Municipal Bond Market Support Act of 2019

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. 1. Short title This Act may be cited as the Municipal Bond Market Support Act of 2019 2. Permanent modification of small issuer exception to tax-exempt interest expense allocation rules for financial institutions (a) Permanent increase in limitation Subparagraphs (C)(i), (D)(i), and (D)(iii)(II) of section 265(b)(3) $10,000,000 $30,000,000 (b) Permanent modification of other special rules Section 265(b)(3) of such Code is amended— (1) by redesignating clauses (iv), (v), and (vi) of subparagraph (G) as clauses (ii), (iii), and (iv), respectively, and moving such clauses to the end of subparagraph (H) (as added by paragraph (2)), and (2) by striking so much of subparagraph (G) as precedes such clauses and inserting the following: (G) Qualified 501( c 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. (H) Special rule for qualified financings (i) In general In the case of a qualified financing issue— (I) subparagraph (F) shall not apply, and (II) 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). . (c) Inflation adjustment Section 265(b)(3) of such Code, as amended by subsection (b), is amended by adding at the end the following new subparagraph: (I) Inflation adjustment In the case of any calendar year after 2019, 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— (i) such dollar amount, multiplied by (ii) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year, determined by substituting calendar year 2018 calendar year 2016 Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $100,000. . (d) Effective date The amendments made by this section shall apply to obligations issued after the date of the enactment of this Act.

Summary: Municipal Bond Market Support Act of 2019 This bill amends the Internal Revenue Code, with respect to the limitations on deductions for interest expenses of financial institutions that hold tax-exempt bonds, to: permanently increase from $10 million to $30 million the annual limit on the amount of tax-exempt obligations that may be issued to qualify for the small issuer exception to the tax-exempt interest expense allocation rules; require the limit for the small issuer exception to be adjusted for inflation after 2019; make permanent the rule that allows qualified 501(c)(3) bonds to be treated is if they were issued by the tax-exempt organization for whose benefit the bond was issued; and make permanent the special rule for the tax treatment of qualified financings used to make or finance loans to certain states, political subdivisions, or tax-exempt organizations.