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Business and Policy Areas
Business and Policy Areas

Senate Bill Would Increase Bank-Qualified Debt Limit

July 26, 2016

Sens. Ben Cardin (D-MD) and Bob Menendez (D-NJ) recently introduced companion legislation (S. 3257) to a House measure (H.R. 2229) that would raise the limit for issuers of bank-qualified bonds from $10 million to $30 million.

In June, NACUBO joined 12 other associations, including the United States Conference of Mayors and the American Hospital Association, in a letter supporting introduction of the bill, the Municipal Bond Market Support Act of 2016. "Bank-qualified debt allows small governments and entities, to place their debt with local and community banks and by doing so, gives these communities access to the lower cost borrowing to build schools, roads, bridges, education, health facilities, and other public purpose projects," the organizations wrote.

Bank-qualified bonds were created in 1986, and since then the program's $10 million cap has not kept pace with inflation or the cost of labor, land, and materials associated with most capital projects.  For many institutions, bank-qualified debt can realize cost savings. The Government Finance Officers Association estimates that a 25-40 basis point cost savings on a 15-year, $30 million bond at current interest rates ranges from $696,000 to $1.1 million. 

It is unclear if Congress will take further action on this or other tax legislation when they return to Capitol Hill after the summer recess. Before the end of the year, lawmakers will likely take action on a number of temporary tax provisions that are set to expire on December 31. It is possible this bank-qualified bond issue and other tax concerns will be addressed at that time. However, most tax issues will likely be tabled until after a new Congress and administration are in place next year. NACUBO and others are working to build support for this legislation and to ensure it remains a priority for lawmakers.


Liz Clark
Senior Director, Federal Affairs