Today, Rep. Adam Schiff (D-CA) introduced the Build America Bonds Extension Act of 2011, to extend until the end of 2012 the popular program that has helped finance critical transportation and infrastructure projects across the country. Build America Bonds are taxable municipal bonds that as originally established provided a 35 percent tax credit on the interest rate established between the buyer and the issuer of the bond. The Build America Bonds program was created in the 111th Congress and expired at the end of 2010.
"California has issued numerous Build America Bonds to undertake critical public infrastructure projects, so much so that nearly a quarter of the Build America Bonds issued nationwide have been issued in our state," Rep. Schiff said. "Extending the popular program for another two years and expanding the number of eligible organizations that can use these bonds to fund projects will provide a much-needed boost to the hard-hit construction industry in California and throughout the nation."
The legislation introduced by Rep. Schiff today will lower the federal tax credit on the interest paid on the bond from 35 percent to 28 percent as the Administration proposed in its Fiscal Year 2011 budget. The Administration expects that lowering the subsidy to 28 percent will help reduce the cost of the program, making it as close to revenue neutral as possible.
The Administration's Fiscal Year 2012 budget, which was released this week, recommended extending the program permanently and the federal tax credit lowered to a "level designed to be approximately revenue-neutral." The legislation will also allow state or local governments to issue qualified section 501(c)(3) bonds to be treated as a Build America Bond to fund construction activity on property owned by nonprofits, such as nonprofit hospitals and universities.
California has sold about $30 billion in Build America Bonds, more than any other state. Among other projects, the program was used in rebuilding the Bay Bridge, and renovating and erecting new buildings at University of California medical centers, among other important projects.