A fast-moving tax reform package released by the U.S. House of Representatives Ways & Means Committee includes a provision to eliminate the tax exemption for private-activity bonds (PABs) for certain entities, including qualified 501(c)(3) organizations. The Wisconsin Hospital Association opposes this provision and relayed its opposition to the Wisconsin Delegation.
“These bonds play a critical role in helping not-for-profit hospitals and health systems access low-cost capital, enabling them to keep infrastructure expenditures low so they can efficiently fulfill their mission and focus on the work they do for the public good,” said WHA President/CEO Eric Borgerding in a statement.
Under Section 3601 of the House tax legislation, HR 1, interest on newly issued PABs would be included in income and thus subject to tax. Section 3601 would be effective for bonds issued after 2017.
An entity in Wisconsin that has assisted many hospitals and health systems with PABs for decades is the Wisconsin Health & Educational Facilities Authority (WHEFA). WHEFA is a public Authority created by the Wisconsin Legislature in 1973 and authorized it to provide PABs to Wisconsin non-profit health care institutions in 1979. WHA joins WHEFA and many national groups in opposing this drastic provision.
On November 9, the House Ways & Means Committee approved the legislation on a party-line vote of 24-16. The legislation is expected to move quickly to the House floor for a vote in the coming week. Unless changed in the House Rules Committee, the package is unamendable on the House floor. The U.S. Senate Committee also released its tax reform package November 9. WHA is pleased to see their proposal does not include the PAB provision. Assuming both the Senate and the House pass their respective tax proposals, the final dispensation of PABs will come during negotiations between the two Chambers.