‘‘(B) the interest on such bond would (but 
for this section) be excludable from gross in-
come 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 ap-
plying paragraph (1)— 
‘‘(A) NOT TREATED AS FEDERALLY GUAR-
ANTEED.—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 re-
duced by the credit allowed under this section. 
‘‘(d) DEFINITION AND SPECIAL RULES.—For pur-
poses of this section— 
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‘‘(1) INTEREST
INCLUDIBLE
IN
GROSS
IN-
COME.—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 pro-
ceeds), and 
‘‘(II) amounts in a reasonably re-
quired 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 
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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
LIMITA-
TION.—The applicable percentage with respect 
to any bond to which subparagraph (A) applies 
shall be 30 percent. 
‘‘(C) DETERMINATION OF AVERAGE MATU-
RITY.—For purposes of subparagraph (A)(i), 
average maturity shall be determined in accord-
ance with section 147(b)(2)(A). 
‘‘(D) APPLICATION OF DAVIS-BACON ACT 
REQUIREMENTS WITH RESPECT TO AMERICAN 
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INFRASTRUCTURE
BONDS.—Subchapter IV of 
chapter 31 of the title 40, United States Code, 
shall apply to projects financed with the pro-
ceeds 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 ‘‘or 6431’’ and 
inserting ‘‘6431, or 6431A’’. 
(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. 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) 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).’’, 
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(2) by redesignating paragraphs (2) and (3) as 
paragraphs (5) and (7), respectively, 
(3) by inserting after paragraph (1) the fol-
lowing 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 re-
ferred 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 
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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 re-
deemed 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 re-
funded bond invested in higher yielding in-
vestments (as defined in section 148(b)) 
which are nonpurpose investments (as de-
fined in section 148(f)(6)(A)) does not ex-
ceed— 
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‘‘(I) the amount so invested as 
part of a reasonably required reserve 
or replacement fund or during an al-
lowable temporary period, and 
‘‘(II) the amount which is equal 
to the lesser of 5 percent of the pro-
ceeds of the issue of which the re-
funded bond is a part or $100,000 (to 
the extent such amount is allocable to 
the refunded bond). 
‘‘(B) 
SPECIAL
RULES
FOR
REDEMP-
TIONS.— 
‘‘(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 
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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 re-
designated) the following new paragraph: 
‘‘(6) SPECIAL RULES FOR PURPOSES OF PARA-
GRAPH (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 re-
funded bond, and 
‘‘(B) a bond issued before 1986, shall be 
treated as advance refunded no more than once 
before March 15, 1986.’’. 
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(b) 
CONFORMING
AMENDMENT.—Section 
148(f)(4)(C) of such Code is amended by redesignating 
clauses (xiv) through (xvi) as clauses (xv) to (xvii), respec-
tively, 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 deter-
mined 
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 EX-
CEPTION 
TO 
TAX-EXEMPT 
INTEREST 
EX-
PENSE ALLOCATION RULES FOR FINANCIAL 
INSTITUTIONS. 
(a) PERMANENT INCREASE IN LIMITATION.—Sub-
paragraphs (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’’. 
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(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 
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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 2024, the 
$30,000,000 amounts contained in subpara-
graphs (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 de-
termined under section 1(f)(3) for such 
calendar year, determined by substituting 
‘calendar year 2023’ for ‘calendar year 
2016’ in subparagraph (A)(ii) thereof. 
Any increase determined under the preceding 
sentence shall be rounded to the nearest mul-
tiple of $100,000.’’. 
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(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to obligations issued after the date 
of the enactment of this Act. 
Æ 
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