<html><head><meta http-equiv="Content-Type" content="text/html charset=windows-1252"></head><body style="word-wrap: break-word; -webkit-nbsp-mode: space; -webkit-line-break: after-white-space; "><h1 itemprop="headline" class="articleHeadline" style="margin: 0px 0px 8px; font-size: 32px; line-height: 1.083em; font-weight: normal; "><img id="93b96ecb-5c41-4908-a718-544076bc1ab3" height="18" width="122" apple-width="yes" apple-height="yes" src="cid:CC49D958-3A15-4F0C-9FE4-B98ECBB71F5A@att.net"></h1><h1 itemprop="headline" class="articleHeadline" style="margin: 0px 0px 8px; font-size: 32px; line-height: 1.083em; font-weight: normal; "><nyt_headline version="1.0" type=" ">A Stealth Tax Subsidy for Business Faces New Scrutiny</nyt_headline></h1><div class="articleSpanImage" style="width: 600px; margin-bottom: 8px; font-size: 10px; "><div id="articleSpanVideoModule" class="articleSpanVideoModule" style="position: relative; "><div id="articleSpanVideoStillImage" class="image" style="margin-bottom: 2px; position: absolute; top: 0px; left: 0px; z-index: 3; "><a href="http://www.nytimes.com/2013/03/05/business/qualified-private-activity-bonds-come-under-new-scrutiny.html?nl=todaysheadlines&emc=edit_th_20130305&pagewanted=all" class="playOverlay" style="color: rgb(102, 102, 153); text-decoration: none; display: block; position: absolute; background-image: url(http://graphics8.nytimes.com/images/global/icons/playbutton_closed.png); width: 55px; height: 50px; z-index: 4; left: 20px; bottom: 20px; background-position: 0% 100%; background-repeat: no-repeat no-repeat; "></a><img width="600" height="338" alt="" border="0" id="0979468a-bef1-40d4-bc81-8272c7d790c5" apple-width="yes" apple-height="yes" src="cid:B8ABFC26-2BDA-487E-A498-3DFDC43AB533@att.net"></div><div id="articleSpanVid_100000002099045" class="articleSpanVideo" style="position: relative; width: 600px; height: 337px; top: 0px; left: 0px; z-index: 2; "></div><p id="articleSpanVideoCaption" class="caption noPhotoCredit" style="margin: 5px 0px 0px; font-size: 12px; line-height: 1.2727em; font-family: arial, helvetica, sans-serif; color: rgb(102, 102, 102); "><strong class="videoIcon video" style="background-image: url(http://graphics8.nytimes.com/images/icons/multimedia/video_icon.gif); padding: 0px 0px 0px 18px; background-position: 1px 1px !important; background-repeat: no-repeat no-repeat; ">Bond Giveaway:</strong> The Times’s Louise Story on corporations that enjoy billions of dollars in tax-free financing.</p></div></div><nyt_byline style="font-size: 10px; "><h6 class="byline" style="margin: 2px 0px; color: rgb(128, 128, 128); font-size: 10px; line-height: 1.2em; font-weight: normal; font-family: arial, helvetica, sans-serif; ">By <span itemprop="author creator" itemscope="" itemtype="http://schema.org/Person" itemid="http://topics.nytimes.com/top/reference/timestopics/people/w/mary_williams_walsh/index.html"><a href="http://topics.nytimes.com/top/reference/timestopics/people/w/mary_williams_walsh/index.html" rel="author" title="More Articles by MARY WILLIAMS WALSH" style="color: rgb(102, 102, 153); text-decoration: none; ">MARY WILLIAMS WALSH</a></span> and <span itemprop="author creator" itemscope="" itemtype="http://schema.org/Person" itemid="http://topics.nytimes.com/top/reference/timestopics/people/s/louise_story/index.html"><a href="http://topics.nytimes.com/top/reference/timestopics/people/s/louise_story/index.html" rel="author" title="More Articles by LOUISE STORY" style="color: rgb(102, 102, 153); text-decoration: none; ">LOUISE STORY</a></span></h6></nyt_byline><h6 class="dateline" style="margin: 0px; color: rgb(128, 128, 128); font-size: 10px; line-height: 1.2em; font-weight: normal; font-family: arial, helvetica, sans-serif; ">Published: March 4, 2013 <span id="datelineCommentCount" class="commentCount" style="margin-left: 4px; padding-left: 7px; border-left-color: rgb(204, 204, 204); border-left-width: 1px; border-left-style: solid; "><a class="commentCountLink icon commentIcon" href="http://www.nytimes.com/2013/03/05/business/qualified-private-activity-bonds-come-under-new-scrutiny.html?nl=todaysheadlines&emc=edit_th_20130305&pagewanted=all#commentsContainer" style="color: rgb(102, 102, 153); text-decoration: none; padding-left: 13px; background-image: url(http://graphics8.nytimes.com/images/icons/multimedia/comment_icon.gif); background-position: 0% 50%; background-repeat: no-repeat no-repeat; ">296 Comments</a></span></h6><div class="articleBody" style="margin-top: 1.5em; margin-bottom: 1.7em; font-size: 10px; "><nyt_text><div style="margin: 0px; font-size: 18px; line-height: 1.467em; ">The last time the nation’s <a title="Click to Continue > by CouponDropDown" id="_GPLITA_2" href="http://www.nytimes.com/2013/03/05/business/qualified-private-activity-bonds-come-under-new-scrutiny.html?nl=todaysheadlines&emc=edit_th_20130305&pagewanted=all#" in_rurl="http://i.trkjmp.com/click?v=VVM6MzM3Mjg6MTUyNTp0YXggY29kZTo3NjEzMmU1YzEyMGU3MzRiY2FkMGEwN2YzODE1MTU1MTp6LTExMjItOTU0NTg6d3d3Lm55dGltZXMuY29tOjMzNjgwOmNiODUwNjNmNDYxMjFlYjczMTQyOGEyN2I0MDM4MDI1" style="color: rgb(102, 102, 153); ">tax code</a> was overhauled, in 1986, Congress tried to end a big corporate giveaway.</div></nyt_text></div><div class="articleInline runaroundLeft" style="float: left; clear: left; display: inline; margin: 6px 15px 10px 0px !important; width: 190px; font-size: 10px; "><div class="columnGroup doubleRule" style="width: auto !important; margin-bottom: 12px; clear: both; padding-top: 12px; border-width: 0px !important; background-image: url(http://graphics8.nytimes.com/images/global/borders/doubleRule.gif); margin-left: 10px; margin-right: 7px; background-position: 0% 0%; background-repeat: repeat no-repeat; "><h3 class="sectionHeader" style="margin: 0px 0px 8px; font-size: 16px; line-height: 1.2857em; font-family: arial, helvetica, sans-serif; ">Related</h3><ul class="headlinesOnly multiline flush" style="margin: 0px; list-style: none; padding-left: 0px; "><li style="font-size: 13px; line-height: 1.25em; background-image: none; padding: 0px; margin-bottom: 0px; "><h6 style="margin: 0px; font-size: 13px; line-height: 1.25em; font-weight: normal; "><a href="http://www.nytimes.com/2012/12/02/us/how-local-taxpayers-bankroll-corporations.html?ref=business" style="color: rgb(102, 102, 153); text-decoration: none; ">United States of Subsidies: As Companies Seek Tax Deals, Governments Pay High Price</a>(December 2, 2012)</h6></li></ul></div><div class="inlineImage module" style="margin-bottom: 12px; clear: both; width: 190px; "><div class="image" style="margin-bottom: 2px; "><div class="icon enlargeThis" style="padding-left: 16px; text-align: right; margin-bottom: 2px; background-position: 0% 50%; background-repeat: no-repeat no-repeat; "><a href="http://www.nytimes.com/2013/03/05/business/qualified-private-activity-bonds-come-under-new-scrutiny.html?nl=todaysheadlines&emc=edit_th_20130305&pagewanted=all" style="color: rgb(102, 102, 153); text-decoration: none; display: inline; font-family: arial, helvetica, sans-serif; font-size: 12px; padding-left: 15px; background-image: url(http://graphics8.nytimes.com/images/icons/multimedia/enlarge_icon.gif); background-position: 0% 50%; background-repeat: no-repeat no-repeat; ">Enlarge This Image</a></div><a href="http://www.nytimes.com/2013/03/05/business/qualified-private-activity-bonds-come-under-new-scrutiny.html?nl=todaysheadlines&emc=edit_th_20130305&pagewanted=all" style="color: rgb(102, 102, 153); text-decoration: none; display: block; "><span itemprop="associatedMedia" itemscope="" itemid="http://graphics8.nytimes.com/images/2013/03/05/business/05muni2_cnd/05muni2_cnd-articleInline.jpg" itemtype="http://schema.org/ImageObject"><img itemprop="url" width="190" height="127" alt="" id="c75faddb-5a43-4122-b2a7-3ae00348f55f" apple-width="yes" apple-height="yes" style="border: none; " src="cid:67D169FA-45DD-4282-8C74-191FF01A9DA2@att.net"></span></a></div><h6 class="credit" style="margin: 0px 0px 3px; color: rgb(144, 144, 144); line-height: 1.223em; font-weight: normal; font-family: arial, helvetica, sans-serif; text-align: right; font-size: 8px; ">Richard Perry/The New York Times</h6><div style="margin: 0px; font-size: 12px; line-height: 1.2727em; font-family: arial, helvetica, sans-serif; color: rgb(102, 102, 102); ">The Barclays Center in Brooklyn, on opening night in September 2012.</div></div><div class="inlineImage module" style="margin-bottom: 12px; clear: both; width: 190px; "><div class="image" style="margin-bottom: 2px; "><div class="icon enlargeThis" style="padding-left: 16px; text-align: right; margin-bottom: 2px; background-position: 0% 50%; background-repeat: no-repeat no-repeat; "><a href="http://www.nytimes.com/2013/03/05/business/qualified-private-activity-bonds-come-under-new-scrutiny.html?nl=todaysheadlines&emc=edit_th_20130305&pagewanted=all" style="color: rgb(102, 102, 153); text-decoration: none; display: inline; font-family: arial, helvetica, sans-serif; font-size: 12px; padding-left: 15px; background-image: url(http://graphics8.nytimes.com/images/icons/multimedia/enlarge_icon.gif); background-position: 0% 50%; background-repeat: no-repeat no-repeat; ">Enlarge This Image</a></div><a href="http://www.nytimes.com/2013/03/05/business/qualified-private-activity-bonds-come-under-new-scrutiny.html?nl=todaysheadlines&emc=edit_th_20130305&pagewanted=all" style="color: rgb(102, 102, 153); text-decoration: none; display: block; "><span itemprop="associatedMedia" itemscope="" itemid="http://graphics8.nytimes.com/images/2013/03/05/business/05muni1_cnd/05muni1_cnd-articleInline.jpg" itemtype="http://schema.org/ImageObject"><img itemprop="url" width="190" height="127" alt="" id="3d5c783c-eb80-4c8d-adbf-1b6c07349fa2" apple-width="yes" apple-height="yes" style="border: none; " src="cid:0CCB9A32-7A50-4330-BD21-EFB95F9167CC@att.net"></span></a></div><h6 class="credit" style="margin: 0px 0px 3px; color: rgb(144, 144, 144); line-height: 1.223em; font-weight: normal; font-family: arial, helvetica, sans-serif; text-align: right; font-size: 8px; ">Tina Fineberg for The New York Times</h6><div style="margin: 0px; font-size: 12px; line-height: 1.2727em; font-family: arial, helvetica, sans-serif; color: rgb(102, 102, 102); ">Bank of America Tower, center, at 115 West 42nd Street in New York.</div></div><div class="inlineImage module" style="margin-bottom: 12px; clear: both; width: 190px; "><div class="image" style="margin-bottom: 2px; "><div class="icon enlargeThis" style="padding-left: 16px; text-align: right; margin-bottom: 2px; background-position: 0% 50%; background-repeat: no-repeat no-repeat; "><a href="http://www.nytimes.com/2013/03/05/business/qualified-private-activity-bonds-come-under-new-scrutiny.html?nl=todaysheadlines&emc=edit_th_20130305&pagewanted=all" style="color: rgb(102, 102, 153); text-decoration: none; display: inline; font-family: arial, helvetica, sans-serif; font-size: 12px; padding-left: 15px; background-image: url(http://graphics8.nytimes.com/images/icons/multimedia/enlarge_icon.gif); background-position: 0% 50%; background-repeat: no-repeat no-repeat; ">Enlarge This Image</a></div><a href="http://www.nytimes.com/2013/03/05/business/qualified-private-activity-bonds-come-under-new-scrutiny.html?nl=todaysheadlines&emc=edit_th_20130305&pagewanted=all" style="color: rgb(102, 102, 153); text-decoration: none; display: block; "><span itemprop="associatedMedia" itemscope="" itemid="http://graphics8.nytimes.com/images/2013/03/05/business/Muni3/Muni3-articleInline.jpg" itemtype="http://schema.org/ImageObject"><img itemprop="url" width="190" height="279" alt="" id="d3dca00b-ab26-429b-ab9c-0c78d5defb93" apple-width="yes" apple-height="yes" style="border: none; " src="cid:35A08AFC-D312-4F26-9216-C4CA7AAFDC0B@att.net"></span></a></div><h6 class="credit" style="margin: 0px 0px 3px; color: rgb(144, 144, 144); line-height: 1.223em; font-weight: normal; font-family: arial, helvetica, sans-serif; text-align: right; font-size: 8px; ">Mario Tama/Getty Images</h6><div style="margin: 0px; font-size: 12px; line-height: 1.2727em; font-family: arial, helvetica, sans-serif; color: rgb(102, 102, 102); ">The headquarters of Goldman Sachs in Lower Manhattan.</div></div></div><div id="readerscomment" class="inlineLeft" style="float: left; clear: left; width: 190px; background-image: url(http://graphics8.nytimes.com/images/global/borders/aColumnHorizontalBorder.gif); background-attachment: scroll; background-color: rgb(235, 241, 245); margin: 0px 15px 20px 0px; font-size: 10px; background-position: 0% 0%; background-repeat: repeat no-repeat; "><h3 style="margin: 7px 10px 2px; font-size: 8px; line-height: 1.133em; font-family: Arial, Helvetica, sans-serif; padding: 5px 15px; background-image: url(http://graphics8.nytimes.com/images/article/comments/icons/comment_black.gif); background-position: 0% 50%; background-repeat: no-repeat no-repeat; ">Readers’ Comments</h3><div class="content" style="padding: 9px 10px 13px; background-image: url(http://graphics8.nytimes.com/images/global/borders/aColumnHorizontalBorder.gif); background-attachment: scroll; border-top-width: 1px; border-top-style: solid; border-top-color: white; background-position: 0% 100%; background-repeat: repeat no-repeat; "><blockquote style="margin: 0px 0px 6px; ">"The politicians responsible for this policy should be identified and held accountable. If they aren't, history will continue to repeat itself."</blockquote><cite style="display: block; margin-bottom: 6px; ">RC, MN</cite><ul class="more" style="margin: 0px; list-style: none; padding-left: 0px; font-family: Arial, Helvetica, sans-serif; "><li style="font-size: 8px; line-height: 1.2em; background-image: none; padding: 0px; margin: 0px; "><a href="http://www.nytimes.com/2013/03/05/business/qualified-private-activity-bonds-come-under-new-scrutiny.html?permid=18#comment8437753" rel="2v" style="color: rgb(102, 102, 153); text-decoration: none !important; font-size: 8px; ">Read Full Comment »</a></li><li style="font-size: 8px; line-height: 1.2em; background-image: none; padding: 0px; margin: 0px; "><a href="http://www.nytimes.com/2013/03/05/business/qualified-private-activity-bonds-come-under-new-scrutiny.html?nl=todaysheadlines&emc=edit_th_20130305&pagewanted=all#postcomment" rel="2p" style="color: rgb(102, 102, 153); text-decoration: none !important; font-size: 8px; ">Post a Comment »</a></li></ul></div></div><div class="articleBody" style="margin-top: 1.5em; margin-bottom: 1.7em; "><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">But this valuable perk — the ability to finance a variety of business projects cheaply with bonds that are exempt from <a title="Click to Continue > by CouponDropDown" id="_GPLITA_0" href="http://www.nytimes.com/2013/03/05/business/qualified-private-activity-bonds-come-under-new-scrutiny.html?nl=todaysheadlines&emc=edit_th_20130305&pagewanted=all#" in_rurl="http://i.trkjmp.com/click?v=VVM6MzI0MDM6MTg4MzpmZWRlcmFsIHRheGVzOmQ5YWU3M2EzMjgyYjlkZWJlNmNkNTgyMjJkNmJlODAyOnotMTEyMi05NTQ1ODp3d3cubnl0aW1lcy5jb206MzEwMTA6ZmMxNjZmMWIzYjA3NDMxN2M3ZWUwNTQxNTU1YWRiOTM" style="color: rgb(102, 102, 153); ">federal taxes</a> — has not only endured, it has grown, in what amounts to a stealth subsidy for private enterprise.</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; position: static; z-index: auto; ">A winery in North Carolina, a golf<a title="Click to Continue > by CouponDropDown" id="_GPLITA_4" href="http://www.nytimes.com/2013/03/05/business/qualified-private-activity-bonds-come-under-new-scrutiny.html?nl=todaysheadlines&emc=edit_th_20130305&pagewanted=all#" in_rurl="http://i.trkjmp.com/click?v=VVM6MTAzNzQ6MjE4OnJlc29ydCBpbiBwdWVydG8gcmljbzo4MjU5YWZhMTQ5YTdmMzA0N2U2YzU1ZTRiNmU3ZmFmZDp6LTExMjItOTU0NTg6d3d3Lm55dGltZXMuY29tOjI0MDI6ODhhMzg3MGVkZDRhYjgyYzk4NTg5ZGZiNjk5OThmMzE" style="color: rgb(102, 102, 153); ">resort in Puerto Rico</a> and a Corvette museum in Kentucky, as well as the Barclays Center in Brooklyn and the offices of the Goldman Sachs Group and the Bank of America Tower in New York — all of these projects, and many more, have been built using the tax-exempt bonds that are more conventionally used by cities and states to pay for roads, bridges and schools.</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">In all, more than $65 billion of these bonds have been issued by state and local governments on behalf of corporations since 2003, according to an analysis of Bloomberg bond data by The New York Times. During that period, the single biggest beneficiary of such securities was the Chevron Corporation, which issued bonds with a total face value of $2.6 billion, the analysis showed. Last year it reported a profit of $26 billion.</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">At a time when Washington is rent by the politics of taxes and deficits, select companies are enjoying a tax break normally reserved for public works. This style of financing, called “qualified private activity bonds,” saves businesses money, because they can borrow at relatively <a title="Click to Continue > by CouponDropDown" id="_GPLITA_3" href="http://www.nytimes.com/2013/03/05/business/qualified-private-activity-bonds-come-under-new-scrutiny.html?nl=todaysheadlines&emc=edit_th_20130305&pagewanted=all#" in_rurl="http://i.trkjmp.com/click?v=VVM6MjM2MjY6MTA6bG93IGludGVyZXN0IHJhdGVzOjBiYzFkYjZlZDA4ZTk1YTQxNGNkMTkzODlhZDNlNzFmOnotMTEyMi05NTQ1ODp3d3cubnl0aW1lcy5jb206MzU1MzU6NzIxYjM2MzcxMmZjYzUyYTMzNzliZWZhMGQwN2Y1MjI" style="color: rgb(102, 102, 153); ">low interest rates</a>. But those savings come at the expense of American taxpayers, because the interest paid to bondholders is exempt from taxes.</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">What is more, the projects are often structured so companies can avoid paying state sales taxes on new equipment and, at times, avoid local <a title="Click to Continue > by CouponDropDown" id="_GPLITA_1" href="http://www.nytimes.com/2013/03/05/business/qualified-private-activity-bonds-come-under-new-scrutiny.html?nl=todaysheadlines&emc=edit_th_20130305&pagewanted=all#" in_rurl="http://i.trkjmp.com/click?v=VVM6MzM0OTY6MTUyNTpwcm9wZXJ0eSB0YXhlczozOTM3YTAyOTEzODQwMmJlODE5ZDEwMGIxMGUzZDYyMzp6LTExMjItOTU0NTg6d3d3Lm55dGltZXMuY29tOjMzMjczOjAwNDY5NGM0ODExYWY1N2UyMzE4ZWFkMWYxMDkzZmZi" style="color: rgb(102, 102, 153); ">property taxes</a>. While some deals might encourage businesses to invest where they might otherwise not have invested, there are few guarantees that job creation or other economic benefits actually occur.</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">Budget analysts say these bonds amount to a government subsidy, in the form of forgone tax revenue. While it is difficult to calculate the precise dollar amount of the subsidy, given the number and variety of these bonds, experts say the annual cost to federal taxpayers could run into the billions.</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">“The federal government doesn’t cut a check for this, but it costs the government in terms of lower tax revenue,” said Lisa Washburn, a managing director at Municipal Market Advisors, an independent municipal research firm in Concord, Mass., that assisted The Times with its analysis.</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">“If these companies were to issue taxable bonds instead, then the federal government would receive tax revenues on them.”</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">Ms. Washburn added that the gain to companies, and bond buyers, can be big and long-lasting.</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">Chevron used most of its federally tax-free borrowings to expand a refinery in Pascagoula, Miss. Archer Daniels Midland, the agribusiness giant, used about $180 million in tax-exempt bonds to improve its grain-processing facilities in Indiana and Iowa. Alcoa raised $250 million to renovate an aluminum plant in Iowa.</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">Such financing arrangements are now worrying some state and local officials. Many are concerned that the budget battles in Washington will mean less federal money for them, and that the federal government might try to limit the scope of their own tax-free financing.</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">Some of the subsidized business projects are almost indistinguishable from public works. American Airlines, for instance, another big user of tax-exempt bonds over the last decade, used $1.3 billion of these securities to finance a new terminal at Kennedy International Airport. That terminal is owned by the City of New York; American is the builder, the borrower and a tenant.</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">As political controversy over the federal deficit has mounted, some fiscal experts have taken aim at this sort of tax-exempt borrowing. The team at the <a title="The report." href="http://bipartisanpolicy.org/projects/debt-initiative/about" style="color: rgb(102, 102, 153); ">Bipartisan Policy Center</a>led by Alice M. Rivlin, a former member of the Federal Reserve, and Pete V. Domenici, the former Republican senator, has called for ending it. A spokeswoman for the center said that such a change could bring in $50 billion for the federal government over 10 years.</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">The Obama administration would take a different approach, capping the value of the tax break that wealthy bond buyers enjoy, whether they buy private activity bonds or conventional <a href="http://topics.nytimes.com/top/reference/timestopics/subjects/m/municipal_bonds/index.html?inline=nyt-classifier" title="More articles about municipal bonds." class="meta-classifier" style="color: rgb(102, 102, 153); ">municipal bonds</a>. Some of the bonds in The Times’s analysis are subject to the <a href="http://topics.nytimes.com/top/reference/timestopics/subjects/a/alternative_minimum_tax/index.html?inline=nyt-classifier" title="More articles about the alternative minimum tax." class="meta-classifier" style="color: rgb(102, 102, 153); ">alternative minimum tax</a>, but taxpayers who incur the A.M.T. typically do not buy those bonds. There are also tax-exempt private activity bonds that are used for hospitals and universities. The Times did not include those in the analysis, because they do not benefit profit-making companies.</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">It was Ms. Rivlin who, as founding director of the Congressional Budget Office, issued one of the first major reports on private activity bonds, which the report said were invented by officials in Mississippi eager to attract business during the Depression. In a <a title="The report." href="http://www.gao.gov/assets/280/272369.pdf" style="color: rgb(102, 102, 153); ">1981 report</a>, Ms. Rivlin found that the bonds were in much wider use than previously understood. Companies were using the federal subsidy to build Kmarts, McDonald’s restaurants, private golf courses and tennis clubs — even a topless bar and an adult bookstore in Philadelphia.</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">“These trends have cast into sharp relief the questions concerning the public purpose” of the subsidy, Ms. Rivlin wrote at the time. “So far, federal legislation has left the definition of ‘public purpose’ to state and local governments.”</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">Finally, in 1986, in a sweeping tax reform signed by President Ronald Reagan, Congress set limits on qualified private activity bonds, giving each state a yearly allotment. Some projects, like airports and wharves, were not subject to the yearly limits. Others could not be financed with tax-exempt bonds at all, including golf courses, stadiums, hotels, massage parlors and tanning salons.</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">But over time, Reagan-era concerns about budget deficits faded, and so did some of the limits on tax-exempt private activity bonds. The Government Accountability Office reported in 2008 that use had risen to a record high and that once-forbidden projects like stadiums, hotels and golf courses were back.</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">“It is not clear whether facilities like these provide public benefits to federal taxpayers,” the<a title="The report." href="http://www.gao.gov/assets/280/272369.pdf" style="color: rgb(102, 102, 153); ">G.A.O. stated in its report</a>.</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">In the years since 1986, Congress has lifted the caps on some states’ or cities’ allotments, often in response to natural disasters and other emergencies.</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">After the terrorist attacks in 2001, for example, Congress approved $8 billion worth of tax-exempt Liberty Bonds, which were in addition to New York State’s normal allotment and could be used to keep companies from moving out of the neighborhood near ground zero. Goldman Sachs used around $1.6 billion of tax-exempt bonds under the program to help pay for its headquarters in Lower Manhattan. In a related program, Goldman agreed to keep 8,900 jobs in the city but has not met that level for the last three years, according to public records.</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">A spokesman for Goldman did not dispute that its jobs levels have been below 8,900 but said the bank was meeting its obligations.</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">The Liberty Bond program allowed for a limited amount of tax-exempt financing for projects beyond Lower Manhattan. That’s how One Bryant Park L.L.C. was able to use $650 million of tax-exempt bonds to build the Bank of America Tower in Midtown.</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">In 2005, Congress created a similar program to spur rebuilding in areas of Louisiana, Alabama and Mississippi that were ravaged by <a href="http://topics.nytimes.com/top/reference/timestopics/subjects/h/hurricane_katrina/index.html?inline=nyt-classifier" title="More articles about Hurricane Katrina." class="meta-classifier" style="color: rgb(102, 102, 153); ">Hurricane Katrina</a>. The Times’s data shows that much of the bond proceeds went to the oil and gas industry, or to showcase projects like hotels or the Superdome. In 2008, Congress passed the <a title="An I.R.S. report." href="http://www.irs.gov/uac/Tax-Law-Changes-Related-to-Midwestern-Disaster-Areas" style="color: rgb(102, 102, 153); ">Heartland Disaster Tax Relief Act</a>, a bond program to help 10 Midwestern states hit by flooding and tornadoes. The goal was to help businesses rebuild their destroyed property. But by the time the program was set to expire at the end of last year, the criteria had been expanded to include new businesses.</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">One of those businesses was Orascom Construction Industries of Egypt, which raised $1.2 billion of tax-exempt bonds to build a <a href="http://topics.nytimes.com/top/reference/timestopics/subjects/f/fertilizer/index.html?inline=nyt-classifier" title="More articles about fertilizer." class="meta-classifier" style="color: rgb(102, 102, 153); ">fertilizer</a> plant in Iowa. Another was the <a title="Related article." href="http://www.courierpress.com/news/2013/jan/11/fertilizer-herp/" style="color: rgb(102, 102, 153); ">Fatima Group of Pakistan</a>. In December, a Fatima subsidiary raised $1.3 billion, tax-exempt, to build a fertilizer plant in Mount Vernon, Ind.</p><p itemprop="articleBody" style="font-family: georgia, 'times new roman', times, serif; text-align: left; background-color: rgb(255, 255, 255); margin: 0px 0px 1em; font-size: 18px; line-height: 1.467em; ">But weeks later, Indiana received alarming news: Pentagon officials said that fertilizer from Fatima’s operations in Pakistan had been turning up in Afghanistan, in homemade bombs used against American troops. Gov. <a title="Related article." href="http://www.courierpress.com/news/2013/feb/26/54-hed1-15-inches-of-story/" style="color: rgb(102, 102, 153); ">Mike Pence of Indiana</a> has delayed the project while the Defense Department investigates. The $1.3 billion is now sitting in escrow and will have to go back to the bond buyers if the project is rejected.</p><div><br></div></div></body></html>