To attract additional private-sector investment in infrastructure and heighten the ability of municipalities to carry out future projects, the Metropolitan Policy Program at Brookings recommends the exemption of Private Activity Bonds from the Alternative Minimum Tax. Tax exemptions on PABs will reduce the cost of borrowing for issuers and give them added flexibility to make targeted investments in those projects that promise the greatest impact on the area economy.
Exempting PABs from the AMT would:
- Help boost private-sector investment in infrastructure, spurring the development of projects throughout the nation
- Lower existing costs of PABs for state and local governments faced with declining revenues and restricted by tight budgets
- Facilitate investment in infrastructure projects with a clear public benefit, including capital improvement projects at airports that connect metropolitan areas and foster trade
- Build on the success of the previous exemption under ARRA, providing greater financial clarity and regulatory certainty for investors in the long term
In this way, by promoting favorable regulation on bonds, the federal government can encourage private- and public-sector infrastructure investment and streamline the delivery of necessary infrastructure projects.