New tax plan will not curtail port infrastructure investment

As we related at this time last year, the American Association of Port Authorities (AAPA), was keeping a watchful eye on what then President-elect Donald Trump would do about improving port infrastructure.

That concern was heightened when it was announced that new tax cutting initiatives would soon be announced.

Fortunately for logistics managers reliant on campaign promises, existing plans for port improvements will not be curtailed. Indeed, the AAPA was pleased that several important tax related policy priorities were addressed in the final “Tax Cuts and Jobs Act” legislation recently passed by Congress. These included provisions related to tax-exempt bond financing and wind energy production tax credits.

“Public port authorities throughout the country are investing billions of dollars in needed infrastructure improvements,” said Kurt Nagle, AAPA’s president and CEO.

He noted that With private activity bonds (PABs) providing a significant source of financing for these projects, AAPA has worked with several transportation and bond-related coalitions to strongly advocate against the elimination of tax exempt status for PABs.

“We’re extremely pleased that the final legislation keeps the tax-exempt status for PABs. This provision will help foster investments, not just in and around ports, but also in needed infrastructure development throughout the nation,” he added.

In collaboration with many of its U.S. member ports, AAPA conducted vocal outreach to inform policymakers and the public about the negative impact of removing the tax-exempt status of PABs. “It was estimated that ports would have had to pay approximately $19 million in extra debt service costs for every $100 million borrowed had the PAB tax exemption been lost.  These significantly increased costs would have harmed ports’ ability to make needed investments, and likely would have delayed or even killed some projects,” said Nagle.

Another “win” for ports and for all engaged in wind energy in the final legislation was the continuation of the existing level of wind energy production tax credits. The original House bill would have reduced the tax credit level. A sizable number of ports on the east, gulf, and west coasts and the Great Lakes handle wind energy components as part of their cargo mix.

In addition, AAPA had supported the House bill’s repeal of the alternative minimum tax (AMT).  This is important since most PABs issued by ports are subject to the AMT, and therefore, increases the cost of financing. In the final bill, Congress repealed the AMT for corporations, but retained it in a modified form for higher-income individuals.  

The association, along with other groups, had also urged continuation of the tax-exemption on advance refunding of municipal bonds. However, the final legislation takes away the tax-exempt status of advance refunding, which is likely to increase the cost of public infrastructure investments.