By Rich Juliano, senior vice president and managing director of the P3 Division, and David Bauer, senior vice president of government relations, ARTBA
The “Tax Cuts & Jobs Act,” a major overhaul of the federal tax code, would not change the tax exempt status of Private Activity Bonds (PABs), a key financing mechanism for transportation infrastructure projects. The bill’s final language, released by the House-Senate conference committee Dec. 15, does not include a provision from the House version of the bill which would have effectively ended the use of PABs by terminating their tax exemption.
PABs have been a financing option for surface transportation projects since 2005, and are also used on various other types of infrastructure projects. When Republicans on the House Ways & Means Committee released their version of the tax bill on Nov. 2, ARTBA helped lead a coalition of national organizations in opposing the termination of PABs, arguing that this change in tax policy would further constrain transportation investment and endanger projects of all sizes, regardless of their funding source.
ARTBA helped organize a letter to House Republicans on the issue, and was also a lead signer of letters to U.S. senators and the House-Senate conference committee. Subsequently, 39 House Republicans signed a similar letter to their colleagues in support of PABs. Rep. Sam Graves (R-Mo.), chairman of the House Highways & Transit Subcommittee, led that effort.
Other key provisions would:
• Reduce the corporate tax rate from 35 percent to 21 percent;
• Provide a 20 percent deduction on the first $315,000 of joint income for businesses organized as S corporations, LLCs, and sole proprietorships;
• Increase bonus depreciation from 50 percent to 100 percent for “qualified property” placed in service after Sept. 27, 2017, and before 2023. The increased expensing would be phased down by 20 percent per year beginning in 2023;
• Raise Section 179 expensing to $1 million for “qualified property” in tax years after 2017;
• Limit Section 1031 like kind exchanges to real property only (repeal eligibility of personal property, such as equipment); and
• Double the estate tax exemption to $10 million and index it to inflation.
The House is expected to pass on Dec. 19 the reconciled “Tax Cuts & Jobs Act.” The measure would then go to the Senate where it also appears Republicans have sufficient votes to send it to President Trump for his signature.
The president has previously characterized the tax bill as a Christmas gift for the middle class.