June 17, 1983
To the Senate of the United States:
I am returning, without my approval, S. 973, ``an Act to make technical amendments to the
Indian Self-Determination and Education Assistance Act and other Acts.'' I have no objection to
these technical amendments.
However, section 5 of the bill, added by an amendment on the Senate floor, would allow a
particular school to transfer to taxable investors tax benefits attributable to a building that it
refurbished with Federal funds. Without this legislation, the proposed transaction would result in
the school being required to repay the Federal funds used to refurbish the building.
Recently there has been a great deal of concern about the sale of tax benefits by tax-exempt
entities through leasing transactions. Leasing transactions similar to the one contemplated by this
legislation present tremendous potential for abuse and could result in billions of dollars of revenue
loss to the Federal Government. The transaction that this legislation would condone would permit
a school that has already received tax deductible contributions and Federal grant money to sell
certain tax benefits to outside investors. This case is particularly offensive in that the tax benefits
being sold are attributable to property that was paid for with Federal grant money. In addition to
receiving money for selling tax benefits, the school, as a tax-exempt entity, would be able to
invest the proceeds of the sale and receive the income from such investment tax-free.
The propriety of leasing transactions involving the sale by tax-exempt organizations of tax
benefits needs to be scrutinized very carefully. Where the tax benefits being sold are attributable
to expenditures of Federal funds, the transaction becomes totally unjustifiable. We cannot
condone the sale by a tax-exempt entity of tax benefits produced through the use of Federal funds.
As I have noted, the Indian-related amendments contained in this bill are not objectionable.
Accordingly, I urge the Congress to reenact sections 1 - 4 of S. 973 without delay.
Ronald Reagan
The White House,
June 17, 1983.
Note: The text of the message was released by the Office of the Press Secretary on June 18.