The Bush Administration is coming to a close, but it’s not asleep. With eyebrow-raising timing, the Internal Revenue Service (IRS) recently proposed changes, that would lessen the public approval and transparency requirements states and localities have to follow when they issue tax-exempt bonds for economic development projects.
Under the Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982, and subsequently the Tax Reform Act of 1986, all localities must hold a public hearing before issuing triple (local, state and federal) tax-free bonds for private-sector projects. Those eligible for these bonds, which carry below-market interest rates, include some manufacturers (through Industrial Revenue Bonds), housing developers, nonprofit organizations (including hospitals), among others. We’ve even seen a few financial firms benefit in New York City, mostly under the post-9/11 Liberty Bond Program, and we’ve seen Wal-Marts across the country receive tax-free bonds. [This paragraph was updated on 1/23/09]
Cutting back these so-called “TEFRA requirements” would diminish the ability of community groups, labor unions, tax & budget advocates and individual taxpayers to question the use of tax-exempt bonds. Good Jobs New York has successfully used the TEFRA process to expose the questionable labor practices of some proposed bond recipients and to highlight inequitable and irresponsible proposals – like using post-9/11 Liberty Bonds for luxury housing, and issuing tax-free bonds to build the new Yankee and Mets Stadiums.
The IRS’ proposed changes would:
1) Decrease from two weeks to one the amount of time the public has to research a project and prepare testimony in support or opposition.
2) Allow localities to proceed with no hearing at all if there are no “timely requests” to participate.
3) Limit the information now made publicly available prior to a hearing by allowing for more general project descriptions.
Before the IRS can change the TEFRA public approval process, it is itself subject to a public approval process. You can tell the IRS not to diminish your community’s voice by submitting testimony before December 8, 2008. There will be a hearing at the IRS on January 26, 2009, but you’ve got to submit written comments first.
More information about the proposed changes and how to comment are HERE.
Good Jobs New York encourages you to contact us with any questions or to let us know if you are interested in submitting comments.