February 23, 2018
States have used advance refunding bonds to refinance debt. Their tax-exempt status was nixed as part of last year’s tax rewrite.
State treasurers are pushing Congress to reinstate a municipal bond tax exemption that was scotched as part of last year’s tax overhaul.
The federal income tax exemption applied to interest earned on what are known as “advance refunding” bonds. These bonds are a refinancing tool that state and local governments have commonly used in the past to lower borrowing costs and restructure debt.
In a letter sent Wednesday to leaders in the Senate and House, the National Association of State Treasurers said reviving the exemption would help to achieve the goals outlined in an infrastructure investment plan that President Trump is pushing for.
“Advance refunding bonds save money for taxpayers and free up money for additional infrastructure projects, by allowing state and local issuers to refinance bonds at a lower interest rate,” they wrote.
“As experts on infrastructure financing, we believe that reinstating the tax-exempt status of these bonds will be critical for state and local governments to properly execute any infrastructure proposal.”
State and local governments finance over 75 percent of all U.S. infrastructure projects, and last year more than $100 billion in advance refunding bonds were issued, according to the letter…