117th CONGRESS 1st Session |
To amend the Internal Revenue Code of 1986 to provide a credit for American infrastructure bonds, and for other purposes.
April 16, 2021
Ms. Sewell introduced the following bill; which was referred to the Committee on Ways and Means
To amend the Internal Revenue Code of 1986 to provide a credit for American infrastructure bonds, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
This Act may be cited as the “Local Infrastructure Financing Tools Act”, or the “LIFT Act”.
SEC. 2. Credit to issuer for certain infrastructure bonds.
(a) In general.—Subchapter B of chapter 65 is amended by adding at the end the following new section:
“SEC. 6431A. Credit allowed to issuer for American infrastructure bonds.
“(a) In general.—In the case of an American infrastructure bond, the issuer of such bond shall be allowed a credit with respect to each interest payment under such bond which shall be payable by the Secretary as provided in subsection (b).
“(1) IN GENERAL.—The Secretary shall pay (contemporaneously with each date on which interest is so payable) to the issuer of such bond (or to any person who makes such interest payments on behalf of such issuer) an amount equal to the applicable percentage of such interest so payable.
“(2) APPLICABLE PERCENTAGE.—For purposes of this subsection, except as provided in subsection (d), the applicable percentage with respect to any bond shall be determined under the following table:
| “In the case of a bond issued | The applicable |
| during calendar year: | percentage is: |
| 2020 through 2024 | 42% |
| 2025 | 38% |
| 2026 | 34% |
| 2027 and thereafter | 30%. |
“(A) IN GENERAL.—The amount of any interest payment taken into account under paragraph (1) with respect to a bond for any payment date shall not exceed the amount of interest which would have been payable under such bond on such date if such interest were determined at the rate which the Secretary estimates will permit the issuance of American infrastructure bonds with a specified maturity or redemption date without discount and without additional interest cost.
“(B) DATE OF RATE DETERMINATION WITH RESPECT TO BOND.—Such rate with respect to any American infrastructure bond shall be determined as of the first day on which there is a binding, written contract for the sale or exchange of the bond.
“(c) American infrastructure bond.—
“(1) IN GENERAL.—For purposes of this section, the term ‘American infrastructure bond’ means any bond (other than a private activity bond) issued as part of an issue if—
“(A) 100 percent of the available project proceeds of such issue are to be used for capital expenditures or operations and maintenance expenditures in connection with property the acquisition, construction, or improvement of which would be a capital expenditure,
“(B) the interest on such bond would (but for this section) be excludable from gross income under section 103,
“(C) the issue price has not more than a de minimis amount (determined under rules similar to the rules of section 1273(a)(3)) of premium over the stated principal amount of the bond, and
“(D) prior to the issuance of such bond, the issuer makes an irrevocable election to have this section apply.
“(2) APPLICABLE RULES.—For purposes of applying paragraph (1)—
“(A) NOT TREATED AS FEDERALLY GUARANTEED.—For purposes of section 149(b), an American infrastructure bond shall not be treated as federally guaranteed by reason of the credit allowed under this section.
“(B) APPLICATION OF ARBITRAGE RULES.—For purposes of section 148, the yield on an American infrastructure bond shall be reduced by the credit allowed under this section.
“(d) Definition and special rules.—For purposes of this section—
“(1) INTEREST INCLUDIBLE IN GROSS INCOME.—For purposes of this title, interest on any American infrastructure bond shall be includible in gross income.
“(2) AVAILABLE PROJECT PROCEEDS.—The term ‘available project proceeds’ means—
“(i) the proceeds from the sale of an issue, over
“(I) issuance costs financed by the issue (the extent that such costs do not exceed 2 percent of such proceeds), and
“(II) amounts in a reasonably required reserve (within the meaning of section 150(a)(3)) with respect to such issue), and
“(B) the proceeds from any investment of the excess described in clause (i).
“(3) CURRENT REFUNDINGS ALLOWED.—
“(A) IN GENERAL.—In the case of a bond issued to refund an American infrastructure bond, such refunding bond shall be treated as an American infrastructure bond for purposes of this section if—
“(i) the average maturity date of the issue of which the refunding bond is a part is not later than the average maturity date of the bonds to be refunded by such issue,
“(ii) the amount of the refunding bond does not exceed the outstanding amount of the refunded bond,
“(iii) the refunded bond is redeemed not later than 90 days after the date of the issuance of the refunding bond, and
“(iv) the refunded bond was issued more than 30 days after the date of the enactment of this section.
“(B) APPLICABLE PERCENTAGE LIMITATION.—The applicable percentage with respect to any bond to which subparagraph (A) applies shall be 30 percent.
“(C) DETERMINATION OF AVERAGE MATURITY.—For purposes of subparagraph (A)(i), average maturity shall be determined in accordance with section 147(b)(2)(A).
“(D) APPLICATION OF DAVIS-BACON ACT REQUIREMENTS WITH RESPECT TO AMERICAN INFRASTRUCTURE BONDS.—Subchapter IV of chapter 31 of the title 40, United States Code, shall apply to projects financed with the proceeds of American infrastructure bonds.
“(e) Regulations.—The Secretary may prescribe such regulations and other guidance as may be necessary or appropriate to carry out this section.”.
(1) Section 1324(b)(2) of title 31, United States Code, is amended by striking “or 6431” and inserting “6431, or 6431A”.
(2) The table of sections for subchapter B of chapter 65 is amended by adding at the end the following new item:
“Sec. 6431A. Credit allowed to issuer for American infrastructure bonds.”.
(c) Effective date.—The amendments made by this section shall apply to bonds issued more than 30 days after the date of the enactment of this Act.
SEC. 3. Advance refunding bonds.
(a) In general.—Section 149(d) is amended—
(1) by striking “to advance refund another bond.” in paragraph (1) and inserting “as part of an issue described in paragraph (2), (3), or (4).”,
(2) by redesignating paragraphs (2) and (3) as paragraphs (5) and (7), respectively,
(3) by inserting after paragraph (1) the following new paragraphs:
“(2) CERTAIN PRIVATE ACTIVITY BONDS.—An issue is described in this paragraph if any bond (issued as part of such issue) is issued to advance refund a private activity bond (other than a qualified 501(c)(3) bond).
“(A) IN GENERAL.—An issue is described in this paragraph if any bond (issued as part of such issue), hereinafter in this paragraph referred to as the ‘refunding bond’, is issued to advance refund a bond unless—
“(i) the refunding bond is only—
“(I) the first advance refunding of the original bond if the original bond is issued after 1985, or
“(II) the first or second advance refunding of the original bond if the original bond was issued before 1986,
“(ii) in the case of refunded bonds issued before 1986, the refunded bond is redeemed not later than the earliest date on which such bond may be redeemed at par or at a premium of 3 percent or less,
“(iii) in the case of refunded bonds issued after 1985, the refunded bond is redeemed not later than the earliest date on which such bond may be redeemed,
“(iv) the initial temporary period under section 148(c) ends—
“(I) with respect to the proceeds of the refunding bond not later than 30 days after the date of issue of such bond, and
“(II) with respect to the proceeds of the refunded bond on the date of issue of the refunding bond, and
“(v) in the case of refunded bonds to which section 148(e) did not apply, on and after the date of issue of the refunding bond, the amount of proceeds of the refunded bond invested in higher yielding investments (as defined in section 148(b)) which are nonpurpose investments (as defined in section 148(f)(6)(A)) does not exceed—
“(I) the amount so invested as part of a reasonably required reserve or replacement fund or during an allowable temporary period, and
“(II) the amount which is equal to the lesser of 5 percent of the proceeds of the issue of which the refunded bond is a part or $100,000 (to the extent such amount is allocable to the refunded bond).
“(B) SPECIAL RULES FOR REDEMPTIONS.—
“(i) ISSUER MUST REDEEM ONLY IF DEBT SERVICE SAVINGS.—Clause (ii) and (iii) of subparagraph (A) shall apply only if the issuer may realize present value debt service savings (determined without regard to administrative expenses) in connection with the issue of which the refunding bond is a part.
“(ii) REDEMPTIONS NOT REQUIRED BEFORE 90TH DAY.—For purposes of clauses (ii) and (iii) of subparagraph (A), the earliest date referred to in such clauses shall not be earlier than the 90th day after the date of issuance of the refunding bond.
“(4) ABUSIVE TRANSACTIONS PROHIBITED.—An issue is described in this paragraph if any bond (issued as part of such issue) is issued to advance refund another bond and a device is employed in connection with the issuance of such issue to obtain a material financial advantage (based on arbitrage) apart from savings attributable to lower interest rates.”, and
(4) by inserting after paragraph (5) (as so redesignated) the following new paragraph:
“(6) SPECIAL RULES FOR PURPOSES OF PARAGRAPH (3).—For purposes of paragraph (3), bonds issued before October 22, 1986, shall be taken into account under subparagraph (A)(i) thereof except—
“(A) a refunding which occurred before 1986 shall be treated as an advance refunding only if the refunding bond was issued more than 180 days before the redemption of the refunded bond, and
“(B) a bond issued before 1986, shall be treated as advance refunded no more than once before March 15, 1986.”.
(b) Conforming amendment.—Section 148(f)(4)(C) is amended by redesignating clauses (xiv) through (xvi) as clauses (xv) to (xvii), respectively, and by inserting after clause (xiii) the following new clause:
“(xiv) DETERMINATION OF INITIAL TEMPORARY PERIOD.—For purposes of this subparagraph, the end of the initial section temporary period shall be determined without regard to section 149(d)(3)(A)(iv).”.
(c) Effective date.—The amendments made by this section shall apply to advance refunding bonds issued more than 30 days after the date of the enactment of this Act.
SEC. 4. Permanent modification of small issuer exception to tax-exempt interest expense allocation rules for financial institutions.
(a) Permanent increase in limitation.—Subparagraphs (C)(i), (D)(i), and (D)(iii)(II) of section 265(b)(3) are each amended by striking “$10,000,000” and inserting “$30,000,000”.
(b) Permanent modification of other special rules.—Section 265(b)(3) is amended—
(1) by redesignating clauses (iv), (v), and (vi) of subparagraph (G) as clauses (ii), (iii), and (iv), respectively, and moving such clauses to the end of subparagraph (H) (as added by paragraph (2)), and
(2) by striking so much of subparagraph (G) as precedes such clauses and inserting the following:
“(G) QUALIFIED 501(c)(3) BONDS TREATED AS ISSUED BY EXEMPT ORGANIZATION.—In the case of a qualified 501(c)(3) bond (as defined in section 145), this paragraph shall be applied by treating the 501(c)(3) organization for whose benefit such bond was issued as the issuer.
“(H) SPECIAL RULE FOR QUALIFIED FINANCINGS.—
“(i) IN GENERAL.—In the case of a qualified financing issue—
“(I) subparagraph (F) shall not apply, and
“(II) any obligation issued as a part of such issue shall be treated as a qualified tax-exempt obligation if the requirements of this paragraph are met with respect to each qualified portion of the issue (determined by treating each qualified portion as a separate issue which is issued by the qualified borrower with respect to which such portion relates).”.
(c) Inflation adjustment.—Section 265(b)(3), as amended by subsection (b), is amended by adding at the end the following new subparagraph:
“(I) INFLATION ADJUSTMENT.—In the case of any calendar year after 2020, the $30,000,000 amounts contained in subparagraphs (C)(i), (D)(i), and (D)(iii)(II) shall each be increased by an amount equal to—
“(i) such dollar amount, multiplied by
“(ii) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year, determined by substituting ‘calendar year 2019’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.
Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $100,000.”.
(d) Effective date.—The amendments made by this section shall apply to obligations issued after the date of the enactment of this Act.