S. 4203 - American Infrastructure Bonds Act of 2020

"SEC. 6431. CREDIT TO ISSUER OF AMERICAN INFRASTRUCTURE BONDS.

"(a) IN GENERAL. — The issuer of an American infrastructure 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 interest payment date under such bond) to the issuer of such bond (or to any person who makes such interest payments on behalf of the issuer) the applicable percentage of the interest payable under such bond on such date.

"(2) APPLICABLE PERCENTAGE. — For purposes of paragraph (1), the applicable percentage shall be equal to —

"(A) in the case of any American infrastructure bond issued before January 1, 2026, 35 percent, and

"(B) in the case of any American infrastructure bond issued after December 31, 2025, 28 percent.

"(3) INTEREST PAYMENT DATE. — For purposes of this subsection, the term 'interest payment date' means each date on which the holder of record of the American infrastructure bond is entitled to a payment of interest under such bond.

"(c) AMERICAN INFRASTRUCTURE BOND. —

"(1) IN GENERAL. — For purposes of this section, the term 'American infrastructure bond' means any obligation if —

"(A) the interest on such obligation would (but for this section) be excludable from gross income under section 103,

"(B) either —

"(i) the obligation is not a private activity bond, or

"(ii) the obligation is a private activity bond, but it is issued as part of an issue 95 percent or more of the net proceeds of which are to be used to finance or refinance property that meets the ownership test in section 145(a)(1), as applied by substituting '95 percent of the property' for 'all property', and

"(C) the issuer makes an irrevocable election to have this section apply.

"(2) APPLICABLE RULES. — For purposes of applying paragraph (1) —

"(A) for purposes of section 149(b), a bond shall not be treated as federally guaranteed by reason of the credit allowed under this section, and

"(B) a bond shall not be treated as an American infrastructure bond if the issue price has 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.

"(d) SPECIAL RULES. —

"(1) INTEREST ON AMERICAN INFRASTRUCTURE BONDS INCLUDIBLE IN GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES. — For purposes of this title, interest on any American infrastructure bond shall be includible in gross income.

"(2) APPLICATION OF ARBITRAGE RULES. — For purposes of section 148, the yield on an issue of American infrastructure bonds shall be reduced by the credit allowed under this section, except that no such reduction shall apply with respect to determining the amount of gross proceeds of an issue that qualifies as a reasonably required reserve or replacement fund.

"(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) The table of sections for subchapter B of chapter 65 of subtitle F of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

"Sec. 6431. Credit to issuer of american infrastructure bonds.".

(2) Subparagraph (A) of section 6211(b)(4) of such Code is amended by inserting "6431,"after "36B,". 

(c) TRANSITIONAL COORDINATION WITH STATE LAW. — Except as otherwise provided by a State after the date of the enactment of this Act, the interest on any American infrastructure bond (as defined in section 6431 of the Internal Revenue Code of 1986 (as added by this Act)) and the amount of any credit determined under such section with respect to such bond shall be treated for purposes of the income tax laws of such State as being exempt from Federal income tax.

(d) ADJUSTMENT TO PAYMENT TO ISSUERS IN CASE OF SEQUESTRATION. —

(1) IN GENERAL. — In the case of any payment under subsection (b) of section 6431 of the Internal Revenue Code of 1986 (as added by this Act) made after the date of enactment of this Act to which sequestration applies, the amount of such payment shall be increased to an amount equal to —

(A) such payment (determined before such sequestration), multiplied by

(B) the quotient obtained by dividing the number 1 by the amount by which the number 1 exceeds the percentage reduction in such payment pursuant to such sequestration.

(2) SEQUESTRATION. — For purposes of this subsection, the term "sequestration" means any reduction in direct spending ordered in accordance with a sequestration report prepared by the Director of the Office and Management and Budget pursuant to the Balanced Budget and Emergency Deficit Control Act of 1985 or the Statutory Pay-As-You-Go Act of 2010 or future legislation having similar effect.

(e) EFFECTIVE DATE. — The amendments made by this section shall apply to obligations issued after the date of enactment of this Act.