March 2010 Report to NAHEFFA on Washington Developments Affecting 501(c)(3) Financing

1. March 2010Report to NAHEFFA on Washington DevelopmentsAffecting 501(c)(3) Financing Charles A. Samuels Mintz Levin Cohn Ferris Glovsky and Popeo PC 701 Pennsylvania Avenue, NW Washington, DC 20004 Phone: 202-434-7311 Email: casamuels@mintz.com

2. 2010 vs. 2009 • Market improved but still rocky-- variable rate debt, expiring LOC’s • Important TEB provisions enacted but need to be extended (some Administration support) • Turmoil in Congress • Partisanship • W&M leadership turnover • Increased SEC interest in TEB’s • Animus toward Wall Street and big banks

3. Ways and Means Committee • Chairman Rangel (NY) -- out Rep. Levin (MI) -- in • Mostly same approach and interests but emphasis on “regular order”(markups, amendments, conferences) • Impact on TEB’s and 501(c)(3)’s

4. Jobs/Stimulus Bills and TEB Provisions • Legislation containing TEB provisions coming in tranches? • Hiring Incentives to Restore Employment Act (HIRE) -- BAB’s extended to 4 types of tax credit bonds (schools, energy projects) but at reduced subsidy. H.R. 2847 adopted by Senate, signed by President

5. Jobs/Stimulus Bills and TEB Provisions cont’d • H.R. 4849 - small business and jobs bill extends BAB’s 1 1/2 years but reduces current subsidy • As year progresses, extender opportunities for bank deductibility, FHLB LOC’s, and BAB’s expansion

6. Bank Deductibility • Incentive for banks to purchase munis, particularly small charities with low or no credit rating and for small amounts • Increased exemption ($10 million to $30 million) and measure exemption at borrower level -- facilitate state issuers offering BQ debt • Examples - clinics, community health centers, small hospitals and colleges • Main Street, not Wall Street; revenue loss barriers to extension

7. Build America Bonds • Proven to be very popular so far -- efficient distribution of subsidy? • Administration -- make permanent program and expand to 501(c)(3)’s but lower subsidy • SIFMA priority - convert tax credit bonds to BAB’s and extend existing program • Sen. Grassley (IA.) and other Republican concerns about fees • Sen. Kyl (R. Az) -BAB’s encourage states to take “greater risks.”

8. FHLB LOC • 2008 Housing Act amended IRC to permit FHL banks to credit enhance non-housing tax exempt bonds • Program should be made permanent or extended • Has helped non-profits suffering from collapse of bond insurers • Mostly used for restructuring • Collateralization requirement self-limits use

9. HUD 242 • Essentially a federal guarantee of bond repayment • Ambition to expand program stymied by HUD conservatism and problems in residential market • Limited use, small number of financings • Emphasis on liberalizing refinancings to make them more workable

10. Community Health Centers • Concerned about perceived lack of state/local issuers and inability to finance • Proposal for national issuer and federally guaranteed bonds • Unclear need, feasibility and value • Conflicts with principle of local control and oversight?

11. Financial Reform Legislation • House passed bill, Senate bill unveiled • Attempt to obtain uniform ratings between municipal and corporate debt -- probably inapplicable to 501(c)(3)’s. • Will SEC propose direct regulation of issuers/borrowers?

12. Financial Reform Legislationcont’d • Enhanced MSRB authority -- FA’s (but not for “obligated persons” or borrowers), swap advisors, and investment brokers • Diversify MSRB board • GAO Study

13. Greater Oversight of 501(c)(3)’s and TEB’s • SEC - IRS Task Force • Form 990 and IRS non-profit Inquiries • Reorganized, enhanced SEC oversight and enforcement. • Issues of frequency and speed of disclosure.

14. Thank you!Questions? Charles A. Samuels: casamuels@mintz.com