The absence of tax-exempt municipal bonds in the Treasury Department’s Green Book for the second consecutive year has raised concerns among experts in the municipal bond market. Despite President Joe Biden’s focus on infrastructure development, the lack of mention of these bonds in the Green Book is perplexing. According to Edwin Oswald, a tax partner at Orrick, Herrington & Sutcliffe LLP, the omission of tax-exempt municipal bonds, which play a crucial role in financing infrastructure projects, reflects the administration’s priorities.
One of the reasons behind the absence of tax-exempt municipal bonds in the Green Book is the lack of a muni expert in the Treasury’s Office of Tax Policy. Emily Brock, federal liaison for the Government Finance Officers Association, highlighted this issue, stating that the current administration does not have a specialist like John Cross III, a former municipal market expert who retired in 2019. The absence of expertise in tax exempts within the Treasury’s Office of Tax Policy has hindered productive discussions on important issues facing the municipal bond market.
The ongoing oversight of tax-exempt municipal bonds in the Green Book could have significant implications for the future of the municipal bond market. With many provisions of the Tax Cuts and Jobs Act set to expire by December 2025, negotiations over the tax code will become crucial in the coming years. According to Oswald, advocates of tax-exempt bonds will need to make a strong case for the reinstatement of advance refunding bonds as discussions over the tax code intensify in Congress.
Market participants have expressed concerns that the absence of tax-exempt bonds in next year’s Green Book could make the tax-exemption newly vulnerable. With important issues such as state and local tax deductions, tax-exempt advance refunding, bank-qualified debt, and the tax-exemption itself potentially up for discussion, the lack of a tax specialist in the Treasury’s Office of Tax Policy could hinder productive conversations and scoring on these matters.
The absence of tax-exempt municipal bonds in the Treasury Department’s Green Book for two consecutive years highlights the need for expertise in tax exempts within the government. As discussions over the tax code and infrastructure financing continue to evolve, it is crucial for the administration to prioritize the inclusion of tax-exempt bonds in its policy initiatives to ensure the continued growth and stability of the municipal bond market.