I 
112TH CONGRESS 
2D SESSION 
H. R. 5705 
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. 
IN THE HOUSE OF REPRESENTATIVES 
MAY 9, 2012 
Mr. REED (for himself and Mr. NEAL) introduced the following bill; which was 
referred to the Committee on Ways and Means 
A BILL 
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. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Municipal Bond Mar-
ket Support Act of 2012’’. 
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SEC. 2. PERMANENT MODIFICATION OF SMALL ISSUER EX-
CEPTION 
TO 
TAX-EXEMPT 
INTEREST 
EX-
PENSE ALLOCATION RULES FOR FINANCIAL 
INSTITUTIONS. 
(a) PERMANENT INCREASE IN LIMITATION.—Sub-
paragraphs (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’’. 
(b) PERMANENT MODIFICATION OF OTHER SPECIAL 
RULES.—Paragraph (3) of section 265(b) of the Internal 
Revenue Code of 1986 is amended— 
(1) by redesignating clauses (iv), (v), and (vi) 
of subparagraph (G) as clauses (ii), (iii), and (iv) of 
such subparagraph, respectively, and 
(2) by striking so much of subparagraph (G) as 
precedes such clauses and inserting the following: 
‘‘(G) QUALIFIED 501(c)(3) BONDS TREAT-
ED AS ISSUED BY EXEMPT ORGANIZATION.—In 
the case of a qualified 501(c)(3) bond (as de-
fined 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.— 
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‘‘(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.—Paragraph (3) of sec-
tion 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: 
‘‘(I) INFLATION
ADJUSTMENT.—In the 
case of any calendar year after 2012, the 
$30,000,000 amounts contained in subpara-
graphs (C)(i), (D)(i), and (D)(iii)(II) shall each 
be increased by an amount equal to— 
‘‘(i) such dollar amount, multiplied by 
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