(The Bond Buyer) – House Ways and Means Committee chairman Sander Levin Wednesday introduced a new bill that enables Congress to make another attempt at extending several bond provisions slated to expire at the end of the year, including Build America Bonds.

The Investing In American Jobs and Closing Tax Loopholes Act — HR 5893 — would extend BABs for two years, along with other extensions to temporary bond provisions first enacted in the American Recovery and Reinvestment Act of 2009.

The bill “is about moving forward to create opportunities for Americans in America using job-creating programs such as the Build America Bonds,” Levin, a Michigan Democrat, said in a statement. “Experts have deemed these bonds, which helped support nearly two million jobs, to be one of the most successful recovery efforts in place. Republican and Democratic governors alike have praised these programs.”

House Democrats plan to bring the bill straight to the House floor and hope to pass it before Congress breaks for a month-long recess beginning Aug. 9, according to sources. The Senate would then take up the measure after the break.

The House previously passed a bill extending temporary bond provisions, but it ground to a halt in the Senate after Democrats were unable to garner 60 votes on the package to block a filibuster threatened by Republicans. The bond provisions were eventually stripped from that bill, but have found a new home in Levin’s measure.

The legislation would gradually reduce the subsidy rate for BABs from the current 35% level to 32% for bonds sold in 2011, and 30% for those sold in 2012.

“National League of Cities is certainly pleased that the chairman has recognized … that these important provisions need to be extended,” said Lars Etzkorn, program director of the NLC’s center for federal relations.

The NLC was one of six groups that sent a letter earlier this month to senators urging them to pass a BAB extension, saying the program has provided critical assistance to state and local governments during times of extraordinary budgetary pressures. Issuers have sold nearly $120 billion of the securities since passage of the ARRA last year, according to data from Thomson Reuters.

Levin’s bill also includes an extension to another muni provision that encouraged banks to buy more tax-exempt debt from smaller issuers. It would extend by one year, through 2011, the greater small-issuer exemption for bank-qualified bonds.

The ARRA modified the tax law to allow banks to deduct 80% of the costs of buying and carrying tax-exempt debt sold by borrowers whose annual issuance is no greater than $30 million, up from $10 million. It also allowed for the $30 million limit to be applied to individual borrowers participating in conduit deals, rather than at the conduit-issuer level.

“We appreciate and welcome chairman Levin’s leadership in continuing to emphasize the relationship between municipal finance liberalization, stimulus and jobs,” said Charles Samuels, a lawyer with Mintz Levin Cohn Ferris Glovsky & Popeo PC and counsel to the National Association of Health and Educational Facilities Finance Authorities. “Nonprofit education and health continue to need access on reasonable terms to the capital market.”

Susan Gaffney, director of the Government Finance Officers Association’s federal liaison center, also threw her support behind the bank-qualified debt provision, saying it is “vital for smaller local governments to be able to issue debt efficiently and in a cost-effective manner.”

The bill also would extend for one year the programs for recovery zone economic development bonds and recovery zone facility bonds. It would also allocate an additional $10 billion and $15 billion to the programs, respectively. And the bond authority would be allocated using a new formula that would guarantee each locality receives a minimum allocation equal to at least its share of national unemployment as of December 2009.

The bill also would extend for one year, through 2011, the exemption from the alternative minimum tax for all private-activity bonds, including those issued to refund debt sold after 2003. It also would exempt water and sewer exempt-facility bonds from state volume caps for PABs, and allow Federal Home Loan Banks to guarantee tax-exempt bonds through 2011.

Read More…

(Bloomberg) — The House Ways and Means Committee voted 25-15 along party lines to approve a three-year extension of the Build America Bonds program, the fastest-growing part of the $2.8 trillion U.S. municipal debt market.

The measure will be sent to the full House for consideration as early as next week. The federally subsidized Build America program, created last year as part of the government’s economic stimulus, is set to expire Dec. 31.

“By assisting small businesses and continuing effective financing mechanisms for state and local governments, we can spur job growth and make vital improvements to our communities,” said acting Committee Chairman Sander Levin, a Michigan Democrat.

State and local governments from California to New York have cut borrowing costs by selling $86 billion of Build America Bonds for construction projects, according to data compiled by Bloomberg. The U.S. Treasury subsidizes 35 percent of the interest costs on BABs, in contrast to the tax breaks afforded to buyers of conventional municipal securities.

The bill passed today would reduce future subsidies to 33 percent in 2011, 31 percent in 2012, and 30 percent in 2013, according to an analysis prepared for the Ways and Means Committee. President Barack Obama’s fiscal 2011 budget proposed extending and expanding the program while reducing the subsidy to 28 percent.

Read More…

Obama Looks to Boost Jobs As Senate Democrats look to pass a jobs bill before Presidents Day, experts say the debate is an opportunity to see if calls for bipartisanship will be answered.

With high unemployment — now at 9.7 percent — and polls showing Americans desperate for economic relief, the White House and the Democratic leadership are looking for ways to quell fears and get legislation passed as the midterm elections near.

The Democrats’ agenda includes: renewing existing highway legislation for a year, which is expected to result in 1 million jobs, Senate Majority Leader Harry Reid said. Also, enacting small business and job creation tax credits — and extending Build America Bonds, a stimulus measure that helps states and municipalities fund capital construction projects.

Read More…

A permanent Build America Bonds program, as proposed by President Obama, is likely to increase interest in these taxable bonds from states and localities among mutual-fund investors.

Right now, the funds specializing in these taxable variants on municipal bonds, which typically aren’t taxed, are few.

PowerShares launched a BAB-focused exchange-traded fund in November. PowerShares Build America Bond Portfolio (trading symbol: BAB), which has about $80.4 million in assets, has advanced 3.2% thus far this year, or 2.5 percentage points better than the muni bond category. Eaton Vance Build America Bond Fund (EBABX), the first actively traded fund designed to invest in the bonds, also debuted in November and has returned 3.0% this year.

“We are encouraged by reports coming out of Washington regarding the possible extension of the Build America Bonds program,” said Ed McRedmond, senior vice president of institutional and portfolio strategies at Invesco PowerShares.

Build America Bonds are municipal-debt instruments authorized under the government’s 2009 stimulus program. The federal government subsidizes 35% of the overall interest cost of the bonds. The bonds have been attractive to investors, such as pension funds and foreign investors.

The program is set to expire at the end of 2010, but in his 2011 budget, President Obama proposed making it permanent. He also proposed reducing the government subsidy to 28%, and expanding the eligible types of issuers.

Read More…