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H.R. 5705 (112th): Municipal Bond Market Support Act of 2012

The text of the bill below is as of May 9, 2012 (Introduced).



2d Session

H. R. 5705


May 9, 2012

(for himself and Mr. Neal) introduced the following bill; which was referred to the Committee on Ways and Means


To amend the Internal Revenue Code of 1986 to permanently modify the limitations on the deduction of interest by financial institutions which hold tax-exempt bonds, and for other purposes.


Short title

This Act may be cited as the Municipal Bond Market Support Act of 2012.


Permanent modification of small issuer exception to tax-exempt interest expense allocation rules for financial institutions


Permanent increase in limitation

Subparagraphs (C)(i), (D)(i), and (D)(iii)(II) of section 265(b)(3) of the Internal Revenue Code of 1986 are each amended by striking $10,000,000 and inserting $30,000,000.


Permanent modification of other special rules

Paragraph (3) of section 265(b) of the Internal Revenue Code of 1986 is amended—


by redesignating clauses (iv), (v), and (vi) of subparagraph (G) as clauses (ii), (iii), and (iv) of such subparagraph, respectively, and


by striking so much of subparagraph (G) as precedes such clauses and inserting the following:


Qualified 501(c)(3) bonds treated as issued by exempt organization

In the case of a qualified 501(c)(3) bond (as defined in section 145), this paragraph shall be applied by treating the 501(c)(3) organization for whose benefit such bond was issued as the issuer.


Special rule for qualified financings


In general

In the case of a qualified financing issue—


subparagraph (F) shall not apply, and


any obligation issued as a part of such issue shall be treated as a qualified tax-exempt obligation if the requirements of this paragraph are met with respect to each qualified portion of the issue (determined by treating each qualified portion as a separate issue which is issued by the qualified borrower with respect to which such portion relates).



Inflation adjustment

Paragraph (3) of section 265(b) of the Internal Revenue Code of 1986, as amended by subsection (b), is amended by adding at the end the following new subparagraph:


Inflation adjustment

In the case of any calendar year after 2012, the $30,000,000 amounts contained in subparagraphs (C)(i), (D)(i), and (D)(iii)(II) shall each be increased by an amount equal to—


such dollar amount, multiplied by


the cost-of-living adjustment determined under section 1(f)(3) for such calendar year, determined by substituting calendar year 2011 for calendar year 1992 in subparagraph (B) thereof.

Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $100,000.



Effective date

The amendments made by this section shall apply to obligations issued after the date of the enactment of this Act.