22

Tax Credit Bonds: Tax Credit Bonds: BackgroundBackground

Public Power and Coops have sought tax Public Power and Coops have sought tax incentives for development of renewable incentives for development of renewable energy resources, comparable to those energy resources, comparable to those provided to IOU’s through tax creditsprovided to IOU’s through tax credits

2005 Energy Policy Act authorized Clean 2005 Energy Policy Act authorized Clean Renewable Energy Bonds (CREBs) to be Renewable Energy Bonds (CREBs) to be issued as Tax Credit Bondsissued as Tax Credit Bonds

Tax Credit Bonds are an alternative to the Tax Credit Bonds are an alternative to the politically unpopular tradable tax creditspolitically unpopular tradable tax credits

33

Tax Credit Bonds: “CREBs”Tax Credit Bonds: “CREBs”

Designed to provide an interest free loan Designed to provide an interest free loan to munis and coops for qualified projectsto munis and coops for qualified projects

CREBs may be issued in 2006 and 2007CREBs may be issued in 2006 and 2007 Based on “QZAB” programBased on “QZAB” program

44

CREBs: Qualified ProjectsCREBs: Qualified Projects

Wind, closed and open-loop biomass Wind, closed and open-loop biomass (including agricultural livestock waste (including agricultural livestock waste nutrients), geothermal, solar, small irrigation nutrients), geothermal, solar, small irrigation power, landfill gas, hydropower, and trash power, landfill gas, hydropower, and trash combustioncombustion

Applies to expenditures made after August 8, Applies to expenditures made after August 8, 20052005

Reimbursement and refinancing permitted Reimbursement and refinancing permitted for post-8/8/05 expendituresfor post-8/8/05 expenditures

55

CREBs: Maturity and YieldsCREBs: Maturity and Yields

Must pay principal in level annual Must pay principal in level annual installmentsinstallments

Limited final maturity: number of years such Limited final maturity: number of years such that final maturity has a PV equal to 50% of that final maturity has a PV equal to 50% of its face amount. Currently a 15 year limitits face amount. Currently a 15 year limit

Intended to be issued at par with a tax Intended to be issued at par with a tax credit equivalent to a taxable couponcredit equivalent to a taxable coupon

On September 13, 2006 QZAB rates ranged On September 13, 2006 QZAB rates ranged from 5.43% for a one year maturity to from 5.43% for a one year maturity to 5.75% for a 15 year maturity5.75% for a 15 year maturity

66

Marketing Challenges – Marketing Challenges – Lessons From QZABs PricingLessons From QZABs Pricing Prices set by Treasury once a dayPrices set by Treasury once a day

““One size fits all” pricing does not address differing One size fits all” pricing does not address differing credit quality of issuerscredit quality of issuers

Issued at prices as low as 80%Issued at prices as low as 80% Levelized principal payments present Levelized principal payments present

additional pricing complexity over bullet additional pricing complexity over bullet maturitiesmaturities

Market’s appetite for such bonds could be Market’s appetite for such bonds could be limited, especially if other tax credit bond limited, especially if other tax credit bond programs are authorized. New GO Bonds programs are authorized. New GO Bonds are the latest tax credit bondare the latest tax credit bond

77

Marketing Challenges – Marketing Challenges – cont’dcont’d

Tax credits cannot be stripped from Tax credits cannot be stripped from underlying bondunderlying bond Assumes investor will continue to have tax liability Assumes investor will continue to have tax liability

for the life of the bondfor the life of the bond Assumes tax credits will be valid for life of the bondAssumes tax credits will be valid for life of the bond Impact on pricingImpact on pricing

Any OID reduces the benefit of the “interest Any OID reduces the benefit of the “interest free” borrowingfree” borrowing

Coops may well have marketing advantage Coops may well have marketing advantage in pooling of issuance through CFC and in pooling of issuance through CFC and CoBank CoBank

88

CREBs: ExpenditureCREBs: Expenditureand Other Requirementsand Other Requirements

95% of the proceeds must be spent within 5 95% of the proceeds must be spent within 5 years of the issuance of the CREBs unless years of the issuance of the CREBs unless extended by the IRS extended by the IRS

If this requirement is not satisfied, a portion of If this requirement is not satisfied, a portion of the CREBs must be redeemed within 90 daysthe CREBs must be redeemed within 90 days

CREBs are subject to arbitrage and rebate rulesCREBs are subject to arbitrage and rebate rules

99

CREBs Volume CapCREBs Volume Cap In total, $800 million of CREBs may be In total, $800 million of CREBs may be

issued but at least $300 million is reserved issued but at least $300 million is reserved for cooperatives for cooperatives

Congress directed Treasury to determine Congress directed Treasury to determine an allocation methodology for the volume an allocation methodology for the volume cap, but provided no guidance on how it cap, but provided no guidance on how it should be doneshould be done

IRS opted to make allocations using a IRS opted to make allocations using a smallest-to largest methodsmallest-to largest method Does this lead to inaccurate pricing signals to Does this lead to inaccurate pricing signals to

Treasury?Treasury?

1010

Allocations -- Process and Allocations -- Process and StatusStatus

Applications were due April 26, 2006Applications were due April 26, 2006 IRS indicated 700 applications received IRS indicated 700 applications received

totaling over $2 billiontotaling over $2 billion IRS estimates allocations to be made by IRS estimates allocations to be made by

early Octoberearly October The Bureau of Public Debt sets rates and The Bureau of Public Debt sets rates and

maturities on a daily basis maturities on a daily basis http://www.publicdebt.treas.gov/spe/spe.htmhttp://www.publicdebt.treas.gov/spe/spe.htm

1111

CREBs: Future QuestionsCREBs: Future Questions Could the delay in awarding of allocations, Could the delay in awarding of allocations,

lead to unused allocations?lead to unused allocations? Can deadline for issuance be extended?Can deadline for issuance be extended? No set process for reallocating volume capNo set process for reallocating volume cap

Several bills were introduced in the Senate Several bills were introduced in the Senate that would extended CREBs program and that would extended CREBs program and increased the capincreased the cap If this occurs, will Congress or Treasury be open to If this occurs, will Congress or Treasury be open to

reassessing the basis for allocation?reassessing the basis for allocation?

Will Tax Credit Bonds eventually replace Will Tax Credit Bonds eventually replace traditional tax exempt financing?traditional tax exempt financing?

1212

PREPAYMENTS:PREPAYMENTS:Background on Final Background on Final

RegulationsRegulations Number of gas prepayments done in the 1990s Number of gas prepayments done in the 1990s

under old regulations (“substantial business under old regulations (“substantial business purpose” test)purpose” test)

IRS audits of several deals in the late 1990s IRS audits of several deals in the late 1990s IRS issued proposed regulations to stop new deals IRS issued proposed regulations to stop new deals Ultimately closed all the audits with no changesUltimately closed all the audits with no changes Final Regulations on prepayments issued in 2003Final Regulations on prepayments issued in 2003 Legislation subsequently enacted – 2005 EPACTLegislation subsequently enacted – 2005 EPACT

Provides an additional safe harbor to permit gas prepayments Provides an additional safe harbor to permit gas prepayments using tests which differ from the IRS regulationsusing tests which differ from the IRS regulations

1313

Final Regulations—Final Regulations—General RulesGeneral Rules

Prepayments made with bond proceeds Prepayments made with bond proceeds ordinarily result in prohibited investment-ordinarily result in prohibited investment-type property and taxable bondstype property and taxable bonds

Final Regulations eliminate substantial Final Regulations eliminate substantial business purpose exceptionbusiness purpose exception

Exception for “customary prepayments” Exception for “customary prepayments” but this has limited applicabilitybut this has limited applicability

Exception for prepayments approved by Exception for prepayments approved by the IRSthe IRS

Exception for 90 day prepaymentsException for 90 day prepayments

1414

Final Regulations—Special Final Regulations—Special Rule for Prepayments for Rule for Prepayments for

GasGas Final Regulations permit prepayments for Final Regulations permit prepayments for

natural gasnatural gas At least 90% of the gas must be used for a At least 90% of the gas must be used for a

qualifying usequalifying use ““Qualifying use” means:Qualifying use” means:

Used by retail customers in the historic service area Used by retail customers in the historic service area of a municipal utilityof a municipal utility

Used by a municipal utility to produce electricity sold Used by a municipal utility to produce electricity sold to retail customers in its historic service areato retail customers in its historic service area

Used to fuel the pipeline transportation of the Used to fuel the pipeline transportation of the qualifying gas supplyqualifying gas supply

1515

Final Regulations—Special Final Regulations—Special Rule for Prepayments for Rule for Prepayments for

GasGas Qualifying service area: Area throughout Qualifying service area: Area throughout

which service was continuously provided which service was continuously provided for 5 years, or service area as defined for 5 years, or service area as defined under state lawunder state law

Nonqualifying Uses limited to 10 percent Nonqualifying Uses limited to 10 percent and are defined as sales to:and are defined as sales to: Governmental entities outside the service area that Governmental entities outside the service area that

are not utilitiesare not utilities Nongovernmental entities outside service areaNongovernmental entities outside service area Retail customers of another municipal utilityRetail customers of another municipal utility Comparable rules for electricityComparable rules for electricity

1616

90% Test and Remedial 90% Test and Remedial ActionsActions

Regulations provide that the 90% test is Regulations provide that the 90% test is based on actual facts, not expectationsbased on actual facts, not expectations

Compliance with 90% test is measured over Compliance with 90% test is measured over life of prepaymentlife of prepayment

Requires issuers to develop an effective Requires issuers to develop an effective tracking systemtracking system

How do swap and exchange agreements fit How do swap and exchange agreements fit in?in?

Remedial action to cure noncompliance:Remedial action to cure noncompliance: Bond redemption or defeasanceBond redemption or defeasance Taxable refundingTaxable refunding 2 year rule for sales and repurchases2 year rule for sales and repurchases

1717

New Statutory Safe HarborNew Statutory Safe Harbor

Enacted by Congress – 2005 EPACTEnacted by Congress – 2005 EPACT Qualified use test based on historic sales Qualified use test based on historic sales

or consumption (rather than actual) or consumption (rather than actual) Volume of gas cannot exceed 100% of the Volume of gas cannot exceed 100% of the

utility’s average annual consumption over utility’s average annual consumption over the past 5 yearsthe past 5 years A one time test, therefore no continuing A one time test, therefore no continuing

compliance aspectscompliance aspects

Issuers can choose to use Final Issuers can choose to use Final Regulations or statutory safe harborRegulations or statutory safe harbor

1818

Commodity SwapsCommodity Swaps

Many transactions use commodity swaps Many transactions use commodity swaps to convert fixed price gas to indexed to convert fixed price gas to indexed priced. Final Regulations limit the use of priced. Final Regulations limit the use of commodity swaps in prepayment commodity swaps in prepayment transactionstransactions

Swaps are permitted between:Swaps are permitted between: Issuer of the bonds and an unrelated third party Issuer of the bonds and an unrelated third party

(but not the gas supplier)(but not the gas supplier) The gas supplier and an unrelated third party (but The gas supplier and an unrelated third party (but

not the issuer)not the issuer)

1919

Commodity Swaps: Commodity Swaps: “Independence”“Independence”

The commodity swap must be independentThe commodity swap must be independent Matched swaps involving supplier, issuer, and Matched swaps involving supplier, issuer, and

third party are permittedthird party are permitted BUT each party’s obligation under the swap BUT each party’s obligation under the swap

cannot depend on performance of another cannot depend on performance of another entityentity

EXCEPT THAT, issuer’s swap contract may EXCEPT THAT, issuer’s swap contract may provide for termination for gas delivery failure provide for termination for gas delivery failure

The application of the swap independence The application of the swap independence rule is a key aspect of many of the current rule is a key aspect of many of the current gas prepayment structuresgas prepayment structures

2020

Other Issues Other Issues

Practical problems that arise for tax counsel Practical problems that arise for tax counsel under the prepayment rulesunder the prepayment rules

Circumstances under which the transaction Circumstances under which the transaction can collapse raise tax and business issuescan collapse raise tax and business issues

Continuing “business purpose” concern?Continuing “business purpose” concern? These structures are complex and will affect These structures are complex and will affect

the documentation, negotiations, and the the documentation, negotiations, and the tax and business analysistax and business analysis

2121

New Excise Tax on Tax New Excise Tax on Tax SheltersShelters

New Tax Act enacted Section 4965—New Tax Act enacted Section 4965—imposes an excise tax on governmental imposes an excise tax on governmental entities and other nonprofitsentities and other nonprofits

Tax applies to “prohibited tax shelter Tax applies to “prohibited tax shelter transactions” defined as “listed transactions” defined as “listed transactions” and reportable transactions. transactions” and reportable transactions. Listed transactions are transactions that Listed transactions are transactions that Treasury identifies as abusive in a public Treasury identifies as abusive in a public noticenotice

Tax imposed at 35% on greater of net Tax imposed at 35% on greater of net income or proceeds from the transactionincome or proceeds from the transaction

2222

New Excise Tax on Tax New Excise Tax on Tax SheltersShelters

The excise tax applies retroactively to pre-The excise tax applies retroactively to pre-enactment SILOs and LILOs, as well as a number enactment SILOs and LILOs, as well as a number of other transactions that governmental entities of other transactions that governmental entities did not typically participate indid not typically participate in

The excise tax will apply retroactively to The excise tax will apply retroactively to transactions “listed” in the future. There is no transactions “listed” in the future. There is no reason that the tax could not be applied to tax-reason that the tax could not be applied to tax-exempt bondsexempt bonds

New rules also impose a $20,000 tax on “entity New rules also impose a $20,000 tax on “entity managers” who approve prohibited transactions managers” who approve prohibited transactions

Treasury requested comments and will be issuing Treasury requested comments and will be issuing guidance shortlyguidance shortly

2323

Overview Of CurrentOverview Of CurrentLegislative AtmosphereLegislative Atmosphere

JCT proposalsJCT proposals Legislative Action—information reportingLegislative Action—information reporting Other Legislative IssuesOther Legislative Issues

Potential SFC proposalsPotential SFC proposals Budget Picture – search for revenue raisersBudget Picture – search for revenue raisers Tax reformTax reform

2424

JCT ProposalsJCT Proposals Eliminate advance refundings of bonds Eliminate advance refundings of bonds

issued after enactmentissued after enactment Not retroactiveNot retroactive

Changes that will reduce investor demand Changes that will reduce investor demand for tax-exempt bonds:for tax-exempt bonds: Eliminate de minimis rule for corporate investors in Eliminate de minimis rule for corporate investors in

tax-exempt bondstax-exempt bonds Eliminate special rules for insurance companies that Eliminate special rules for insurance companies that

invest in tax-exempt bondsinvest in tax-exempt bonds Proposals would eliminate tax deductions for Proposals would eliminate tax deductions for

corporate and insurance company investments in corporate and insurance company investments in tax-exempt bonds – reduces after tax returntax-exempt bonds – reduces after tax return

P&Cs hold almost 15% of outstanding bondsP&Cs hold almost 15% of outstanding bonds

2525

JCT Proposals – cont’dJCT Proposals – cont’d

Potential impact on issuers if enactedPotential impact on issuers if enacted Advance refundingAdvance refunding Demand side changesDemand side changes

2626

Information ReportingInformation Reporting

Information reporting requirementInformation reporting requirement Requires that bondholders and IRS receive 1099 Requires that bondholders and IRS receive 1099

type. type. Lots of details still to be decided—implementation Lots of details still to be decided—implementation

date, who provides the information, who bears the date, who provides the information, who bears the cost, what information to be providedcost, what information to be provided

2727

Equity First Equity First

Equity first – the problemEquity first – the problem IRS Proposal – advance notice of proposed IRS Proposal – advance notice of proposed

rulemakingrulemaking For output facilities, private use may be allocated For output facilities, private use may be allocated

to equity first.to equity first. ““Equity” only includes taxable bond proceeds and Equity” only includes taxable bond proceeds and

issuer funds at closing.issuer funds at closing. For the equity first rule to apply, bond proceeds and For the equity first rule to apply, bond proceeds and

equity must have been spent contemporaneously.equity must have been spent contemporaneously. The private use and equity must be “allocable” to The private use and equity must be “allocable” to

the same facility for the equity first rule to apply.the same facility for the equity first rule to apply.

2828

Equity First – CommentsEquity First – Comments

Comments:Comments: The contemporaneous expenditure requirement The contemporaneous expenditure requirement

should be eliminated (especially for older should be eliminated (especially for older transactions)transactions)

““Equity” should be defined to include retired Equity” should be defined to include retired tax-exempt bondstax-exempt bonds

More flexible allocation rules are needed for More flexible allocation rules are needed for this purposethis purpose

676195676195 2929

Equity First – Status of Equity First – Status of Allocation and Accounting Allocation and Accounting

Regulations and Next Steps Regulations and Next Steps

Timing—Soon!Timing—Soon! Scope—Broad!Scope—Broad! Opportunity for input—Expected request Opportunity for input—Expected request

for commentsfor comments

3030

IRS Audit Program – StatusIRS Audit Program – Status Status of Audit ProgramStatus of Audit Program Areas of IRS focus:Areas of IRS focus:

Largely aimed at “abuses” blind pools, escrow puts, Largely aimed at “abuses” blind pools, escrow puts, yield burningyield burning

Selected other areas (solid waste)Selected other areas (solid waste) Development of IRS “expertise”Development of IRS “expertise” Possible expansion of audit topicsPossible expansion of audit topics SwapsSwaps Issue Price/FlippersIssue Price/Flippers

3131

IRS Audit Program IRS Audit Program –– Risks and Problems Risks and Problems

Impact on outstanding bondsImpact on outstanding bonds Whether to disclose auditWhether to disclose audit Impact of disclosure – Variable rate bondsImpact of disclosure – Variable rate bonds Impact of disclosure – Fixed rate bondsImpact of disclosure – Fixed rate bonds Impact of disclosure – New IssuesImpact of disclosure – New Issues

The audit process is stacked against The audit process is stacked against issuersissuers

Difficult to convince the auditors that they Difficult to convince the auditors that they are wrongare wrong

3232

IRS Audit Program – IRS Audit Program – Risks and Problems (cont.)Risks and Problems (cont.)

No real ability to obtain an independent No real ability to obtain an independent review of the matterreview of the matter

IRS doesn’t like to go away empty handedIRS doesn’t like to go away empty handed 6700 penalty threat to issuers, 6700 penalty threat to issuers,

underwriters, bond counsel, etcunderwriters, bond counsel, etc

3333

IRS Audit Program – IRS Audit Program – Risks and Problems (cont.)Risks and Problems (cont.)

Is there any hope for improvement?Is there any hope for improvement? NABL ADR proposalNABL ADR proposal Treasury/IRS interestTreasury/IRS interest Impact of new excise tax?Impact of new excise tax?

3434

IRS Audits – Avoiding AuditsIRS Audits – Avoiding Audits

Analyzing tax risks to avoid auditsAnalyzing tax risks to avoid audits How do issuers protect themselves?How do issuers protect themselves? Avoiding “abusive” transactionsAvoiding “abusive” transactions Reliance on counsel – is it enough?Reliance on counsel – is it enough? What if you find a problem? VCAP programWhat if you find a problem? VCAP program

3535

Circular 230 - UPDATECircular 230 - UPDATE

What is Circular 230?What is Circular 230? Proposed rules for tax-exempt bond opinionsProposed rules for tax-exempt bond opinions Why is this being done?Why is this being done? The rules govern how bond counsel renders their The rules govern how bond counsel renders their

opinionsopinions Requires a written description by bond counsel of Requires a written description by bond counsel of

facts, law and analysis of tax issuesfacts, law and analysis of tax issues

3636

Circular 230 – Potential Circular 230 – Potential Consequences for IssuersConsequences for Issuers

Additional transaction costsAdditional transaction costs Potential disclosure issue and higher Potential disclosure issue and higher

interest ratesinterest rates Provides audit roadmap for IRSProvides audit roadmap for IRS Opinion “disclaimer”?Opinion “disclaimer”? Immediate problem for “long” forward Immediate problem for “long” forward

transactionstransactions Bond counsel become more conservative? Bond counsel become more conservative?

More aggressive?More aggressive?

3737

Circular 230 - FutureCircular 230 - Future

Impact of Final Regulations for other Impact of Final Regulations for other transactionstransactions

What happens next?What happens next? Regulatory processRegulatory process

3838

Additional MaterialsAdditional Materials

3939

Potential SFC ProposalsPotential SFC Proposals

SFC staff investigation of tax-exempt bondsSFC staff investigation of tax-exempt bonds Follows from investigation of nonprofit organizationsFollows from investigation of nonprofit organizations Goes beyond JCT proposalsGoes beyond JCT proposals Involves research, interviews with market Involves research, interviews with market

participants, and extensive discussions with participants, and extensive discussions with IRS audit groupIRS audit group

Staff call for industry to develop its own reform Staff call for industry to develop its own reform proposalsproposals

4040

Potential SFC Proposals – Potential SFC Proposals – cont’dcont’d

Interest of Senator Grassley, SFC ChairInterest of Senator Grassley, SFC Chair Grassley focus on nonprofits and tax-exempt bonds in Grassley focus on nonprofits and tax-exempt bonds in

complimenting JCT on its report proposalscomplimenting JCT on its report proposals Need for revenueNeed for revenue Sen. Grassley led the charge against “abusive” leasing Sen. Grassley led the charge against “abusive” leasing

transactions involving state and local governmentstransactions involving state and local governments

4141

Potential SFC Proposals Potential SFC Proposals – – cont’dcont’d

Areas of concern and possible proposalsAreas of concern and possible proposals Very supportive of JCT proposals and JCT Very supportive of JCT proposals and JCT

in generalin general Belief that IRS lacks resources to effectively police Belief that IRS lacks resources to effectively police

the industrythe industry Concern with issuer/borrower failures to spend Concern with issuer/borrower failures to spend

bond proceeds – led to mandatory redemption bond proceeds – led to mandatory redemption requirement for unspent CREB proceedsrequirement for unspent CREB proceeds

SFC staff belief that there are lots of problems with SFC staff belief that there are lots of problems with tax-exempt bonds and QZABstax-exempt bonds and QZABs

4242

Longer Term Risks – Longer Term Risks – Tax ReformTax Reform

Tax reform statusTax reform status Presidential Commission released its report on Presidential Commission released its report on

October 31, 2005October 31, 2005 Report to be followed by Treasury Department Report to be followed by Treasury Department

proposals and then White House proposalsproposals and then White House proposals

Potential concerns prior to report release:Potential concerns prior to report release: Eliminate tax on all investment earningsEliminate tax on all investment earnings Subject tax-exempt entities to income taxSubject tax-exempt entities to income tax Eliminate deductibility of state and local taxesEliminate deductibility of state and local taxes Potential impact on tax-exempt bondsPotential impact on tax-exempt bonds

4343

Tax Reform ProposalTax Reform Proposal

Two Different Proposals:Two Different Proposals: ““Simplified Income Tax Plan”Simplified Income Tax Plan” ““Growth and Investment Tax Plan”Growth and Investment Tax Plan” Both eliminate the AMTBoth eliminate the AMT Both revenue neutralBoth revenue neutral Both eliminate deduction for State and local taxesBoth eliminate deduction for State and local taxes

4444

Tax Reform Proposal--Tax Reform Proposal--OverviewOverview

Overview of Simplified Income TaxOverview of Simplified Income Tax Converts many deductions to creditsConverts many deductions to credits New tax brackets: 15%, 25%, 30% and 33% and New tax brackets: 15%, 25%, 30% and 33% and

31.5% for businesses31.5% for businesses

Overview of Growth and Investment Tax Overview of Growth and Investment Tax Similar to Simplified Plan for individuals but with Similar to Simplified Plan for individuals but with

15%, 25% and 30% tax brackets and 30% for 15%, 25% and 30% tax brackets and 30% for businessesbusinesses

4545

Tax Reform—Impact on Tax-Tax Reform—Impact on Tax-Exempt BondsExempt Bonds

Simplified Plan:Simplified Plan: interest on “tax-exempt bonds” held by corporations interest on “tax-exempt bonds” held by corporations

would be taxable, potentially eliminating 30% of the would be taxable, potentially eliminating 30% of the investorsinvestors

Corporate dividends to individuals would be tax exempt Corporate dividends to individuals would be tax exempt and 75% exclusion for corporate capital gains and 75% exclusion for corporate capital gains

Growth Plan would make Growth Plan would make all interestall interest received received by corporations (other than financial by corporations (other than financial institutions) tax-exemptinstitutions) tax-exempt

4646

Tax Reform—Impact on Tax-Tax Reform—Impact on Tax-Exempt Bonds (cont’d)Exempt Bonds (cont’d)

Both plans would create new tax-favored Both plans would create new tax-favored savings vehicles for individualssavings vehicles for individuals

SummarySummary: Both plans would substantially : Both plans would substantially reduce demand for tax-exempt bonds by reduce demand for tax-exempt bonds by either eliminating the benefit of tax-exempt either eliminating the benefit of tax-exempt bonds for certain investors or by providing bonds for certain investors or by providing tax-exempt status for other investments tax-exempt status for other investments that would compete with tax-exempt bondsthat would compete with tax-exempt bonds