Summary
Provides a federal tax credit to state and local governments that issue special bonds to pay for infrastructure, making it cheaper for them to borrow money.
What problem does this solve?
Local governments often find it expensive to borrow money for big projects like roads and bridges. This bill lowers borrowing costs by giving governments a tax credit on the interest they pay for infrastructure bonds.
What does this bill do?
Creates American Infrastructure Bonds
Establishes a new type of bond that state and local governments can issue to fund infrastructure projects. The government issuing the bond receives a direct payment from the Treasury.
Provides a direct tax credit to bond issuers
Gives a credit to the bond issuer equal to a percentage of the interest paid. The rate starts at 42% for bonds issued through 2030 and decreases over time.
Makes bond interest taxable for investors
Requires investors who buy these bonds to include the interest they earn as part of their taxable income, unlike traditional tax-exempt municipal bonds.
Reference
Text:
Section:
Sec. 2(a)
Header:
Application of Davis-Bacon Act requirements with respect to American infrastructure bonds
Applies prevailing wage requirements
Requires that workers on projects financed by these bonds be paid according to the Davis-Bacon Act, which sets local prevailing wage standards for federal projects.
Changes rules for advance refunding bonds
Modifies the rules for when governments can issue new bonds to pay off old, higher-interest bonds before they are due, a practice known as advance refunding.
Increases small issuer limit for banks
Raises the annual limit for tax-exempt bonds a small government can issue from $10 million to $30 million, making it easier for banks to buy and hold these bonds.
Who does this affect?
- State and local governments
- Financial institutions
- Infrastructure and construction workers
What is the real world impact?
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Stimulates local infrastructure investment
Makes it cheaper for local governments to borrow money for public projects like roads, bridges, and schools. This can lead to more construction jobs and better public facilities.
When does this start?
The rules in this bill will apply to bonds that are issued more than 30 days after the bill becomes law.
Credit rate for 2026-2030
The credit paid to issuers of American infrastructure bonds will be 42% of the interest payable for bonds issued from 2026 through 2030.
Credit rate for 2031
The credit paid to issuers will be 38% of the interest payable for bonds issued in 2031.
Credit rate for 2032
The credit paid to issuers will be 34% of the interest payable for bonds issued in 2032.
Credit rate for 2033 and beyond
The credit paid to issuers will be 30% of the interest payable for bonds issued in 2033 and after.