Overview
Title
To amend the Internal Revenue Code of 1986 to provide a credit for American infrastructure bonds, and for other purposes.
ELI5 AI
H.R. 8396, called the "LIFT Act," wants to give special money bonuses to people who build things like roads and bridges in America, hoping it will help make these things better for everyone.
Summary AI
H.R. 8396, also known as the "Local Infrastructure Financing Tools Act" or the "LIFT Act," aims to amend the Internal Revenue Code to provide tax credits for issuers of American infrastructure bonds, incentivizing investments in capital projects and infrastructure improvements. The bill specifies the conditions under which these bonds can be issued and how credits will be calculated and paid. It also includes provisions for advance refunding bonds and permanently modifies certain tax rules for small issuers, increasing the financial limits and applying inflation adjustments to them. The goal is to enhance financial support for infrastructure projects across the United States.
Published
Keywords AI
Sources
Bill Statistics
Size
Language
Complexity
AnalysisAI
General Summary of the Bill
The bill titled "To amend the Internal Revenue Code of 1986 to provide a credit for American infrastructure bonds, and for other purposes" is designed to modify the tax code to support infrastructure funding through bond issuance. It proposes changes that affect the way American infrastructure bonds function, offering issuers credits on interest payments. Furthermore, it addresses provisions related to advance refunding bonds and proposes a permanent adjustment of the small issuer exception limit from $10 million to $30 million, along with adjustments for inflation. Throughout its multiple sections, the bill stipulates conditions and rules surrounding these changes, aiming to provide financial incentives to invest in infrastructure projects.
Summary of Significant Issues
Several significant issues have arisen concerning the bill's complexity and potential implications:
Complexity and Accessibility: The technical language used throughout the bill, especially in Sections 2, 3, and 4, is dense and may not be easily understood by the general public. This could hinder public engagement and discourse.
Potential for Wasteful Spending: The concern arises that estimated interest rates determined under Section 2 might be inaccurately high, leading to potentially excessive credit payments from the government—raising issues of fiscal responsibility.
Encouragement of Frequent Refinancing: The provision allowing for bonds to be treated as current refundings might incentivize frequent refinancing. This could lead to inefficiencies and increased administrative costs if not carefully managed.
Lack of Cost Analysis: There is no cost or economic impact assessment within the bill, particularly regarding the tax credits and bond provisions, which raises questions about its fiscal impact and long-term economic implications.
Favoritism in Financial Limits: Section 4 proposes an increase in financial limits, which might disproportionately benefit certain financial institutions or nonprofit organizations without a clear public interest justification.
Unclear Intent in Tax Code Changes: The amendments in Section 3 do not clearly convey their intent, making it uncertain whether they are intended to tackle specific issues or promote new regulations.
Impact on the Public
Broadly, the bill aims to encourage infrastructure development by easing the financial burden through bond interest credits. If implemented effectively, this could lead to enhanced infrastructure, benefiting communities through improved facilities and services. However, the potential for misuse or inefficient financial practices as a result of unclear provisions or excessive credit payments could counteract these benefits.
Impact on Specific Stakeholders
Issuers of Bonds: These entities stand to benefit significantly from the tax credits on interest payments, making it financially viable to participate in infrastructure projects. However, the irrevocable election requirement adds a layer of risk, as it limits flexibility if conditions change post-issuance.
General Public: While improved infrastructure is a positive outcome, taxpayer concerns arise regarding government spending efficiency and equity if the bill's fiscal impacts are not thoroughly assessed and managed.
Financial and Nonprofit Organizations: With the increase in limits for tax-exempt interest allocations, certain small issuers might find new opportunities, yet the complexity introduced could pose challenges in long-term financial planning.
Legal and Financial Advisors: The bill's technical details necessitate expertise for accurate compliance and implementation, potentially increasing demand for legal and financial advisory services.
In conclusion, while the bill has the potential to foster needed infrastructure improvements, its success will depend on addressing the highlighted fiscal and administrative issues and providing clear guidelines to avoid inefficient financial practices.
Financial Assessment
The "Local Infrastructure Financing Tools Act," or "LIFT Act," introduces several financial measures related to American infrastructure bonds. It aims to provide tax credits to issuers of these bonds, thereby encouraging investments in infrastructure projects. A detailed examination of the financial references and their implications is discussed below.
Financial Allocations and References
Tax Credits for Infrastructure Bonds
The bill proposes a tax credit system for issuers of "American infrastructure bonds." These credits entail payments made by the Secretary of Treasury to the bond issuers equivalent to a percentage of the interest on such bonds. The applicable percentage scales over time, starting at 42% for bonds issued between 2024 and 2028, declining to 38% in 2029, 34% in 2030, and stabilizing at 30% in 2031 and beyond.
Increase in Financial Limits for Small Issuers
In Section 4, the bill permanently increases the limitation from $10,000,000 to $30,000,000 on tax-exempt interest allocations for small issuers. This figure is subject to inflation adjustments, which means it will rise over time based on a cost-of-living adjustment.
Analysis of Financial Implications
Complexity and Public Understanding
The technical nature of the bill, especially in its financial provisions, can be challenging for the general public to grasp. The intricacies of tax credit calculations and bond qualifications require specialized knowledge, which might discourage engagement or understanding among individuals and small entities.
Potential Risk of Excessive Spending
There is concern about excessive government spending if the Secretary's estimated interest rates for the bonds are set inaccurately high. Such overestimation could lead to unwarrantedly high credit payouts, resulting in inefficient use of taxpayer resources, which highlights the need for precise rate assessments.
Refinancing and Administrative Costs
Provisions allowing bonds to be treated as current refundings raise the possibility of frequent refinancing. While this could offer financial flexibility, it may also result in unnecessary administrative costs if refinancing occurs without a clear, beneficial objective.
Disproportional Benefits
The increase in financial limits for tax-exempt allocations might disproportionately benefit certain financial institutions or non-profit organizations, potentially skewing advantages based on the size and type of the issuer without an apparent justification for the public interest. This could be viewed as favoring larger entities able to issue higher-value bonds frequently.
Immediate Implementation Concerns
Lastly, the bill's immediate effectiveness following enactment provides little transition time for affected parties. This urgency can impact financial institutions and small issuers who need to adapt quickly to the new regulations, potentially causing temporary disruptions or financial strain.
In summary, the LIFT Act introduces notable financial strategies aimed at bolstering infrastructure investment through tax credits and increased financial limits for small issuers. However, without careful regulation and clear public education, there are risks of inefficiencies and uneven distribution of benefits.
Issues
The complexity and technicality of the language used throughout various sections of the bill (particularly Sections 2, 3, and 4) may present accessibility challenges for individuals without legal, tax, or financial expertise, potentially limiting public understanding and engagement.
There is a concern in Section 2 that the estimated interest rates determined by the Secretary could lead to excessive credit payments if inaccurately high, risking wasteful government spending on infrastructure bonds.
Section 2 allows bonds to be treated as current refundings, which might encourage frequent refinancing. This could lead to inefficiencies and additional administrative costs, particularly if refinancing is done without careful scrutiny of its necessity and benefits.
The bill does not include a cost analysis or expected economic impact assessment (especially in Section 2), which might raise concerns about its fiscal responsibility and the long-term economic implications of the tax credits and bond provisions.
Section 4 involves a permanent increase in financial limits regarding tax-exempt interest allocations, which could potentially favor certain financial or nonprofit organizations disproportionately without a clear public interest justification.
The bill in Section 3 introduces vague terms such as 'a device employed ... to obtain a material financial advantage' that might lead to varied interpretations and potential legal disputes, lacking guidelines for consistent application.
The changes to the tax code in Section 3 are not clearly explained in terms of their intent, leaving it unclear whether they are meant to curb certain practices or introduce new financial regulations, which could affect issuers and users of bonds differently.
In Section 4, the immediate effectiveness of the change upon enactment leaves little transition time for affected parties to adjust to the new regulations, potentially impacting financial institutions and small issuers adversely.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The first section of this bill specifies the short title, indicating that it can be referred to as the "Local Infrastructure Financing Tools Act" or the "LIFT Act".
2. Credit to issuer for certain infrastructure bonds Read Opens in new tab
Summary AI
The section introduces the American infrastructure bond, which allows issuers to receive a credit from the Secretary for interest payments made on these bonds. This credit covers a percentage of the interest payments, which varies depending on the year the bond is issued, and it applies only if certain conditions are met, such as using the bond proceeds for capital expenditures and ensuring the bond's interest is typically tax-exempt.
6431A. Credit allowed to issuer for American infrastructure bonds Read Opens in new tab
Summary AI
The section describes a financial credit for issuers of American infrastructure bonds, which helps reduce the interest costs for projects that improve infrastructure. It outlines conditions for the bonds to qualify, such as usage of funds and electing the credit, while also explaining payments, percentage limits, rules for refunding bonds, and includes a potential for additional regulations.
3. Advance refunding bonds Read Opens in new tab
Summary AI
The bill changes existing tax rules about advance refunding bonds. It updates definitions and rules for these bonds, outlines specific conditions under which private activity bonds can be refunded, and prohibits transactions that use these bonds to gain financial benefits unfairly. Additionally, it specifies when these amendments will take effect.
Money References
- — “(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.
4. Permanent modification of small issuer exception to tax-exempt interest expense allocation rules for financial institutions Read Opens in new tab
Summary AI
The section of the bill permanently increases the limit for small issuers on tax-exempt interest expense allocations from $10 million to $30 million, adjusts provisions to treat certain 501(c)(3) bonds as issued by the exempt organization, and introduces an inflation adjustment for the $30 million limit starting after 2024, with these changes applying to obligations issued after the bill is enacted.
Money References
- (a) Permanent increase in limitation.—Subparagraphs (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”.
- (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 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 2023’ 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.”.