SIFIA Act

To amend the Internal Revenue Code of 1986 to provide for school infrastructure finance and innovation tax credit bonds. 1. Short title This Act may be cited as the School Infrastructure Finance and Innovation Act SIFIA Act 2. SIFIA bonds (a) In general Part IV of subchapter A of chapter 1 is amended by adding at the end the following new subpart: K SIFIA Bonds Sec. 54BB. SIFIA bonds. 54BB. SIFIA bonds (a) In general If a taxpayer holds a SIFIA bond on one or more interest payment dates of the bond during any taxable year, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of the credits determined under subsection (b) with respect to such dates. (b) Amount of credit The amount of the credit determined under this subsection with respect to any interest payment date for a SIFIA bond is 100 percent of the amount of interest payable by the issuer with respect to such date. (c) Limitation based on amount of tax (1) In general The credit allowed under subsection (a) for any taxable year shall not exceed the excess of— (A) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over (B) the sum of the credits allowable under this part (other than subpart C and this subpart). (2) Carryover of unused credit If the credit allowable under subsection (a) exceeds the limitation imposed by paragraph (1) for such taxable year, such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year (determined before the application of paragraph (1) for such succeeding taxable year). (d) Interest payment date For purposes of this section, the term interest payment date (e) Sifia bonds (1) In general For purposes of this section, the term SIFIA bond (A) 100 percent of the available project proceeds of such issue are to be used for the design, construction, expansion, renovation, furnishing, or equipping of qualified school facilities (as defined in paragraph (5) of this subsection) pursuant to an agreement under which a private, for-profit entity agrees with a State or local educational agency— (i) to construct, expand, or renovate one or more buildings constituting the qualified school facilities (together with any related design, furnishing, and equipping of such buildings), (ii) to operate the facilities at least until the date the facilities are first placed in service and operating substantially at their design level, and (iii) at or before the end of the agreement, to transfer the facilities to such agency for no additional consideration, (B) all buildings whose construction, expansion, or renovations is included in the qualified school facilities being financed with proceeds of a SIFIA bond are reasonably expected to be net-zero energy buildings as defined in section 410(20) of the Energy Independence and Security Act of 2007 ( 42 U.S.C. 17061(20) commercial buildings (C) the interest on such bond would (but for this section and section 141) be excludable from gross income under section 103, (D) the issuer designates such bond as a SIFIA bond for purposes of this subsection, (E) the bond is not issued with more than a de minimis amount of premium (determined under rules similar to the rules of section 1273(a)(3)) over the stated principal amount of the bond, (F) the issue of which such bond is a part satisfies the expenditure period requirements of paragraph (2), and (G) the bond is issued before January 1, 2027. (2) 6-year expenditure period (A) In general An issue shall be treated as meeting the requirements of this paragraph if, as of the date of issuance, the issuer reasonably expects 100 percent of the available project proceeds to be spent for purposes described in subparagraphs (1)(A) and (1)(B) within the 6-year period beginning on such date of issuance. (B) Failure to spend required amount of bond proceeds within 6 years To the extent that less than 100 percent of the available project proceeds of the issue are expended at the close of the period described in subparagraph (A) with respect to such issue, the issuer shall redeem all of the nonqualified bonds within 90 days after the end of such period. For purposes of this paragraph, the amount of the nonqualified bonds required to be redeemed shall be determined in the same manner as under section 141. (3) Limitation on amount of sifia bonds designated (A) Overall limitation The maximum aggregate face amount of SIFIA bonds issued under this subsection that may be designated under subparagraph (2)(D) is $200,000,000,000. (B) Set-aside for rural areas Subject to the provisions of this subparagraph, $45,000,000,000 of the overall limitation described in subparagraph (A) shall be set aside for projects located in rural areas. As used in this section, the term rural area (i) outside of a metropolitan statistical area (as such area is defined by the Secretary of Commerce), or (ii) determined by the Secretary of Agriculture, after consultation with the Secretary of Commerce, to be a rural area. (4) Allocation of limitation The authority to issue SIFIA bonds within the limitations set forth in paragraph (3) shall be allocated by the Secretary to prospective issuers on a first come-first served basis, under rules to be prescribed by the Secretary, provided that— (A) no issuer (together with any entities that would be aggregated with such issuer under section 265(b)(3)(E)) shall be allocated the authority to issue more than $15,000,000,000 in aggregate face amount of SIFIA bonds under this subsection, (B) an issuer applying for an allocation shall certify (based on the certifications of any conduit borrower of bond proceeds where applicable) that it reasonably expects to commence the project to be financed with proceeds of the bonds within 6 months of the issue date of the bonds, and to expend all of the available project proceeds within 6 years of the issue date of the bonds, (C) in making such allocations, the Secretary shall give preference to the financing of projects that are reasonably expected to be commenced and completed as early as possible, based on definite, non-contingent plans and arrangements to proceed as expeditiously as possible with the construction, expansion, or renovation of the project facilities upon the receipt of financing, and (D) in making such allocations, the Secretary shall also give preference to the financing of projects for which either (i) at least 10 percent of the equity investment is provided by one or more preferred concerns, (ii) the general contractor is a preferred concern, or (iii) at least 30 percent of the amounts paid to building trade subcontractors will be paid to subcontractors that are preferred concerns. (5) Qualified school facilities For purposes of this subsection, the term qualified school facilities 20 U.S.C. 8801 (6) Preferred concern For purposes of this subsection, the term preferred concern (7) Small business concern For purposes of this subsection, the term small business concern 15 U.S.C. 632(a) (8) Minority owned For purposes of this subsection, the term minority owned (9) Woman owned For purposes of this subsection, the term woman owned (f) Other applicable rules (1) Interest includible in gross income For purposes of this title, interest on any SIFIA bond shall be includible in gross income. (2) Credit treated as interest For purposes of this subtitle, the credit determined under subsection (a) shall be treated as interest which is includible in gross income. (3) S corporations and partnerships In the case of a tax credit bond held by an S corporation or partnership, the allocation of credit allowed by this section to the shareholders of such corporation or partners of such partnership shall be treated as a distribution. (4) Bonds held by real estate investment trusts If any qualified tax credit bond is held by a real estate investment trust the credit determined under subsection (a) shall be allowed to beneficiaries of such trust (and any gross income included under paragraph (2) with respect to such credit shall be distributed to such beneficiaries) under procedures prescribed by the Secretary (similar to the procedures prescribed by the Secretary under section 54A(h) (as in effect before its repeal by Public Law 115–97 (5) Credits may be stripped Under regulations prescribed by the Secretary (similar to regulations prescribed under section 54A(i) (as in effect before its repeal by Public Law 115–97 (A) In general There may be a separation (including at issuance) of the ownership of a qualified tax credit bond and the entitlement to the credit under this section with respect to such bond. In case of any such separation, the credit under this section shall be allowed to the person who on the credit allowance date holds the instrument evidencing the entitlement to the credit and not to the holder of the bond. (B) Certain rules to apply In the case of a separation described in subparagraph (A), the rules of section 1286 shall apply to the qualified tax credit bond as if it were a stripped bond and to the credit under this section as if it were a stripped coupon. (6) Not treated as federally guaranteed For purposes of section 149(b), a SIFIA bond shall not be treated as federally guaranteed by reason of the credit allowed under subsection (g). (7) Yield determination For purposes of section 148, the yield on a SIFIA bond shall be determined without regard to the credit allowed under subsection (a). (8) Maximum interest rate An issue shall be treated as meeting the requirements of this section if the rate of interest payable on any bond which is part of such issue is no greater than the rate which the Secretary estimates will permit the issuance of each such bond with a specified maturity or redemption date without discount and without interest cost to the issuer. The applicable interest rate with respect to any such 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. (9) Maturity limitation (A) In general An issue shall be treated as meeting the requirements of this section if the maturity of any bond which is part of such issue does not exceed the maximum term determined by the Secretary under subparagraph (B). (B) Maximum term During each calendar month, the Secretary shall determine the maximum term permitted under this paragraph for bonds issued during the following calendar month. Such maximum term shall be the term which the Secretary estimates will result in the present value of the obligation to repay the principal on the bond being equal to 20 percent of the face amount of such bond. Such present value shall be determined using as a discount rate the average annual interest rate of tax-exempt obligations having a term of 10 years or more which are issued during the month. If the term as so determined is not a multiple of a whole year, such term shall be rounded to the next highest whole year. (10) Depreciation If the school facilities financed with proceeds of SIFIA bonds are owned by a person otherwise entitled to allowance for depreciation with respect to such facility, that person may make an irrevocable election (binding on any successors in interest) not to claim depreciation with respect to the property financed with proceeds of the SIFIA bonds for so long as the issue of which such bonds are a part is outstanding. Such election shall be deemed to have been made if the person fails to claim depreciation with respect to the property in the first tax return filed by the person in which such depreciation could have been claimed. To the extent the person elects not to claim depreciation under this paragraph, the basis of the financed property shall not be reduced under section 1016 or otherwise for the depreciation that could have been claimed. (g) Direct-Pay credit payments (1) Election In lieu of the tax credits otherwise provided for under this section, the issuer of a SIFIA bond may elect to be allowed a credit with respect to each interest payment under such bond, which shall be payable by the Secretary in the amounts and at the times set forth in paragraph (2). (2) Amount and timing of credit payments The Secretary shall pay (contemporaneously with each interest payment date under such bond) to the issuer of such bond (or to any person who makes interest payments on behalf of the issuer) 100 percent of the interest payable under such bond on such date. (3) Election The election under paragraph (1) shall be made in writing before the first interest payment date with respect to the bond in such form and manner as the Secretary shall prescribe. Such election, once made, shall be irrevocable. (4) Other applicable rules In the case of a SIFIA bond with respect to which an election is made under this subsection, the following rules shall apply: (A) Interest on any such bond shall be includible in gross income for purposes of this title. (B) Any payments made under this subsection shall not be includible as income for purposes of this title. (C) The deduction otherwise allowable under this title with respect to interest paid under such bond shall be reduced by the amount of the payment made under this subsection with respect to that interest. (D) For purposes of section 148, the yield on a SIFIA bond for which credit payments have been elected under this subsection shall be reduced by the amount of such credit payments. . (b) Clerical amendments The table of subparts for part IV of subchapter A of chapter 1 is amended by adding at the end the following: Subpart K—SIFIA Bonds . (c) Direct purchases of SIFIA bonds The Secretary shall purchase SIFIA bonds that the issuer is otherwise unable to sell, subject to procedures and credit standards to be established by the Secretary, which standards and procedures shall be similar to those applicable to loans made under lines of credit under section 1503 of the Transportation Infrastructure Finance and Innovation Act of 1998 ( 23 U.S.C. 184 (d) Effective date The amendments made by this section shall apply to obligations issued after December 31, 2021.

Summary: School Infrastructure Finance and Innovation Act or the SIFIA Act This bill allows a new tax credit for the issuance of school infrastructure finance and innovation bonds (SIFIA bonds). The bill defines SIFIA bonds as any bond issue if 100% of the project proceeds of such issue are to be used for the design, construction, expansion, renovation, furnishing, or equipping of qualified school facilities.