I 117th CONGRESS 1st Session H. R. 4154 IN THE HOUSE OF REPRESENTATIVES June 24, 2021 Mr. Pascrell (for himself, Ms. Moore of Wisconsin , and Mr. Kildee ) introduced 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 consideration 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.

1. Short title This Act may be cited as the Lead-Free America Bonds Act of 2021 . 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: 6431. Credit allowed to issuer for lead drinking 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 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 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 interest rate determined under this paragraph for any qualified lead drinking water service line bond shall be the rate which the Secretary estimates will permit the issuance of qualified lead drinking water service line bonds with a specified maturity or redemption date without discount and without additional interest cost. (B) Procedure for rate determinations (i) In general Such rate with respect 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 service line bonds based on the Secretary’s estimate of the yields on outstanding bonds from market sectors selected at the discretion 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. (c) Qualified lead drinking water service line bond (1) In general For purposes of this section, the term qualified lead drinking water service line 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 replacing 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 system, (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. Except upon approval by the Environmental Protection 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 applying paragraph (1)— (A) Not treated as federally guaranteed 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 purposes of this section— (1) Interest includible in gross income 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 (A) In general The term eligible public water system means, with respect to any bond— (i) in the case of a public water system with respect to which the owner or operator was, during the 6-year period preceding 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 subsequent to the date of enactment of such Act, or (ii) in the case of a public water system with respect to which the owner or operator was, at any time subsequent to 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 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) ). (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 action 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 purposes 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 shall be determined in the same manner as under section 142. (B) Extension of period Upon submission 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 proceeds within such period is due to reasonable cause and the expenditures for the purposes described 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 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). (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 service 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 maturity For purposes of subparagraph (A)(i), average maturity shall be determined in accordance with section 147(b)(2)(A). (6) Application of Davis-Bacon Act requirements with respect to qualified lead drinking water service line bonds Subchapter IV of chapter 31 of title 40, United States Code, shall apply to projects financed with the proceeds 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 Compensation 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 following new item: Sec. 6431. Credit allowed to issuer for qualified lead drinking water service line bonds. . (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.