but it’s still unclear what provisions it would include.