On December 20, 2017, Congress passed the “Tax Cuts and Jobs Act” (the “Tax Act”) under its power to reconcile the 2018 federal budget. The President signed the Tax Act into law on December 22, 2017. The legislation, which passed the House and Senate on December 21, 2017, also contained a "pay-go waiver," which waives the threatened statutory PAYGO cuts to Medicare and other programs, including payments to issuers of direct pay bonds (including Build America Bonds, as discussed in our November 21 Public Finance Advisory available here). As a result, none of those affected programs will see the previously threatened cuts.

The Tax Act impacts the municipal marketplace in several ways: tax-exempt advance refunding bonds and tax credit bonds cannot be issued after December 31, 2017. Further, the corporate alternative minimum tax is repealed, effective for taxable years beginning after December 31, 2017, with the positive result that tax-exempt interest will no longer be subject to the corporate alternative minimum tax.

The Tax Act does not include several of the provisions proposed in earlier versions of the bill. Tax-exempt status has been retained for private activity bonds, “professional stadium bonds”, and “new markets tax credits”. As such, the Tax Act’s parameters are markedly less restrictive than the version passed by the House of Representatives, and is broadly consistent with the version passed by the Senate.

The full text of the Tax Act is available here.