II 

117TH CONGRESS 

1ST SESSION S. 2289 

To amend the Internal Revenue Code of 1986 to provide for direct-pay 

credit bonds in the case of certain bonds the proceeds of which are 

used for the replacement of lead drinking water service lines. 

IN THE SENATE OF THE UNITED STATES 

JUNE 24, 2021 

Mr. MENENDEZ (for himself and Mr. BOOKER) introduced the following bill; 

which was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

for direct-pay credit bonds in the case of certain bonds 

the proceeds of which are used for the replacement of 

lead drinking water service lines. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Lead-Free America 

5 Bonds Act of 2021’’. 


pbinns on DSKJLVW7X2PROD with BILLS
2 

•S 2289 IS

1 SEC. 2. CREDIT TO ISSUER FOR LEAD DRINKING WATER 

2 SERVICE LINE BONDS. 

3 (a) IN GENERAL.—Subchapter B of chapter 65 of the 

4 Internal Revenue Code of 1986 is amended by adding at 

5 the end the following new section: 

6 ‘‘SEC. 6431. CREDIT ALLOWED TO ISSUER FOR LEAD DRINK7 ING WATER SERVICE LINE BONDS. 

8 ‘‘(a) IN GENERAL.—In the case of a qualified lead 

9 drinking water service line bond, the issuer of such bond 

10 shall be allowed a credit with respect to each interest pay11 ment under such bond which shall be payable by the Sec12 retary as provided in subsection (b). 

13 ‘‘(b) PAYMENT OF CREDIT.— 

14 ‘‘(1) IN GENERAL.—The Secretary shall pay 

15 (contemporaneously with each date on which interest 

16 is so payable) to the issuer of such bond (or to any 

17 person who makes such interest payments on behalf 

18 of such issuer) an amount equal to so much of such 

19 interest that is payable at a rate not in excess of the 

20 applicable interest rate determined under paragraph 

21 (2). 

22 ‘‘(2) APPLICABLE INTEREST RATE.— 

23 ‘‘(A) IN GENERAL.—The applicable inter24 est rate determined under this paragraph for 

25 any qualified lead drinking water service line 

26 bond shall be the rate which the Secretary estiVerDate Sep 11 2014 00:06 Jul 15, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2289.IS S2289

pbinns on DSKJLVW7X2PROD with BILLS
3 

•S 2289 IS

1 mates will permit the issuance of qualified lead 

2 drinking water service line bonds with a speci3 fied maturity or redemption date without dis4 count and without additional interest cost. 

5 ‘‘(B) PROCEDURE FOR RATE DETERMINA6 TIONS.— 

7 ‘‘(i) IN GENERAL.—Such rate with re8 spect to any qualified lead drinking water 

9 service line bond shall be determined as of 

10 the first day on which there is a binding, 

11 written contract for the sale or exchange of 

12 the bond. 

13 ‘‘(ii) METHOD AND FREQUENCY.—For 

14 purposes of this paragraph, the Secretary 

15 will determine and announce credit rates 

16 daily for qualified lead drinking water serv17 ice line bonds based on the Secretary’s es18 timate of the yields on outstanding bonds 

19 from market sectors selected at the discre20 tion of the Secretary that, for the business 

21 day immediately preceding the sale date of 

22 the bonds, have an investment grade rating 

23 of between A and BBB for bonds of a 

24 similar maturity and for which the interest 

25 would be included in gross income. 


pbinns on DSKJLVW7X2PROD with BILLS
4 

•S 2289 IS

1 ‘‘(c) QUALIFIED LEAD DRINKING WATER SERVICE

2 LINE BOND.— 

3 ‘‘(1) IN GENERAL.—For purposes of this sec4 tion, the term ‘qualified lead drinking water service 

5 line bond’ means any bond (other than a private ac6 tivity bond) issued as part of an issue if— 

7 ‘‘(A) 100 percent of the available project 

8 proceeds of such issue are to be used for replac9 ing lead components of 1 or more eligible public 

10 water systems that are not lead free, including 

11 any publicly or privately owned portion of a 

12 lead service line of the eligible public water sys13 tem, 

14 ‘‘(B) the interest on such bond would (but 

15 for this section) be excludable from gross in16 come under section 103, 

17 ‘‘(C) the issue price has not more than a 

18 de minimis amount (determined under rules 

19 similar to the rules of section 1273(a)(3)) of 

20 premium over the stated principal amount of 

21 the bond, and 

22 ‘‘(D) prior to the issuance of such bond, 

23 the issuer makes an irrevocable election to have 

24 this section apply. 


pbinns on DSKJLVW7X2PROD with BILLS
5 

•S 2289 IS

1 Except upon approval by the Environmental Protec2 tion Agency for circumstances in which there are 

3 emergent public health risks, none of the available 

4 project proceeds of such issue shall be used for a 

5 partial lead service line replacement. 

6 ‘‘(2) APPLICABLE RULES.—For purposes of ap7 plying paragraph (1)— 

8 ‘‘(A) NOT TREATED AS FEDERALLY GUAR9 ANTEED.—For purposes of section 149(b), a 

10 qualified lead drinking water service line bond 

11 shall not be treated as federally guaranteed by 

12 reason of the credit allowed under this section. 

13 ‘‘(B) APPLICATION OF ARBITRAGE

14 RULES.—For purposes of section 148, the yield 

15 on a qualified lead drinking water service line 

16 bond shall be reduced by the credit allowed 

17 under this section. 

18 ‘‘(d) DEFINITION AND SPECIAL RULES.—For pur19 poses of this section— 

20 ‘‘(1) INTEREST INCLUDIBLE IN GROSS IN21 COME.—For purposes of this title, interest on any 

22 qualified lead drinking water service line bond shall 

23 be includible in gross income. 

24 ‘‘(2) ELIGIBLE PUBLIC WATER SYSTEM.— 


pbinns on DSKJLVW7X2PROD with BILLS
6 

•S 2289 IS

1 ‘‘(A) IN GENERAL.—The term ‘eligible 

2 public water system’ means, with respect to any 

3 bond— 

4 ‘‘(i) in the case of a public water sys5 tem with respect to which the owner or op6 erator was, during the 6-year period pre7 ceding the date of enactment of the Lead8 Free America Bonds Act of 2021, required 

9 to give lead action level notice, such bond 

10 was issued during the 3-year period subse11 quent to the date of enactment of such 

12 Act, or 

13 ‘‘(ii) in the case of a public water sys14 tem with respect to which the owner or op15 erator was, at any time subsequent to the 

16 date of enactment of the Lead-Free Amer17 ica Bonds Act of 2021, required to give 

18 lead action level notice, such bond was 

19 issued during the 3-year period subsequent 

20 to such notice. 

21 ‘‘(B) PUBLIC WATER SYSTEM.—The term 

22 ‘public water system’ has the meaning given 

23 such term in section 1401(4) of such Act (42 

24 U.S.C. 300f(4)). 


pbinns on DSKJLVW7X2PROD with BILLS
7 

•S 2289 IS

1 ‘‘(C) LEAD FREE.—The term ‘lead free’ 

2 has the meaning given such term in section 

3 1417(d) of such Act (42 U.S.C. 300g-6(d)). 

4 ‘‘(D) LEAD SERVICE LINE.—The term 

5 ‘lead service line’ has the meaning given such 

6 term in section 1459B(a)(4) of such Act (42 

7 U.S.C. 300j-19b(a)(4)). 

8 ‘‘(E) LEAD ACTION LEVEL NOTICE.—The 

9 term ‘lead action level notice’ means notice 

10 under section 1414(c)(1)(D) of the Safe Water 

11 Drinking Act (42 U.S.C. 300g- 3(c)(1)(D)) that 

12 the public water system exceeded the lead ac13 tion level. 

14 ‘‘(3) FAILURE TO SPEND REQUIRED AMOUNT

15 OF BOND PROCEEDS WITHIN 5 YEARS.— 

16 ‘‘(A) IN GENERAL.—If at the close of the 

17 5-year period beginning on the date of issuance 

18 less than 100 percent of the available project 

19 proceeds of the issue are expended for the pur20 poses specified in subsection (c)(1)(A), the 

21 issuer shall redeem all of the nonqualified bonds 

22 within 90 days after the end of such period. 

23 For purposes of this paragraph, the amount of 

24 the nonqualified bonds required to be redeemed 


pbinns on DSKJLVW7X2PROD with BILLS
8 

•S 2289 IS

1 shall be determined in the same manner as 

2 under section 142. 

3 ‘‘(B) EXTENSION OF PERIOD.—Upon sub4 mission of a request prior to the expiration of 

5 the 5-year period under subparagraph (A), the 

6 Secretary may extend such period if the issuer 

7 establishes that the failure to expend the pro8 ceeds within such period is due to reasonable 

9 cause and the expenditures for the purposes de10 scribed in subsection (c)(1)(A) will continue to 

11 proceed with due diligence. 

12 ‘‘(4) AVAILABLE PROJECT PROCEEDS.—The 

13 term ‘available project proceeds’ means— 

14 ‘‘(A) the excess of— 

15 ‘‘(i) the proceeds from the sale of an 

16 issue, over 

17 ‘‘(ii) the sum of— 

18 ‘‘(I) issuance costs financed by 

19 the issue (the extent that such costs 

20 do not exceed 2 percent of such pro21 ceeds), and 

22 ‘‘(II) amounts in a reasonably re23 quired reserve (within the meaning of 

24 section 150(a)(3)) with respect to 

25 such issue), and 


pbinns on DSKJLVW7X2PROD with BILLS
9 

•S 2289 IS

1 ‘‘(B) the proceeds from any investment of 

2 the excess described in clause (i). 

3 ‘‘(5) CURRENT REFUNDINGS ALLOWED.— 

4 ‘‘(A) IN GENERAL.—In the case of a bond 

5 issued to refund a qualified lead drinking water 

6 service line bond, such refunding bond shall be 

7 treated as a qualified lead drinking water serv8 ice line bond for purposes of this section if— 

9 ‘‘(i) the average maturity date of the 

10 issue of which the refunding bond is a part 

11 is not later than the average maturity date 

12 of the bonds to be refunded by such issue, 

13 ‘‘(ii) the amount of the refunding 

14 bond does not exceed the outstanding 

15 amount of the refunded bond, and 

16 ‘‘(iii) the refunded bond is redeemed 

17 not later than 90 days after the date of the 

18 issuance of the refunding bond. 

19 ‘‘(B) DETERMINATION OF AVERAGE MATU20 RITY.—For purposes of subparagraph (A)(i), 

21 average maturity shall be determined in accord22 ance with section 147(b)(2)(A). 

23 ‘‘(6) APPLICATION OF DAVIS-BACON ACT RE24 QUIREMENTS WITH RESPECT TO QUALIFIED LEAD

25 DRINKING WATER SERVICE LINE BONDS.—SubVerDate Sep 11 2014 00:06 Jul 15, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S2289.IS S2289

pbinns on DSKJLVW7X2PROD with BILLS
10 

•S 2289 IS

1 chapter IV of chapter 31 of title 40, United States 

2 Code, shall apply to projects financed with the pro3 ceeds of qualified lead drinking water service line 

4 bonds (other than bonds issued to refund a bond 

5 originally issued before the date of the enactment of 

6 this Act). 

7 ‘‘(e) REGULATIONS.—The Secretary may prescribe 

8 such regulations and other guidance as may be necessary 

9 or appropriate to carry out this section.’’. 

10 (b) PAYMENTS MADE UNDER SECTION 6431 OF THE

11 INTERNAL REVENUE CODE OF 1986.—Section 

12 255(g)(1)(A) of the Balanced Budget and Emergency 

13 Deficit Control Act of 1985 (2 U.S.C. 905(g)(1)(A)) is 

14 amended by inserting: ‘‘Payments made under section 

15 6431 of the Internal Revenue Code of 1986’’ after the 

16 item related to Payment to Radiation Exposure Com17 pensation Trust Fund. 

18 (c) CLERICAL AMENDMENT.—The table of sections 

19 for subchapter B of chapter 65 of the Internal Revenue 

20 Code of 1986 is amended by adding at the end the fol21 lowing new item: 

‘‘Sec. 6431. Credit allowed to issuer for qualified lead drinking water service 

line bonds.’’. 


pbinns on DSKJLVW7X2PROD with BILLS
11 

•S 2289 IS

1 (d) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to bonds issued more than 30 days 

3 after the date of the enactment of this Act. 

Æ 


pbinns on DSKJLVW7X2PROD with BILLS