To amend the Internal Revenue Code of 1986 to reinstate advance refunding bonds.
Sponsors
Legislative Progress
IntroducedMr. Kustoff (for himself, Mr. Yakym, Ms. Moore of Wisconsin, …
Summary
What This Bill Does
This bill, known as the "Investing in Our Communities Act," reinstates the ability of state and local governments to issue advance refunding bonds for municipal debt. Advance refunding was eliminated by the Tax Cuts and Jobs Act of 2017, and this legislation would restore the practice by amending Section 149(d) of the Internal Revenue Code. When interest rates drop, governments could refinance their existing bonds to lock in lower rates, similar to how homeowners refinance mortgages.
Who Benefits and How
State and local governments are the primary beneficiaries. They would regain the ability to refinance existing municipal debt when interest rates fall, potentially saving billions of dollars in debt service costs. These savings could fund additional public infrastructure projects or reduce pressure on local taxes.
Municipal bond underwriters and financial advisors benefit from increased transaction volume, as each advance refunding generates fees for arranging and marketing the new bond issues.
Local taxpayers in jurisdictions that successfully refinance may see benefits through either reduced local taxes or improved public services funded by the debt service savings.
Who Bears the Burden and How
Federal taxpayers bear the cost through reduced federal tax revenue. When governments issue more tax-exempt municipal bonds, the federal Treasury collects less income tax from bondholders who otherwise would have invested in taxable securities. The Congressional Budget Office has previously estimated the cost of advance refunding at several billion dollars over ten years.
No private sector entities face new compliance requirements or costs from this legislation.
Key Provisions
- Reinstates advance refunding for tax-exempt municipal bonds, allowing one advance refunding per bond issued after 1985 (or two for bonds issued before 1986)
- Maintains existing prohibition on advance refunding of private activity bonds (except qualified 501(c)(3) bonds like nonprofit hospital and university bonds)
- Requires that refunded bonds be redeemed at the earliest call date to prevent abuse
- Prohibits advance refundings that use arbitrage devices to gain financial advantages beyond lower interest rates
- Requires issuers to demonstrate present value debt service savings before redeeming bonds
- Takes effect for advance refunding bonds issued after the date of enactment
Evidence Chain:
This summary is derived from the structured analysis below. See "Detailed Analysis" for per-title beneficiaries/burden bearers with clause-level evidence links.
Primary Purpose
To reinstate the ability of state and local governments to issue advance refunding bonds for municipal debt refinancing by amending Section 149(d) of the Internal Revenue Code of 1986.
Policy Domains
Legislative Strategy
"Restore municipal bond refinancing flexibility that was eliminated by the Tax Cuts and Jobs Act of 2017, allowing state and local governments to reduce debt service costs when interest rates decline"
Likely Beneficiaries
- State and local governments (reduced debt service costs)
- Municipal bond issuers and underwriters (increased transaction volume)
- Public infrastructure projects (freed-up capital for new projects)
- Taxpayers in jurisdictions that refinance debt (lower local taxes or increased services)
Likely Burden Bearers
- Federal Treasury (reduced tax revenue from increased tax-exempt bond issuance)
- Federal taxpayers (cost of foregone revenue)
Bill Structure & Actor Mappings
Who is "The Secretary" in each section?
- "the_issuer"
- → State or local government entity issuing municipal bonds
Key Definitions
Terms defined in this bill
A bond that does not qualify for tax-exempt status under regular municipal bond rules (excluding qualified 501(c)(3) bonds)
The first bond in a chain of refundings
Investments that are not used to carry out the governmental purpose for which the bonds were issued, as defined in Section 148(f)(6)(A)
The period under Section 148(c) during which bond proceeds may be temporarily invested without arbitrage restrictions
We use a combination of our own taxonomy and classification in addition to large language models to assess meaning and potential beneficiaries. High confidence means strong textual evidence. Always verify with the original bill text.
Learn more about our methodology