II 

111TH CONGRESS 

1ST SESSION S. 279 

To amend the Internal Revenue Code of 1986 to modify the limitations 

on the deduction of interest by financial institutions which hold taxexempt bonds, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 16, 2009 

Mr. BINGAMAN (for himself, Mr. CRAPO, Mr. KERRY, Ms. SNOWE, and Mr. 

SCHUMER) introduced the following bill; which was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to modify 

the limitations on the deduction of interest by financial 

institutions which hold tax-exempt bonds, and for other 

purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Municipal Bond Mar5 ket Support Act of 2009’’. 


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•S 279 IS

1 SEC. 2. MODIFICATION OF SMALL ISSUER EXCEPTION TO 

2 TAX-EXEMPT INTEREST EXPENSE ALLOCA3 TION RULES FOR FINANCIAL INSTITUTIONS. 

4 (a) INCREASE IN LIMITATION.—Subparagraphs 

5 (C)(i), (D)(i), and (D)(iii)(II) of section 265(b)(3) of the 

6 Internal Revenue Code of 1986 are each amended by 

7 striking ‘‘$10,000,000’’ and inserting ‘‘$30,000,000’’. 

8 (b) REPEAL OF AGGREGATION RULES APPLICABLE

9 TO SMALL ISSUER DETERMINATION.—Paragraph (3) of 

10 section 265(b) of such Code is amended by striking sub11 paragraphs (E) and (F). 

12 (c) ELECTION TO APPLY LIMITATION AT BORROWER

13 LEVEL.—Paragraph (3) of section 265(b) of such Code, 

14 as amended by subsection (b), is amended by adding at 

15 the end the following new subparagraph: 

16 ‘‘(E) ELECTION TO APPLY LIMITATION ON

17 AMOUNT OF OBLIGATIONS AT BORROWER

18 LEVEL.— 

19 ‘‘(i) IN GENERAL.—An issuer, the 

20 proceeds of the obligations of which are to 

21 be used to make or finance eligible loans, 

22 may elect to apply subparagraphs (C) and 

23 (D) by treating each borrower as the issuer 

24 of a separate issue. 

25 ‘‘(ii) ELIGIBLE LOAN.—For purposes 

26 of this subparagraph— 


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•S 279 IS

1 ‘‘(I) IN GENERAL.—The term ‘el2 igible loan’ means one or more loans 

3 to a qualified borrower the proceeds of 

4 which are used by the borrower and 

5 the outstanding balance of which in 

6 the aggregate does not exceed 

7 $30,000,000. 

8 ‘‘(II) QUALIFIED BORROWER.— 

9 The term ‘qualified borrower’ means a 

10 borrower which is an organization de11 scribed in section 501(c)(3) and ex12 empt from taxation under section 

13 501(a) or a State or political subdivi14 sion thereof. 

15 ‘‘(iii) MANNER OF ELECTION.—The 

16 election described in clause (i) may be 

17 made by an issuer for any calendar year at 

18 any time prior to its first issuance during 

19 such year of obligations the proceeds of 

20 which will be used to make or finance one 

21 or more eligible loans.’’. 

22 (d) INFLATION ADJUSTMENT.—Paragraph (3) of sec23 tion 265(b) of such Code, as amended by subsections (b) 

24 and (c), is amended by adding at the end the following 

25 new subparagraph: 


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•S 279 IS

1 ‘‘(F) INFLATION ADJUSTMENT.—In the 

2 case of any calendar year after 2009, the 

3 $30,000,000 amounts contained in subpara4 graphs (C)(i), (D)(i), (D)(iii)(II), and (E)(ii)(I) 

5 shall each be increased by an amount equal 

6 to— 

7 ‘‘(i) such dollar amount, multiplied by 

8 ‘‘(ii) the cost-of-living adjustment de9 termined under section 1(f)(3) for such 

10 calendar year, determined by substituting 

11 ‘calendar year 2008’ for ‘calendar year 

12 1992’ in subparagraph (B) thereof. 

13 Any increase determined under the preceding 

14 sentence shall be rounded to the nearest mul15 tiple of $100,000.’’. 

16 (e) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to obligations issued after Decem18 ber 31, 2008. 

19 SEC. 3. DE MINIMIS SAFE HARBOR EXCEPTION FOR TAX-EX20 EMPT INTEREST EXPENSE OF FINANCIAL IN21 STITUTIONS AND BROKERS. 

22 (a) FINANCIAL INSTITUTIONS.—Subsection (b) of 

23 section 265 of the Internal Revenue Code of 1986 is 

24 amended by adding at the end the following new para25 graph: 


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•S 279 IS

1 ‘‘(7) DE MINIMIS EXCEPTION FOR BONDS

2 ISSUED DURING 2009 OR 2010.— 

3 ‘‘(A) IN GENERAL.—In applying paragraph 

4 (2)(A) there shall not be taken into account 

5 tax-exempt obligations issued during 2009 or 

6 2010 (and paragraph (3)(A) shall be applied 

7 without regard to section 291(e)(1)(b) with re8 spect to such obligations). 

9 ‘‘(B) LIMITATION.—The amount of tax-ex10 empt obligations not taken into account by rea11 son of subparagraph (A) shall not exceed 2 per12 cent of the amount determined under para13 graph (2)(B).’’. 

14 (b) BROKERS.—Subsection (a) of section 265 of the 

15 Internal Revenue Code of 1986 is amended by adding at 

16 the end the following new paragraph: 

17 ‘‘(7) DE MINIMIS EXCEPTION FOR BONDS

18 ISSUED DURING 2009 OR 2010.— 

19 ‘‘(A) IN GENERAL.—In applying paragraph 

20 (2) to any broker (as defined in section 

21 6045(c)(1)) there shall not be taken into ac22 count tax-exempt obligations issued during 

23 2009 or 2010 (and paragraph (3)(A) shall be 

24 applied without regard to section 291(e)(1)(b) 

25 with respect to such obligations). 


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•S 279 IS

1 ‘‘(B) LIMITATION.—The amount of tax-ex2 empt obligations not taken into account by rea3 son of subparagraph (A) shall not exceed 2 per4 cent of the taxpayer’s assets.’’. 

5 (c) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply to obligations issued after Decem7 ber 31, 2008. 

Æ 


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