The key issue in Congress is how broader tax reform efforts may impact the federal subsidy of state and local bonds. For example, last year the President proposed broad legislation under which highincome individuals and families would no longer receive interest on state and municipal bonds that is completely exempt from federal income tax. While it is not apparent whether there is any Congressional support for such a proposal, issuers should not ignore this proposal and similar proposals because unenacted bills often provide a starting point for future, successful legislation.
Apart from these sweeping reform proposals, any legislation related to tax-favored bonds in 2013 likely will take the form of very targeted technical fixes or reauthorizations of existing provisions scheduled to expire. For example, in the American Taxpayer Relief Act of 2012, Congress made permanent a more generous small issuer rebate exception for public school construction issues and authorized an additional $400 million of qualified zone academy bond issuance authority.