Reconciliation Update: The Build Back Better (BBB) Act
[As of 10/29/2021]
On Friday, September 10, the House Ways and Means Committee released the a number of tax subtitles for consideration in a reconciliation package proposing to introduce $3.5 trillion in new investment for social safety programs. Throughout the fall, Democratic negotiators debated intraparty disputes between moderates and progressives. On Thursday, October 28, President Biden announced a scaled back version of the proposal that would offer $1.75 trillion in new federal spending and revenue. While the initially proposed package included a number of municipal bond priorities, the reduced compromise version did not include any municipal bond proposals.
Where Do Things Currently Stand?
Congressional leadership had hoped the proposed breakthrough on the BBB impasse would clear the path for a vote on the Bipartisan Infrastructure Framework (BIF) before the end of October. Text for a BBB was offered and it appears that House progressives have substantively signed off on the compromises. Progressives, who continue to require concurrent votes on both BBB and BIF, forced congressional leadership to scrap a vote on the infrastructure package scheduled for October 28.
It is likely that Congress will now pass a short term extension of surface transportation programs scheduled to expire on October 31. Work to prepare the BBB for a final vote alongside BIF will likely continue into November. Democrats are coalescing around the broad parameters of the comprise bill. While small details are possibly subject to change, the major policies are likely close to final. The major remaining questions relate to procedure and timing at this point.
What Does this Mean for BIF (the Infrastructure Bill)?
We continue to expect that BIF will not substantively change and the bill text, including the three proposals for expanding Private Activity Bonds (PABs), should be considered locked in. In light of the October 28 delayed vote, it seems likely that BIF will only pass the House once the BBB is ready for a floor vote. We should know more in the coming week in terms of timing for both packages.
The topline spending number was reduced from $3.5 trillion to $1.75 trillion. All municipal bond provisions have been removed from the latest version of the bill. A new proposal would instate a 15 percent alternative minimum tax for income of corporations with profits greater than $1 billion per year. The proposal begins on page 1509 of the compromise bill.
What Were the Bond Provisions in the Original Bill?
It is important to reiterate that the latest draft of the bill did not include the infrastructure finance proposals. The original bill included the following proposals:
Sec. 135101. Credit to Issuer For Certain Infrastructure Bonds.
Based on the successful Build America Bonds program enacted in the 2009 American Recovery and Reinvestment Act, issuers of qualified infrastructure bonds would receive a tax credit equal to an applicable percentage of the interest, providing direct financing support for infrastructure investments made by state and local governments.
The applicable percentage of the credit for interest paid with respect to qualified bonds is determined in the year the bond is issued as follows:
2022 through 2024.........................................................................................................35%
2027 and thereafter........................................................................................................28%
State and local governments may claim this credit for bonds whose interest would otherwise be eligible for tax-exempt status in the Internal Revenue Code, and the entirety of whose net proceeds are used for capital expenditures or the operation and maintenance of capital expenditures.
This provision requires that 100% of the proceeds of a bond issued under this provision meet the requirements in the Davis-Bacon Act. Payments under this section are grossed up in the event of sequestration. This provision applies to qualified infrastructure bonds issued after December 31, 2021.
Sec. 135102. Advance Refunding Bonds.
Advance refunding refers to a state or local government holding the proceeds of a refunding issue for longer than 90 days before using such proceeds to pay off a refunded issue, allowing State and municipal governments to take advantage of lower interest rates to refinance long-term debt obligations. Prior to repeal in the 2017 Tax Cuts and Jobs Act, interest on advance refunding bonds was exempt from tax. This provision would once again allow interest on advance refunding bonds issued by state and local governments to be exempt from tax. This provision applies to advance refunding bonds issued more than 30 days after date of enactment of this Act.
Sec. 135103. Permanent Modification of Small Issuer Exception to Tax-Exempt Interest Expense Allocation Rules for Financial Institutions.
As a general rule, no deductions are allowed for expenses that are allocable to tax-exempt income, including tax-exempt interest received by holders of certain municipal bonds. The same general rule applies to financial institutions to disallow a deduction for interest expense that is allocable to tax-exempt interest income. However, present law provides an exception for interest expense allocable to certain tax-exempt obligations issued by qualified small issuers, which are defined (in part) as issuers that are not reasonably expected to issue more than $10 million in tax-exempt obligations during a calendar year. This provision revises the definition of qualified small issuers by increasing the $10 million limit to $30 million (indexed annually for inflation). In addition, this provision treats qualified 501(c)(3) bonds as tax-exempt obligations for purposes of the small issuer exception, and makes permanent certain rules related to qualified financings.
Sec. 135104. Modifications to Qualified Small Issue Bonds.
This provision expands the definition of eligible manufacturing facilities eligible for financing through qualified small issue bonds to include facilities used for the creation or production of intangible property, and facilities functionally related and subordinate (or directly related and ancillary) to facilities used for the manufacturing, creation, or productions of tangible or intangible property. This provision also raises the aggregate cap for prior issues from $10 million to $30 million, indexed annually for inflation.
Sec. 135105. Expansion of Certain Exceptions to the Private Activity Bond Rules for First-Time Farmers.
This provision increases the limitation on the exemption of the use of private activity bond proceeds for first-time farmers from $450,000 to $552,500, indexed annually for inflation. The provision also repeals the separate, lower dollar limitation on the purchase of used farm equipment.
Sec. 135106. Certain water and sewage facility bonds exempt from volume cap on private activity bonds.
This provision exempts from the private activity bond volume cap exempt facility bonds for existing water and sewage facilities as of July 1, 2020.
Sec. 135107. Exempt Facility Bonds for Zero-Emission Vehicle Infrastructure.
This provision expands the definition of exempt facility bond eligible for tax-exempt private activity bond financing to include any bond issued if 95 percent or more of the net proceeds are to be used to provide zero-emission vehicle infrastructure. Zero-emission vehicle infrastructure is defined as any depreciable property (not including a building and its structural components) used to charge or fuel zero-emissions vehicles. Charging infrastructure that is not exclusively for governmental or commercial fleets must be made available for use by members of the general public, accepts payment by use of a credit card reader, and is capable of charging or fueling vehicles produced by more than one manufacturer.
Sec. 135108. Application of Davis-Bacon Act Requirements with Respect to Certain Exempt Facility Bonds.
This provision applies Davis-Bacon prevailing wage requirements to all proceeds of exempt facility bonds used for the construction, alteration, or repair of water furnishing facilities, sewage facilities, highway or surface freight transfer facilities, or zero-emissions vehicle infrastructure facilities. This provision applies to bonds issued after date of enactment.
Select Provisions Relating to Housing
Sec. 135501. Increases in State allocations. [Low-Income Housing Tax Credit]
The provision increases the 9% housing credit and the small state minimum by 50 percent and phases in this increase over five years. In calendar years 2026 through 2028, the amounts are adjusted for inflation. The increases include the 12.5% expansion in the 9% housing credit passed in 2018. The provision is effective for calendar years after December 31, 2021.
Sec. 135502. Tax-exempt bond financing requirement.
This provision temporarily reduces the 50% requirement to 25%, to enable housing credit deals to unlock more 4% credits. The provision is effective for buildings financed by the proceeds of certain tax-exempt bonds issued in calendar years 2022, 2023, 2024, 2025, 2026, 2027, or 2028 (and not financed by previous bonds issued in tax years 2019-2021) for buildings placed in service in taxable years after December 31, 2021.
Select Provisions Relating to Tribal Finance
Sec. 135601. Treatment of Indian Tribes as States with respect to bond issuance.
This provision amends rules related to the issuance of tax-exempt debt by Indian tribal governments. There is no volume cap for governmental bonds issued by an Indian tribal government. For private activity bonds, it instructs the Secretary to establish and allocate a national bond volume cap for such governments. Indian tribal governments are defined to include governing bodies of tribes, including agencies, subdivisions, instrumentalities, and certain intertribal consortiums or other organizations that are authorized by Indian tribal governments.
August 13, 2021
Senate Passes the Bipartisan Infrastructure Framework and Budget Resolution
On the morning of August 10, 2021, the Senate passed the 2,700 page infrastructure bill as amended with a 69-30 vote. The amended language passed via H.R. 3684, a previously House-passed surface transportation package. It now returns to the House, where members can either pass the new language as is into law or push for more changes, thus delaying the final package.
Earlier this week, many senators pushed to include additional changes to the amended language via a second tranche of amendments. A dispute on a provision that imposes reporting and tax requirements on certain cryptocurrency transactions slowed these discussions until a Senate vote to invoke cloture limited debate on the entire bill. At that point, only amendments passed under unanimous consent could further amend the advancing language. While negotiators reached an agreement in concept to address the cryptocurrency issue late on the afternoon of August 9, no such additional changes were included in the bill prior to its passage.
The bill now heads to the House where next steps remain less certain. House Speaker Nancy Pelosi (D-CA) has indicated that the House will not take up the infrastructure package until sufficient progress is made on the remainder of President Joe Biden’s economic agenda. To that extent, Senate Democratic Leadership released text for and passed a $3.5 trillion budget resolution that begins the process for a second reconciliation package that will likely advance along party lines. The resolution does not currently include a provision to address the federal debt ceiling. It does, however, give committees the ability to adjust overall budget numbers, which indicates the $3.5 trillion number is more of a moving target.
House leadership now plans to call members of Congress back into session on August 23 -- a week before August recess’ scheduled close. Meanwhile, questions on timing of House action on the infrastructure bill have risen from growing disagreements between moderates and progressives.
As passed, the Senate package includes three bond proposals:
- Expansion of allowable use for private activity bonds (PABs) to include broadband projects.
- Expansion of allowable use for PABs to include carbon capture technology.
- Increase in the nationwide cap for highway or surface freight transfer facility bonds from $15 billion to $30 billion.
We will keep you informed as updates proceed.
Bipartisan Infrastructure Framework Passes the Senate; Heads to House
Yesterday (August 10, 2021), the Senate passed the amended bipartisan infrastructure package with a 69 to 30 vote. The "Infrastructure Investment and Jobs Act" provides $550 billion in new money on top of baseline infrastructure funding for a total of more than $1.2 trillion in federal infrastructure investment over the next eight years. Debate over new provisions to capture data on and tax certain cryptocurrency transactions led to a more drawn out debate. Although a last minute compromise on the cryptocurrency issue was reached, Senate negotiators were not able to include the more narrow provisions due to Senate procedural issues surrounding the advancing bill. The final bill passed out of the Senate did include provisions to expand eligible uses of private activity bond (PAB) proceeds to cover broadband projects (Sec. 80401) as well as carbon capture technology (Sec. 80402). It also included a provision (Sec. 80403) to raise the nationwide cap on qualified highway / surface freight transportation facilities from $15 billion to $30 billion.
The package now heads to the U.S. House of Representatives, which could push for more substantive changes. Speaker Pelosi has maintained that she would not allow the bill to advance without action on a second $3.5 trillion budget reconciliation plan to serve as a vehicle for other components of President Biden's economic agenda. The Senate voted this morning to adopt its version of a $3.5 trillion budget resolution, which was unveiled earlier this week.
August 9, 2021
Bipartisan Infrastructure Framework Moves Closer to Passage (8/9/21)
Over the weekend, the Senate held a series of procedural votes to inch the historic infrastructure package, entitled the Infrastructure Investment and Jobs Act, closer to passage. Yesterday evening, the Senate invoked cloture and limited debate on the subject to 30 hours, clearing the way for a final vote as early as Tuesday morning. One of the main sticking points was a provision relating to taxing certain cryptocurrency transactions. The disagreement delayed and eventually tabled consideration of a second tranche of amendments to the package. While a bipartisan group of Senators have reached an agreement to resolve the cryptocurrency dispute, it remains unlikely that such an additional change will be adopted into the final package as it would require unanimous approval.
If and when the Senate passes the infrastructure package, it will then head to the House where next steps remain less certain. Speaker Pelosi has indicated that the House will not take up the infrastructure package until the Senate passes a budget resolution to begin work on a second reconciliation package. To that extent, Senate Democratic Leadership released text for a $3.5 trillion budget resolution. Of note, the text does not currently include a provision to address the federal debt ceiling. It does, however, give Committees the ability to adjust overall budget numbers.
We will keep you informed as updates proceed into tomorrow.
- Joint Committee on Taxation (JCT) score for tax provisions as of August 2, 2021
- Congressional Budget Office (CBO) score for S. Amdt. 2137 to H.R. 3684 as of August 5, 2021
- Summary of originally agreed upon provisions as of July 30
- S. Amdt. 2137 to H.R. 3684 (Congress.gov)
August 6, 2021
Update on the Bipartisan Infrastructure Package
On Monday, the Senate released legislative text for the highly anticipated bipartisan infrastructure package. The 2,700 page bill, entitled the “Infrastructure Investment and Jobs Act,” would provide $550 billion in new spending for a total of more than $1 trillion in federal infrastructure investment over the next eight years.
The restoration of advance refunding bonds and modernization of bank qualified debt were not included in infrastructure discussions, but remain a possibility for a potential future reconciliation package. The bipartisan group of senators actively discussed including American Infrastructure Bonds (AIBs), a new iteration of direct subsidy bonds with a 28 percent subsidy rate, in the package, but the proposal was ultimately not included due to cost. Three bond proposals remain in play for the Senate bill, including:
- Expansion of allowable use for private activity bonds (PABs) to include broadband projects.
- Expansion of allowable use for PABs to include carbon capture technology.
- Increase in the nationwide cap for highway or surface freight transfer facility bonds from $15 billion to $30 billion.
Legislative text for the proposals at the bottom of page 2409 (Section 80401).
Over the past week, senators have been considering various amendments. A complete list of submitted amendments can be found here, but please note that not all amendments have or will be brought up for a floor vote. Several bipartisan and noncontroversial amendments for technical corrections have already passed. Senate Leader Chuck Schumer (D-NY) had planned to invoke cloture (set a definitive end time for debate) on Thursday evening, but remaining disputes, particularly around provisions to tax certain cryptocurrency transactions, delayed the process and created a new impasse. Many senators are in Wyoming today for the funeral of the late Senator Mike Enzi (R-WY). The chamber is expected to resume consideration of amendments tomorrow and continue through the weekend. A new cloture vote is set for Saturday. At this point, it remains unlikely that large substantive changes with cost implications will be included in a final Senate bill.
Amendments of interest to NABL members include:
American Infrastructure Bonds (AIBs): Senator Roger Wicker (R-MS) has proposed an amendment to include the core provisions of his American Infrastructure Bonds Act. It is unclear if this amendment would be included in a second tranche of amendments for consideration this weekend.
Expanded CSLFRF Flexibility for Infrastructure: Senators John Cornyn (R-TX) and Alex Padilla (D-CA) introduced an amendment, which would allow state and local recipients of the Coronavirus State and Local Fiscal Recovery Fund (CSLFRF) and the Coronavirus Relief Fund (CRF) to spend a portion of those proceeds on qualified surface transportation projects. Negotiators have yet to finalize specifics but have reached an agreement to allow 30 percent of total received funds to be used on such projects. It appears likely that this amendment, which should not increase federal spending, will be included in the second tranche of amendments up for consideration.
Other Infrastructure Resources:
July 30, 2021
On July 28, 2021, the Senate – in a 67-to-32 vote that included 17 Republicans in favor – voted to take up a $1 trillion bipartisan infrastructure bill. The package, which is still lacking legislative text, provides about $550 billion in new federal money for roads, bridges, rail, transit, water, and other physical infrastructure programs.
As reported by The New York Times, the package includes $110 billion for roads, bridges and major projects; $66 billion for passenger and freight rail; $39 billion for public transit; $65 billion for broadband; $17 billion for ports and waterways; and $46 billion to help states and cities prepare for droughts, wildfires, flooding and other consequences of climate change. On the municipal bond front, the bill includes expanded private activity bond authority but not the reinstatement of advance refunding, a new direct-pay bond program, or other provisions considered top priorities.
To pay for the $1 trillion package, Congress unveiled a litany of revenue raisers, including $53 billion in unused unemployment benefits, $49 billion for delaying a drug rebate rule, and even $56 billion in expected economic growth.
The deal still faces several obstacles to becoming law, including clearing final votes in the closely divided Senate and House, GOP amendment demands, and whether or not Republicans will ultimately accept the above mentioned pay-fors. A divided Democratic party is also complicating matters. Last week, House Speaker Nancy Pelosi’s announced that the House will not vote on the bipartisan infrastructure deal until the Senate also passes a sweeping, multitrillion-dollar spding package using budget reconciliation. That statement is coming under intense pressure from moderate Democrats looking for a legislative victory.
Still, Senate Majority Leader Chuck Schumer (D-NY) seems confident that the Senate will pass both the bipartisan bill and a budget blueprint for the multitrillion-dollar legislative package before the chamber leaves for the August recess.
July 23, 2021
The Senate is leaving town July 23, 2021, without a deal on the bipartisan infrastructure package, but key negotiators are likely to be in touch as their staff work through the weekend to try to reach an agreement, with hopes for action early next week. Senate Majority Leader Chuck Schumer (D-NY) scheduled a legislative session to open discussions on the bill Wednesday, July 21, 2021, but the 49-51 vote fell short of the 60 needed to advance what is effectively stand-in legislation that senators will insert the bipartisan group’s text once it’s finished. Despite the setback, members of the group seem confident that they will be able to reach an agreement.
Schumer is planning for a second time to start a debate if a group of senators from both parties is able to finalize their agreement. On Wednesday’s vote, Schumer notably voted "no" on advancing the Senate toward an infrastructure debate, a procedural move that allows him to quickly bring back up a bill. Schumer also disclosed that he is prepared to keep the Senate in session past its August 8 recess date to get the bill passed. That’s if they can quickly resolve their remaining sticking points.
In addition to disagreements on a topline spending number, a group of Democrats is pushing for assurances that the Drinking Water and Wastewater Infrastructure Act, a drinking water and sanitation bill that previously passed, would be fully funded through the bipartisan group's infrastructure bill. Some senators have heard that this inclusion may “be moved around.”
Adding another roadblock is House Speaker Nancy Pelosi’s disclosure on Thursday that the House will not vote on the bipartisan infrastructure deal until the Senate also passes a sweeping, multitrillion-dollar spending package using budget reconciliation.
"We are here to get the job done. We cannot respond to some of the legislation until the Senate acts," Pelosi, D-Calif., told reporters during her weekly press conference. "We will not take up the infrastructure bill until the Senate passes the reconciliation measure."
Treasury Secretary Janet Yellen has asked Congress to raise the debt ceiling to avoid 'catastrophic' default. This request came in testimony before a Senate subcommittee. A two-year deal to suspend the debt limit expires after July 31, at which point the Treasury Department would have to take “extraordinary measures” to prevent the U.S. from defaulting. Typically, one of those extraordinary measures is the suspension of “Treasury Securities – State and Local Government Series” – also known as “SLGS.”
However, Republicans are digging in on the federal debt limit, warning Democrats that it will be up to them to avoid a default as President Biden pushes for trillions more in spending.
July 16, 2021
Senate Majority Leader Chuck Schumer (D-NY) has revealed his plans to open debate on the bipartisan infrastructure deal next Wednesday, July 21, setting up a key test vote on the legislation.
Because the bill is not yet written, Schumer will file cloture on a shell bill that senators will later swap in the infrastructure legislative text. The bipartisan group had hoped to have legislative text released by the end of this week, but none has been published as of yet.
The bill will need 60 votes to get over Wednesday's initial hurdle. Even if every Democrat votes to advance it, the bill will need 10 Republican votes. As of today, that seems unlikely. The size of the package and how to pay for it are making some GOP senators who have previously supported the bill, question that decision.
July 21st is also the deadline Schumer has set for Democrats to be ready to "move forward" on a separate budget resolution that tees up $3.5 trillion in spending. The party hopes to pass its budget and the budget reconciliation package with just Democratic votes.
The latest budget proposal announced by Senate Democrats sets an overall limit of $3.5 trillion for a long list of policy ambitions that won’t make it into a bipartisan infrastructure deal. If the still-forthcoming budget resolution can clear both chambers with lockstep party support, it will unleash the power to circumvent a GOP filibuster using the so-called reconciliation process, the same move that Democrats used to pass the president’s $1.9 trillion pandemic aid package in March.
Combined with a bipartisan infrastructure compromise, Schumer said the budget's investments in infrastructure, the middle class, and more would total about $4.1 trillion. The budget package is expected to include policies like Biden’s proposal for two years of free community college, paid leave, health care subsidies, extending the boosted child tax credit and helping families cover child care costs.
The budget resolution will require backing from every Democrat to make it through the upper chamber and officially kick off reconciliation, which will formally instruct various committees to turn the president’s priorities into legislative text. Sen. Joe Manchin (D-WV) continues to be an influential senator, requiring his fellow Democrats to have a plan to pay for the package.
Embarking again on a reconciliation bill will be arduous, involving two more vote-a-rama sessions in the Senate, each of which will allow Republicans to fire off a barrage of politically tricky amendments. The Senate Parliamentarian, Elizabeth MacDonough, who serves as the chamber’s nonpartisan procedural enforcer, is also expected to shoot down parts of the proposal that are found to be out of bounds under the special budget process.
June 25, 2021
Infrastructure negotiations took a positive turn this week as President Joe Biden signed off on a bipartisan Senate infrastructure plan worth $579 billion in new spending. You can find the fact sheet here. But the next step does not get much easier as Biden needs to convince skeptical senators to support this package while simultaneously advancing a reconciliation bill to include other parts of his infrastructure agenda. The two bills (the bipartisan deal and reconciliation) seem inextricably linked as House Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Charles Schumer (D-NY) are saying the bipartisan proposal will not become law without the reconciliation package.
To pay for the bipartisan infrastructure package, a wide range of options have been offered. Options include, among other things, an estimated $58 billion from dynamic scoring and $100 billion from private activity bonds, direct pay bonds, public private partnerships, and asset recycling for infrastructure investment.
Pelosi said that she will hold off on passing the bipartisan plan until the Senate approves the reconciliation bill in order to link the two proposals together. Biden said he agreed with the Speaker on the sequencing. Schumer said he plans to move both the bipartisan bill and approve a budget resolution in July. That resolution, when adopted, will kick-start the reconciliation process which would likely include other parts of the Biden agenda.
On the surface transportation front, the House will take up a $715 billion surface transportation bill next week. That bill will move on a parallel track as the bipartisan approach. The Senate is also advancing its own version of the surface transportation bill.
Treasury Secretary Janet Yellen yesterday asked Congress to raise the debt ceiling to avoid 'catastrophic' default. This request came in testimony before a Senate subcommittee. A two-year deal to suspend the debt limit expires after July 31, at which point the Treasury Department would have to take “extraordinary measures” to prevent the U.S. from defaulting. Typically, one of those extraordinary measures is the suspension of “Treasury Securities – State and Local Government Series” – also known as “SLGS.”
NABL will continue to report on infrastructure developments including in the Weekly Wrap and on our dedicated infrastructure webpage.
June 18, 2021
Infrastructure negotiations continued this week between the White House and a group of Republican and Democratic senators led by Senators Kyrsten Sinema (D-AZ) and Rob Portman (R-OH). On June 17, the bipartisan group of senators released their framework for a $1.2 trillion package with $579 billion in new spending. The plan proposes to spend $110 billion on roads and bridges, $66 billion on rail and $48.5 billion on transit. Of note, the framework calls for the inclusion of direct-pay municipal bonds for infrastructure investment, as well as the expansion of public private partnerships, tax-exempt private activity bonds, and asset recycling. You can find the bipartisan infrastructure plan framework here.
Earlier in the week, White House officials told House Democrats that they were giving senators another seven to ten days to reach an agreement and if no deal is struck, they would assess the progress of talks and decide whether to pivot to the reconciliation process. And although no deadline has been set, House Democrats said they are ready to move ahead without Republicans if a deal can’t be struck by the end of next week.
The Senate Commerce Committee approved a bipartisan $78 billion transportation funding bill on June 16. On the House side, the Invest in America Act - the House version of the surface transportation bill - was approved on June 10 by the Transportation and Infrastructure Committee. Rep. Peter DeFazio (D-OR), chairman of the House Transportation and Infrastructure Committee, said that he hopes the House can pass infrastructure legislation under regular order and hold conference negotiations with the Senate that will include input from Republicans. Lawmakers face a Sept. 30 deadline to approve the surface transportation package.
Senate Democrats are considering reconciliation instructions for a $6 trillion legislative package that would allow Democrats to avert a Republican filibuster and pass a bill with a simple majority. Majority Leader Charles Schumer (D-NY) noted that a budget resolution would set the stage for passing elements of Biden’s $2.25 trillion American Jobs Plan and $1.8 trillion American Families Plan with simple majority votes. Schumer said he plans to pass a budget resolution in July. House Budget Committee Chairman John Yarmuth (D-KY) said he will try to hold votes on its own budget blueprint the week of July 12 with the full House voting the following week.
NABL will continue to report on infrastructure developments including in the Weekly Wrap and on our dedicated infrastructure webpage.
June 11, 2021
Biden Rejects Capito-Led GOP Proposal:
Notwithstanding weeks of behind-the-scenes negotiating with lead GOP negotiator Senator Shelly Moore Capito (R-WV), President Joe Biden rejected a revised proposal, saying it "did not meet his objectives to grow the economy, tackle the climate crisis, and create new jobs." While the two sides continued to meet this week, the White House is signaling that they may pursue a path forward with other Republican lawmakers or even with only Democrats.
New Bipartisan Discussions:
As a result of the above-mentioned impasse, President Biden will instead move toward discussions with a new bipartisan group of senators that is crafting its own proposal. Members of the bipartisan group include Senators Kyrsten Sinema (D-AZ), Rob Portman (R-OH) and other Senate moderates, such as Sens. Jon Tester (D-MT), Bill Cassidy (R-LA), Joe Manchin (D-WV), and Lisa Murkowski (R-AK). The senators announced a rough agreement on June 10 for a “compromise framework” to invest $1.2 trillion in infrastructure over the next eight years. According to reports, the deal would provide $974 billion over five years, focuses on “core, physical infrastructure” and would not increase taxes, though it includes an option to index the gas tax to inflation. Further, it would provide $579 billion in new funding over what would otherwise be spent without any new legislation.
The initial reception from the White House was positive with White House spokesman Andrew Bates saying that Senior White House staff and President Joe Biden's jobs cabinet will work with the bipartisan Senate group behind a new infrastructure proposal. However, he cautioned that "questions need to be addressed, particularly around the details of both policy and pay-fors, among other matters."
Problem Solvers Caucus Release Framework:
In the meantime, the Problem Solvers Caucus, a group of Democratic and Republican House members recently released a more detailed $1.249 trillion proposal, of which $762 billion would be new spending. The draft proposal would designate $959 billion over eight years to transportation, including $518 billion for highways, roads and safety; $64 billion for bridge investment; $155 billion for transit; $25 billion for electric vehicle infrastructure; $120 billion for Amtrak passenger rail; $41 billion for airports; and $25 billion for waterways and ports. In the coming days, the group — 29 Democrats and 29 Republicans — will offer proposals for how to pay for the package.
On a parallel track, a legislative package authorizing about $547 billion for highways and other surface transportation initiatives advanced in the House. The Transportation & Infrastructure committee approved H.R. 3684, which would authorize $343 billion for roads, bridges, and safety; $95 billion for passenger and freight rail; and $109 billion for transit. It aligns with many of President Biden’s infrastructure priorities. The surface transportation bill could be folded into a larger infrastructure package or passed alone if President Biden is successful in negotiating a larger bipartisan infrastructure deal. Further action in the House is needed however, as the Ways & Means committee will need to approve the revenue measures to finance the bill. Ways & Means also has jurisdiction over tax law changes that involve tax-exempt debt financing such as advance refunding, private activity bonds, and taxable direct-pay bonds.
On the Senate side, the Environment and Public Works Committee advanced a bipartisan $303.5 billion measure (S. 1953) to reauthorize highway programs for the next five years in a unanimous vote on May 26.
On the reconciliation front, House Budget Chairman John Yarmouth (D-KY) is not waiting to see if a bipartisan infrastructure deal emerges. Rep. Yarmuth said he has begun work on a fiscal 2022 budget resolution that would include reconciliation instructions for both of Biden’s major legislative proposals. The proposals include Biden’s $2.25 trillion infrastructure and jobs plan and his $1.8 trillion plan aimed at children and families. Most legislation requires 60 votes to advance in the Senate, meaning at least 10 Republicans would be needed to push past a filibuster. Democrats would use special budget reconciliation rules to allow legislation to be approved with a 51-person vote, if needed.
June 4, 2021:
On May 27, GOP senators offered an almost $1 trillion infrastructure package that may represent President Joe Biden's best chance at a meaningful bipartisan deal. The White House has lowered its infrastructure plan from $2.25 trillion to $1.7 trillion. Lack of tangible progress, however, has created skepticism that a $700 billion gap between the negotiators can be bridged. All is not lost (yet), as President Biden and the lead GOP negotiator, Senator Shelly Moore Capito (R-WV), plan to meet again on Friday, June 4.
Meanwhile, Biden is attempting to find a way to pay for the package without increasing tax rates or rolling back tax cuts from the 2017 Tax Cuts and Jobs Act. To that end, he has pitched the idea of a 15% minimum tax on U.S. corporations. The proposal sets aside Biden's initial push to raise the headline corporate income rate to 28% from 21%, which was a non-starter for Republicans. However, the Washington Times reports that Senate Republicans view the compromise offered by President Biden as merely substituting one tax hike for another. This doesn't bode well for coming to agreement ahead of the administration's self-imposed June 7 deadline for a deal.
And recently, a new complication for Democrats has developed. The Senate parliamentarian has ruled that Democrats will be permitted to circumvent a GOP filibuster only one more time in 2021, as opposed to two. As a result, the $2.3 trillion infrastructure package might have to be even bigger since there is just one more opportunity before the 2022 election year to pass major legislation without Republican support. Passing this legislative package might not happen until the fall.
Regarding House and Senate surface transportation packages (a bill that needs reauthorization before the end of September), the Senate Environment and Public Works Committee approved a $311 billion, five-year section of surface transportation legislation the week of May 24 while the House Transportation and Infrastructure Committee is planning to mark up its own bill on June 9. Movement on a surface transportation package might end up being a possible off-ramp for Democrats and Republicans to pass a bipartisan infrastructure deal if negotiators cannot come to agreement on a larger package.
NABL will continue to monitor progress on the infrastructure front. Please visit our new infrastructure webpage here for more information.
May 26, 2021:
Infrastructure Package in Limbo:
President Joe Biden is still negotiating with Republican senators to forge a bipartisan deal on at least part of a larger infrastructure package. Biden recently agreed to reduce his initial $2.25 trillion proposal down to $1.7 trillion. Still, Republicans do not seem eager to sign on the dotted line just yet, saying that the White House’s counteroffer is still well above where they would like to be in terms of the scope, price tag, and how to pay for a final package.
As far as next steps are concerned, the White House would like Republicans to make a counterproposal above and beyond the $568 billion proposal offered last month. In fact, Senate Republicans have announced their intention to release an offer close to $1 trillion this week. In the end, however, there may still be too much room between the two sides, as noted by a spokeswoman for Senator Shelly Moore Capito (R-WV) who said the president’s latest offer “is well above the range of what can pass Congress with bipartisan support.” However, Senator Roger Wicker (R-MS) told reporters that the new offer—expected on May 27—should be sufficient enough to resolve talks.
Some Senate Democrats are privately looking at the week of June 7 as the last opportunity toward finding common ground on a bipartisan deal. In the meantime, Senate Majority Leader Chuck Schumer (D-NY) has already started meeting with Senator Bernie Sanders (I-VT) in his capacity as chairman of the Senate Budget Committee to discuss a path toward using the reconciliation process. And on May 25, Senator Schumer established July as the deadline by which Democrats will move forward with Biden’s sweeping infrastructure plan — with or without Republicans. Advancing legislation through the reconciliation process would allow Democrats to bypass a GOP filibuster and pass a significant package with a simple majority vote.
As the clock continues to tick, Democratic and Republican leaders from the Senate Environment & Public Works (EPW) Committee revealed a $303 billion surface transportation authorization bill called the Surface Transportation Reauthorization Act, separate from Biden’s effort to strike a deal on an expansive infrastructure package with Republicans. The legislation covers just a section of the reauthorization as three other Senate authorizing panels need to weigh in. The current surface transportation bill expired in 2020 but Congress provided a one-year extension that expires at the end of September.
Senator Capito said the surface transportation bill could end up standing in for the bipartisan deal on infrastructure that Senate Republicans and White House officials are struggling to manage. A significant advantage to passing the surface transportation bill is that it would permit states to move ahead with road construction projects and allow states to issue bonds to finance those projects. It is important to note, however, that a lack of consensus over how to pay for the 2019 transportation bill eventually spoiled any chances it had for moving significantly beyond committee action. That hurdle is very much in play this time around.
May 21, 2021: On May 18, 2021, individuals from President Joe Biden’s administration visited Capitol Hill to discuss the latest Republican counteroffer on infrastructure. The meeting included Transportation Secretary Pete Buttigieg and Commerce Secretary Gina Raimondo, along with top White House aides. They met with Senator Shelley Moore Capito (R-WV), who is spearheading the Republican effort to craft a counterproposal. The discussions are geared toward finding consensus on a bipartisan infrastructure proposal. Democrats and Republicans are trying to find common ground on the scope and overall cost of the package. The GOP’s initial proposal came in the form of a $568 billion, five-year package that was well short of Biden’s $2.25 trillion American Jobs Plan. It looks like the sweet spot for a compromise might come in a package with a price tag closer to $800 billion, the number Senate Minority Leader Mitch McConnell (R-KY) said he could potentially support. At this meeting, the two sides discussed the basics of how to pay for a bill but didn't settle on a topline number or other elements of the bipartisan negotiation.
On May 19, 2021, Senator Capito said the next two weeks will be critical in shaping a deal with the White House. She doubted, however, that a bill can make it through the House and Senate by a July 4 deadline proposed by House Speaker Nancy Pelosi (D-CA).
Also this week, the House and Senate each held hearings focused on, among other things, infrastructure financing tools. A significant component of these talks focused the value in using tools such as tax-exempt advance refunding bonds, direct-pay bonds, bank qualified debt, and private activity bonds. This messaging jives with NABL’s advocacy efforts to promote the municipal bond market as an integral part of the solution to the economic recovery ahead and as a significant part of a future infrastructure package. We continue to be cautiously optimistic that we will see these tools included in the final legislative package when an agreement among leadership is reached.
We will continue to monitor updates on this front and report on developments.
May 14, 2021: This Wednesday, the four most senior congressional leaders met with President Joe Biden at the White House to discuss, among other things, a path forward on an infrastructure package. Attendees included House Speaker Nancy Pelosi (D-CA), House Minority Leader Kevin McCarthy (R-CA), Senate Majority Leader Chuck Schumer (D-NY), and Senate Minority Leader Mitch McConnell (R-KY).
Then on Thursday, President Biden met with half a dozen Republican senators who have said they might support a version of the president’s $2.25 trillion infrastructure proposal. That meeting included Vice President Kamala Harris and Transportation Secretary Pete Buttigieg, along with Senators Roger Wicker (R-MS), Mike Crapo (R-ID), Roy Blunt (R-MO), Shelley Moore Capito (R-WV), John Barrasso (R-WY), and Pat Toomey (R-PA).
At the crux of the discussions was whether there is an opportunity to pass some of the president’s initiatives in a bipartisan manner. But the differences between the sides are significant, including GOP opposition to the scope of Biden’s plan and his intentions to fund it by raising taxes. Sen. McConnell said he told Biden that the “red line” for Republicans is scaling back any of the 2017 tax cuts, which included a reduction in corporate taxes. However, the door remains open to compromise, especially as McConnell recently said he might be open to a larger package than the almost $568 billion package offered by Sen. Capito a few weeks ago. And while there are some Democrats who still want to move an infrastructure proposal through the reconciliation process (without Republican support in the Senate), the president says he would prefer a bipartisan agreement, even for parts of the package. The gap over how to pay for any package, regardless of scope, remains a key roadblock.
Speaker Pelosi has informally set July 4th as the target date for passing infrastructure legislation in the House but if negotiations do not go smoothly, that timeline will most definitely be extended. Further, the Chairman of the House Transportation & Infrastructure Committee, Peter DeFazio (D-OR) is saying that drafting for his portion of the infrastructure package, more commonly known as the surface transportation bill (typically a five-year reauthorization), has already begun. He is also eyeing July 4th as a target date by which to bring that bill to the House floor. Meanwhile, House Minority Leader McCarthy said on Wednesday that the House GOP will be releasing their own infrastructure counteroffer of under $800 billion.
April 30, 2021:
American Jobs Plan – Under Negotiations
Staff level conversations regarding the $568 billion GOP counteroffer to President Joe Biden’s $2.2 trillion American Jobs Plan are well underway with bipartisan talks focused on a compromise proposal between $600 billion and $1 trillion. The House’s 58-member Problem Solvers Caucus also released its own list of priorities for an infrastructure bill focused more on policy priorities than the size and scope of the overall package. The goal is to establish agreement on a bipartisan infrastructure package that can pass both chambers under “regular order,” a process in which committees work on legislative language and members will be able to offer relevant amendments. It is still very likely that only parts of the infrastructure package can pass with bipartisan support, leaving the remaining pieces to move via reconciliation.
NABL is advocating for tax-advantaged bonds to be included as an integral part of any infrastructure package Congress ultimately passes and we will keep our membership appraised of any developments on that front.
April 23, 2021: Decisions are still being discussed among party leaders to address infrastructure needs for the United States but some movement has been made in the way of a GOP counteroffer to President Joe Biden’s proposed $2.25 trillion American Jobs Plan. Senator Shelly Moore Capito (R-WV) is spearheading the negotiations in conjunction with a small group of moderate Republicans. On April 22, 2021, the group unveiled a $568 billion infrastructure proposal seeking to define infrastructure more narrowly and to shrink the price tag of the Biden proposal.
Their plan, which is being billed as a “framework,” would provide:
- $299 billion for roads and bridges;
- $61 billion for transit;
- $20 billion for rail;
- $44 billion for airports;
- $17 billion for water ports; and
- $13 billion for safety agencies.
Non-transportation line items include:
- $65 billion for broadband;
- $35 billion for drinking water and wastewater infrastructure; and
- $14 billion for water storage.
The more challenging part, as always, is figuring out how to pay for such a bill. GOP negotiators are reportedly saying it should be paid for with a combination of user fees, repurposing some of the $350 billion sent out to state and local governments in the American Rescue Plan (passed earlier this year), and other revenue-raising measures. The GOP plan would also preserve all the 2017 Tax Cuts and Jobs Act, which set the corporate tax rate at 21 percent.
The Senate GOP is proceeding under the impression that there might be hope for the passage of a narrower package even as they anticipate Democrats will still use budget reconciliation later this year to pass the rest of Biden’s $2.25 trillion agenda with only Democratic votes. However, Democrats are still divided as to whether they want to embrace the idea of passing a bipartisan down payment on Biden’s infrastructure agenda, or “go big” right out of the gate.
In an initial response to the $568 billion plan, the White House signaled it would be open to further talks with Republican lawmakers. Press Secretary Jen Psaki said the proposal is a legitimate starting point for ongoing talks, and that the president would likely host lawmakers at the White House for further discussions in the coming weeks.
You can find the Republican $568 billion framework outline here.
NABL will continue to monitor developments on this front especially as it relates to the bond provisions we are advocating for in our meetings with staff on Capitol Hill.
April 16, 2021: On April 9, 2021, President Joe Biden released his administration’s proposed 2022 budget. The “skinny budget” will set in motion work in the House and Senate on developing the 2022 budget resolution and future economic plans. It contains funding for state and local governments that is meant to be additive to the aid provided in the recently passed stimulus legislation. Overall, the Biden request calls for a 16% increase in federal spending in addition to the $2 trillion in emergency aid previously approved.
Regarding movement on infrastructure, prospects for a bipartisan deal do not seem to be coming together smoothly. Generally, Republicans perceive Biden's definition of infrastructure as too broad and too expensive. In fact, immediately after Biden unveiled his $2.3 trillion American Jobs Plan, Senate Minority Leader Mitch McConnell (R-KY) called it a "Trojan horse" for Democratic priorities.
It does seem that both Republicans and Democrats are at least willing to try to reach a bipartisan agreement on parts of an infrastructure agenda. The White House has been meeting with a bipartisan group of lawmakers to discuss the American Jobs Plan and, on a separate but related track, on April 15, a group of Senate Republicans said that they are working on a conceptual counteroffer focused on “core” infrastructure that doesn’t raise corporate taxes. Regarding the counteroffer, Senator Shelley Moore Capito (R-WV) said Republicans agreed that roads, bridges, transit, waterways, and broadband need to be upgraded, but that they will never go along with repealing the 2017 tax cuts. Though a timeframe for the GOP plan was not given, it appears the price tag of the counter-bill will be closer to $600 to $800 billion.
Separately, Sen. Chris Coons (D-DE) said he’s talking with Senate Republicans about breaking up the president’s infrastructure-economic package into two bills and passing a bipartisan bill first. White House officials have indicated they might be open to breaking off pieces of Biden's infrastructure proposals to gain bipartisan support. A move in that direction, however, would probably not do away with all the GOP concerns. As a result, we can assume that Democrats will still advance the items they cannot come to agreement on in a reconciliation bill.
NABL will continue to monitor infrastructure developments, especially as it relates to where the bond provisions we support will land. And while we know our issues are not partisan in nature, we still need your help, as our advocates on the ground, in sending this message to your member of Congress. Please visit NABL’s Advocacy Page to learn more about how you can assist.
March 26, 2021:
Congress and the administration are focused on the development of an infrastructure package that might end up being divided into two separate bills – one smaller bill followed by a much larger and more aggressive second measure. Although this approach is not official, it is being reported that the approach would be to first move a smaller infrastructure bill in a bipartisan fashion, then to move to pass a more aggressive second package including climate and economic measures using budget reconciliation. The assumption is that the contents of the second package might not garner the GOP support needed to overcome a filibuster and thus would have to move via simple majority.
The above approach is merely in the discussion phases right now as it remains to be seen if GOP legislators will even be open to giving the president an opportunity for a bipartisan victory knowing the next step is to pass a massive partisan bill. Sen. John Thune (R-SD), the No. 2 Republican in the Senate, said Republicans were open to working with Democrats on a package focused on traditional infrastructure investments, but then crafting another broader package that Democrats could pass along party lines through reconciliation could imperil Republican support for the smaller package.
Last week, the House voted in support of the return of congressionally directed spending known as earmarks, but Senate Republicans are split as to whether they will embrace or reject the approach. Earmarks permit members to secure money for specific local projects and often help garner buy-in for big pieces of legislation. Senate Minority Leader Mitch McConnell (R-KY) was previously a proponent of earmarks but recently cautioned that there was now broad opposition among his caucus. McConnell’s assessment is backed up by conservatives in the caucus, who are warning their colleagues against embracing what they view as wasteful spending.
NABL will continue to monitor developments on the infrastructure front especially as it relates to the bond provisions we care about. We’ll report back on any major developments.
March 19, 2021: President Joe Biden will soon unveil an expansive and longer-term economic stimulus package with a focus on infrastructure. The plan is likely to be based on the Build Back Better plan he championed during his campaign for the presidency.
We can expect the plan to address the following (and more):
- Health care,
- Manufacturing and supply chains,
- Affordable housing,
- Expanding broadband access, and
- Caregiving and education.
There will be obstacles to overcome. On the policy front, Democrats and Republicans are far apart on just how aggressive to be on certain policy changes. With regard to the price tag, Republicans caution against another massive spending proposal in such short succession behind the recently passed $1.9 trillion stimulus package. And there’s always the question about how to pay for the plan and at this point, no consensus has been identified.
NABL will continue to monitor developments on the infrastructure front and report back to its membership.
March 8, 2021:
The House is scheduled to vote as soon as this week on the Senate-modified version of the Biden administration’s $1.9 trillion COVID-19 relief package. Once the House passes the updated version, it will go to the president’s desk to be signed into law. Of note to NABL members and their issuer-clients, the bill provides $350 billion in direct aid to state and local governments, territories and tribes. Of that figure, $195 billion would go to states and the District of Columbia, and $120 billion would be divided among cities and counties, and $10 billion would be set aside for states’ infrastructure projects like improving broadband access.
Among other things, the package provides direct payments of up to $1,400 to most Americans, a $300 weekly boost to jobless benefits into September and an expansion of the child tax credit for one year. It also puts new funding into COVID-19 vaccine distribution and testing, rental assistance for struggling households and K-12 schools for reopening costs.
The next big package NABL is watching is the development of an infrastructure framework where we anticipate many of the provisions we support will be included. We will keep you appraised as developments occur.
February 26, 2021:
House Democrats are expected to vote on and pass the latest pandemic relief measure as soon as this evening. Once passed, the bill will then move to the Senate, where it will be modified to ensure all 50 Senate Democrats and Independents are on board to pass the package. We can expect GOP lawmakers to oppose certain elements of the coronavirus measure, including further aid for state and local governments, but we are not anticipating sweeping changes since Democrats are planning to pass the bill without Republican support. Democratic leadership would like to pass the package by March 14, when expanded unemployment benefits expire.
The $1.9 trillion bill expected to pass the House this evening includes provisions that would:
- Provide $1,400 in direct payments to individuals and dependents.
- Extend pandemic unemployment programs.
- Expand tax credits for families and for employers who offer paid leave.
- Fund state and local government aid, testing and vaccine activities, schools, mass transit systems, restaurants and other small business, childcare, housing, nutrition, and more.
- Increase the minimum wage to $15 an hour over five years.
- The Senate parliamentarian has already ruled that this provision violated the strict budgetary rules that limit what can be included in the package.
- Expand subsidies to purchase health insurance under the Affordable Care Act for two years.
- Temporarily increase Medicaid funding to states that expand their programs.
The next major policy item on deck is likely to be an infrastructure package. This package would be the next major economic recovery effort undertaken this year by the president and it is where we hope to see included the bond provisions NABL supports. White House and congressional Democrats have been discussing strategy for the proposal and we can expect to learn more about the policy plans on that front when President Joe Biden gives his first address to a joint session of Congress in March. Republicans are urging Democrats to make the infrastructure package bipartisan, as opposed to moving it through the budget reconciliation process. And while we know the president’s hope would be to move the proposal in a bipartisan fashion, using reconciliation remains an option.