LIFT Act
Bill: H.R.2634 | Sponsor: Rep. Sewell, Terri A. (D-AL)
Policy area: Taxation

Summary:
Local Infrastructure Financing Tools Act or the LIFT Act
This bill allows the issuer of an American Infrastructure Bond a credit with respect to each interest payment under such bond.
The bill restores advance refundings of bonds to allow states and localities to refinance existing debt.
The bill increases to $30 million the limitation on bank-qualified debt for small municipal and nonprofit issuers.

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 is amended by adding at 
the end the following new section:

``SEC. 6431A. 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:
        2020 through 2024..................................        42% 
        2025...............................................        38% 
        2026...............................................        34% 
        2027 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 ``or 6431'' and inserting ``6431, or 
        6431A''.
            (2) The table of sections for subchapter B of chapter 65 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) 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) 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) are each amended by 
striking ``$10,000,000'' and inserting ``$30,000,000''.
    (b) Permanent Modification of Other Special Rules.--Section 
265(b)(3) 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), 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 2020, 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 2019' 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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