H.R. 8864

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 8864 Introduced in House (IH)]

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119th CONGRESS
2d Session
H. R. 8864

To amend the Internal Revenue Code of 1986 to provide a credit for 
American infrastructure bonds, and for other purposes.

_______________________________________________________________________

IN THE HOUSE OF REPRESENTATIVES

May 15, 2026

Ms. Sewell introduced the following bill; which was referred to the 
Committee on Ways and Means

_______________________________________________________________________

A BILL

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,

SECTION 1. SHORT TITLE.

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 of the Internal Revenue 
Code of 1986 is amended by adding at the end the following new section:

``SEC. 6436. 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).
``(b) Payment of Credit.--
``(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:
2026 through 2030.................................. 42% 
2031............................................... 38% 
2032............................................... 34% 
2033 and thereafter................................ 30%.

``(3) Limitation.--
``(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--
``(A) the excess of--
``(i) the proceeds from the sale of an 
issue, over
``(ii) the sum of--
``(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.''.
(b) Conforming Amendments.--
(1) Section 1324(b)(2) of title 31, United States Code, is 
amended by striking ``6431'' and inserting ``6431, 6436''.
(2) The table of sections for subchapter B of chapter 65 of 
the Internal Revenue Code of 1986 is amended by adding at the 
end the following new item:

``Sec. 6436. 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) of the Internal Revenue Code of 
1986 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).
``(3) Other bonds.--
``(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) of such Code 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) of the Internal Revenue 
Code of 1986 are each amended by striking ``$10,000,000'' and inserting 
``$30,000,000''.
(b) Permanent Modification of Other Special Rules.--Section 
265(b)(3) of such Code 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) of such Code, 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 2026, 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 2025' 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.
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