The one-year reprieve for Washington, D.C. muni bondholders is in jeopardy again.
With just hours to go before the D.C. Council’s summer recess, Mayor Vincent C. Gray vetoed a proposal that would have delayed collecting a new tax on out-of-state municipal bonds.
As we previously reported, the D.C. Council had voted to tax investors on their out-of-state bond interest retroactively from Jan. 1, 2011. Investors and others objected, however, saying it was unfair because investors purchased their bonds believing the interest earned would be fully tax-exempt. Early last month, the Council voted to delay collecting the tax for a year.
Not So Fast
Last week, however, Gray said D.C. needed the revenue to keep the District in good standing with the credit rating agencies and he vetoed the delay.
This use of a pocket veto all but ensures that the Council, which is on summer recess, will not be able to override his decision.
Stay tuned!