As The Rolling Stones sang, “You can’t always get what you want, but … you get what you need.” The long-awaited final version of the tax bill was anounced on Friday, December 15, 2017. For charter schools, the outcome was mostly what we needed.
Private Activity Bonds (PABs), which include 501 c 3 bonds that are the basis of the vast majority of charter school tax-exempt bond issues, were NOT eliminated as originally proposed by the House. Neither were New Markets Tax Credits (NMTCs), so two very important sources of facility funding for charter schools will remain. Advanced refundings (AR), which refinance outstanding tax-exempt bonds more than 90 days prior to the call date on the outstanding bonds, were eliminated beyond December 31, 2017. This will have a minor impact for charter schools, for example in states where some sort of enhancement is available (as schools which didn’t originally qualify for state enhancement later become qualified). However, given that the interest rate environment has been low for a while, I don’t expect a huge impact here. Finally, we can analyze the benefit of shortening the optional call date on new issues going forward to help offset the loss of AR. Also eliminated were bonds whose name began with “Qualified”, such as Qualified Zone Academy Bonds (QZABs) and Qualified School Construction Bonds (QSCBs), whether on a tax-credit or direct pay basis. In the case of QSCBs, most of that allocation had been used anyway, but the loss of QZABs will have a minor impact for charter school facility finance. Other items eliminated were energy-related tax credit bonds called Qualified Energy Conservation Bonds (QECBs) and Clean Renewable Energy Bonds (CREBs). The final bill is expected to pass both houses when they vote the week of December 18. After much drama and many twists and turns, charter school facility finance will largely be Business As Usual (BAU).