WASHINGTON — House Ways and Means Committee Democrats introduced a bill on Thursday that would reinstate Build America Bonds, the higher small-issuer limit for bank-qualified bonds, and six other bond, tax credit and loan guarantee programs.

Most of the programs were created under the American Recovery and Reinvestment Act to help state and local governments, but expired on Dec. 31.

The bill, HR 992, called the Building American Jobs Act, would extend many of these programs through 2011 or 2012.

“These proven programs are vital in our effort to rebuild America’s economy,” former committee chairman Sander Levin, D-Mich., said in a release. “There are still far too many states and municipalities — in addition to the 14 million unemployed Americans — struggling to regain their footing after the Great Recession and this legislation gives them the tools to make long-needed investments.”

Twenty-two municipal market groups representing governments, dealers, and bond lawyers, as well as infrastructure, health care and education organizations, applauded the action, saying it would help state and local governments and authorities at a time when the market is volatile and they have fewer ways to access it.

But sources said the bill faces an uphill battle as Republicans, who hold a majority in the House, remain opposed to stimulus programs and particularly the Build America Bond program. Several GOP leaders, including committee chairman Rep. Dave Camp, R-Mich., have criticized BABs for providing lucrative fees to underwriters and encouraging states with lower credit ratings to issue more bonds for higher federal subsidies.

Committee Democrats contend BABs have been used by states and localities to make more than $106 billion of infrastructure investments nationwide. At least 2,352 Build America Bonds totaling $181.49 billion were issued overall in 2009 and 2010, according to Thomson Reuters.

The bill would extend BABs through 2012 at lower federal subsidy rates of 32% in 2011 and 31% in 2012. The ARRA had allowed state and local governments to issue taxable bonds in return for federal subsidy payments equal to 35% of their interest costs. The new legislation also would allow BABs to be used to current refund previously issued BABs. In addition, BABs could be used to finance levees and other flood-control projects.

The bill would reinstate for this year the ARRA’s higher small-issuer limit for bank-qualified bonds by allowing banks to deduct 80% of the cost of buying and carrying tax-exempt debt sold by issuers whose annual issuance is not more than $30 million, up from $10 million in existing law. The higher limit would also apply to a conduit issue if all of the borrowers qualified for it.

The measure would exempt all tax-exempt bonds from the alternative minimum tax this year and allow AMT relief for 2011 current refundings of private-activity bonds issued after 2003. In current refundings, issuers sell refunding bonds and use the proceeds to retire or defease previously issued bonds within 90 days.

The bill would authorize the allocation to states this year of $15 billion of recovery zone facility bonds and $10 billion of recovery zone economic development bonds. Recovery zone bonds, which states sub-allocate to localities, can be used to finance infrastructure, job training, and education and economic development projects in areas with poverty, high unemployment, or significant home foreclosures.

Under the bill, localities would receive allocations based on their share of national unemployment since December 2009. Previously, the allocations were based on job losses. But some localities in California, Arizona and Nevada complained they were being treated unfairly because they received small or no allocations of the bonds. The localities had spikes in both unemployment and employment, resulting in small net job losses.

Recovery zone facility bonds are like exempt-facility private activity bonds, but must be used to finance “recovery zone property” in designated recovery zones. Recovery economic development bonds are like direct-pay BABs, but they permit muni issuers to sell taxable debt and receive cash payments equal to 45% of interest costs. They must be used to finance “qualified economic development purposes” in recovery zones.

Water and sewer bonds would be exempted from state PAB volume caps under the bill. Tribal governments could issue bonds to finance water and sewage facilities without having to meet certain limitations.

Under the measure, Federal Home Loan Banks would be able to guarantee tax-exempt bonds this year.

The bill also would extend the ability of states to receive a portion of their low-income housing tax-credit allocation as a direct payment through 2011. Further, it will allow taxpayers to claim a new-markets tax credit against the AMT with respect to qualified investments made between March 15, 2010, and Jan. 1, 2012.

The federal government uses the new-markets tax credit program to leverage federal tax credits to encourage private investment in businesses in low-income communities. For each dollar of qualified private investment, the program provides investors with five or six cents of federal tax credits. The success of the program depends on the ability of taxpayers to use the credits to offset their tax liabilities.

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