Trinity Health moves up sale of $889M in bonds in anticipation of tax overhaul
- The prospect that Congress may do away with federal tax breaks for much of the municipal market is prompting hospitals and other debt issuers to issue tax-free bonds while borrowing costs are still low, Reuters reports.
- After the House passed its tax overhaul bill in November, Trinity Health moved up the sale of about $889 million of new and refunding revenue bonds from January 2018 to this week.
- “I look at it as kind of a risk mitigation,” Dina Richard, senior vice president at the Michigan-based Catholic health system, told Reuters. “We were able to accelerate and mitigate any risk of where these proposals may eventually land.”
The House tax proposal would eliminate tax exemptions for new private activity bonds, adding to costs of capital and budget strains at nonprofit healthcare organizations. That change isn't included in the Senate bill approved on Saturday, and the two versions must be reconciled before a final bill can be voted on by both houses of Congress.
The American Hospital Association praised the Senate for keeping the tax exemption for private activity bonds for some nonprofit hospitals, saying it provides hospitals with low-cost capital to upgrade facilities and enhance patient access and care. But the group criticized the bill’s move to end the exemption on interest on advance refunding bonds, another way hospitals reduce borrowing costs.
The Senate bill also imposes a 12.5% tax on income U.S companies earn from foreign-derived intellectual property and would reduce by half a tax credit for pharmaceutical companies conducting clinical trials on orphan drugs. It also threatens a research and development tax credit often used by drug manufacturers.
The House and Senate have their work cut out for them in trying to iron out differences in their versions of tax reform. In addition to their differing positions on private activity bonds, lawmakers have to decide whether to preserve the individual mandate in the Affordable Care Act — the House bill maintains the mandate while the Senate would repeal it. The House bill also does away with the individual medical expense deduction. The Senate version keeps the deductions and lowers the threshold from 10% to 7.5% for two years.
President Donald Trump has said he wants a tax reform bill on his desk by the end of the year.
- Reuters Race is on to sell tax-free bonds ahead of tax changes
- Becker's Hospital CFO Report Trinity Health races to sell $889M in bonds ahead of tax changes