I 
117TH CONGRESS 
1ST SESSION H. R. 4154 
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 HOUSE OF REPRESENTATIVES 
JUNE 24, 2021 
Mr. PASCRELL (for himself, Ms. MOORE of Wisconsin, and Mr. KILDEE) in-
troduced the following bill; which was referred to the Committee on Ways 
and Means, and in addition to the Committee on the Budget, for a period 
to be subsequently determined by the Speaker, in each case for consider-
ation of such provisions as fall within the jurisdiction of the committee 
concerned 
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. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Lead-Free America 
Bonds Act of 2021’’. 
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SEC. 2. CREDIT TO ISSUER FOR LEAD DRINKING WATER 
SERVICE LINE 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. 6431. CREDIT ALLOWED TO ISSUER FOR LEAD DRINK-
ING WATER SERVICE LINE BONDS. 
‘‘(a) IN GENERAL.—In the case of a qualified lead 
drinking water service line bond, the issuer of such bond 
shall be allowed a credit with respect to each interest pay-
ment under such bond which shall be payable by the Sec-
retary 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 so much of such 
interest that is payable at a rate not in excess of the 
applicable interest rate determined under paragraph 
(2). 
‘‘(2) APPLICABLE INTEREST RATE.— 
‘‘(A) IN GENERAL.—The applicable inter-
est rate determined under this paragraph for 
any qualified lead drinking water service line 
bond shall be the rate which the Secretary esti-
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mates will permit the issuance of qualified lead 
drinking water service line bonds with a speci-
fied maturity or redemption date without dis-
count and without additional interest cost. 
‘‘(B) PROCEDURE FOR RATE DETERMINA-
TIONS.— 
‘‘(i) IN GENERAL.—Such rate with re-
spect to any qualified lead drinking water 
service line 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. 
‘‘(ii) METHOD AND FREQUENCY.—For 
purposes of this paragraph, the Secretary 
will determine and announce credit rates 
daily for qualified lead drinking water serv-
ice line bonds based on the Secretary’s es-
timate of the yields on outstanding bonds 
from market sectors selected at the discre-
tion of the Secretary that, for the business 
day immediately preceding the sale date of 
the bonds, have an investment grade rating 
of between A and BBB for bonds of a 
similar maturity and for which the interest 
would be included in gross income. 
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‘‘(c) QUALIFIED LEAD DRINKING WATER SERVICE 
LINE BOND.— 
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘qualified lead drinking water service 
line bond’ means any bond (other than a private ac-
tivity bond) issued as part of an issue if— 
‘‘(A) 100 percent of the available project 
proceeds of such issue are to be used for replac-
ing lead components of 1 or more eligible public 
water systems that are not lead free, including 
any publicly or privately owned portion of a 
lead service line of the eligible public water sys-
tem, 
‘‘(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. 
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Except upon approval by the Environmental Protec-
tion Agency for circumstances in which there are 
emergent public health risks, none of the available 
project proceeds of such issue shall be used for a 
partial lead service line replacement. 
‘‘(2) APPLICABLE RULES.—For purposes of ap-
plying paragraph (1)— 
‘‘(A) NOT TREATED AS FEDERALLY GUAR-
ANTEED.—For purposes of section 149(b), a 
qualified lead drinking water service line 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 a qualified lead drinking water service line 
bond shall be reduced by the credit allowed 
under this section. 
‘‘(d) DEFINITION AND SPECIAL RULES.—For pur-
poses of this section— 
‘‘(1) INTEREST
INCLUDIBLE
IN
GROSS
IN-
COME.—For purposes of this title, interest on any 
qualified lead drinking water service line bond shall 
be includible in gross income. 
‘‘(2) ELIGIBLE PUBLIC WATER SYSTEM.— 
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‘‘(A) IN
GENERAL.—The term ‘eligible 
public water system’ means, with respect to any 
bond— 
‘‘(i) in the case of a public water sys-
tem with respect to which the owner or op-
erator was, during the 6-year period pre-
ceding the date of enactment of the Lead- 
Free America Bonds Act of 2021, required 
to give lead action level notice, such bond 
was issued during the 3-year period subse-
quent to the date of enactment of such 
Act, or 
‘‘(ii) in the case of a public water sys-
tem with respect to which the owner or op-
erator was, at any time subsequent to the 
date of enactment of the Lead-Free Amer-
ica Bonds Act of 2021, required to give 
lead action level notice, such bond was 
issued during the 3-year period subsequent 
to such notice. 
‘‘(B) PUBLIC WATER SYSTEM.—The term 
‘public water system’ has the meaning given 
such term in section 1401(4) of such Act (42 
U.S.C. 300f(4)). 
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‘‘(C) LEAD FREE.—The term ‘lead free’ 
has the meaning given such term in section 
1417(d) of such Act (42 U.S.C. 300g–6(d)). 
‘‘(D) LEAD
SERVICE
LINE.—The term 
‘lead service line’ has the meaning given such 
term in section 1459B(a)(4) of such Act (42 
U.S.C. 300j–19b(a)(4)). 
‘‘(E) LEAD ACTION LEVEL NOTICE.—The 
term ‘lead action level notice’ means notice 
under section 1414(c)(1)(D) of the Safe Water 
Drinking Act (42 U.S.C. 300g–3(c)(1)(D)) that 
the public water system exceeded the lead ac-
tion level. 
‘‘(3) FAILURE TO SPEND REQUIRED AMOUNT 
OF BOND PROCEEDS WITHIN 5 YEARS.— 
‘‘(A) IN GENERAL.—If at the close of the 
5-year period beginning on the date of issuance 
less than 100 percent of the available project 
proceeds of the issue are expended for the pur-
poses specified in subsection (c)(1)(A), 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 
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shall be determined in the same manner as 
under section 142. 
‘‘(B) EXTENSION OF PERIOD.—Upon sub-
mission of a request prior to the expiration of 
the 5-year period under subparagraph (A), the 
Secretary may extend such period if the issuer 
establishes that the failure to expend the pro-
ceeds within such period is due to reasonable 
cause and the expenditures for the purposes de-
scribed in subsection (c)(1)(A) will continue to 
proceed with due diligence. 
‘‘(4) 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 
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‘‘(B) the proceeds from any investment of 
the excess described in clause (i). 
‘‘(5) CURRENT REFUNDINGS ALLOWED.— 
‘‘(A) IN GENERAL.—In the case of a bond 
issued to refund a qualified lead drinking water 
service line bond, such refunding bond shall be 
treated as a qualified lead drinking water serv-
ice line 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, and 
‘‘(iii) the refunded bond is redeemed 
not later than 90 days after the date of the 
issuance of the refunding bond. 
‘‘(B) 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). 
‘‘(6) APPLICATION
OF
DAVIS-BACON
ACT
RE-
QUIREMENTS WITH RESPECT TO QUALIFIED LEAD 
DRINKING
WATER
SERVICE
LINE
BONDS.—Sub-
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chapter IV of chapter 31 of title 40, United States 
Code, shall apply to projects financed with the pro-
ceeds of qualified lead drinking water service line 
bonds (other than bonds issued to refund a bond 
originally issued before the date of the enactment of 
this Act). 
‘‘(e) REGULATIONS.—The Secretary may prescribe 
such regulations and other guidance as may be necessary 
or appropriate to carry out this section.’’. 
(b) PAYMENTS MADE UNDER SECTION 6431 OF THE 
INTERNAL
REVENUE
CODE
OF
1986.—Section 
255(g)(1)(A) of the Balanced Budget and Emergency 
Deficit Control Act of 1985 (2 U.S.C. 905(g)(1)(A)) is 
amended by inserting: ‘‘Payments made under section 
6431 of the Internal Revenue Code of 1986’’ after the 
item related to Payment to Radiation Exposure Com-
pensation Trust Fund. 
(c) CLERICAL AMENDMENT.—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 fol-
lowing new item: 
‘‘Sec. 6431. Credit allowed to issuer for qualified lead drinking water service 
line bonds.’’. 
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(d) 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. 
Æ 
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