Proposed Tax Reform from the House and Senate may have an impact on your financial plans.
House Tax Plan
The “Tax Cuts and Jobs Act” introduced in the House Tax Reform contains provisions that, if passed, could have a significant impact on your financing plans.
-501(C)(3) organizations will no longer be able to “issue” tax-exempt bonds after 12/31/2017.
-Advance refunding bonds will no longer be permitted.
-Interest paid on drawdown bonds drawn after 12/31/2017 would not be tax-exempt.
-Refinancing after 12/31/2017 would be have to be done on a taxable basis.
-Any change in existing tax-exempt bonds that triggers a “reissuance” after 12/31/2017 would cause the bonds to become taxable.
Senate Tax Plan
Though it does not include all the provisions detrimental to tax-exempt financing that the House bill included, if passed, it could have a significant impact on your financing plans
Differences between the Senate & House Bills:
-It does not eliminate private activity bonds, so 501(C)(3) organizations would retain the ability to “issue” tax-exempt bonds.
-Interest paid on tax-exempt drawdown bonds drawn after 12/31/2017 could remain tax-exempt.
-Refinancing after 12/31/2017 could be done on a tax-exempt basis.
-Any change in existing tax-exempt bonds that triggers a “reissuance” after 12/31/2017 would not necessarily cause the bonds to become taxable.
There are defensive measures that you may want to consider taking before year end.
If your organization has tax-exempt financing in place now or plans to finance a project in the future, contact us to discuss the implications in more detail.
In addition, if you have a LIBOR-based interest rate swap, there may be steps to study.
Read More on the House Tax Plan from the National Law Review