Bill restoring tax-exempt advance refunding introduced in House
Cities, states and other municipal bond issuers would regain the ability to advance refund tax-exempt debt under standalone legislation introduced Thursday by a bipartisan group of lawmakers.
Reps. David Kustoff, R-Tenn., Rudy Yakym, R-Ind., Gwen Moore, D-Wis., and Jimmy Panetta, D-Calif., introduced the Investing in Our Communities Act, which has been introduced in previous sessions but failed to gain traction.
Kustoff, the chief sponsor along with Yakym, said the bill would give "state and local governments a critical financing tool to stimulate economic development, create jobs, and save taxpayer dollars."
Bond issuers lost the ability to advance refunding debt on a tax-exempt basis in 2017 in President Trump's Tax Cuts and Jobs Act. For several years, regaining the tool remained a top muni lobby priority — but the new legislation comes as the industry is now fighting to preserve the tax-exemption on all municipal bonds, which some fear are in lawmakers' crosshairs as Congress crafts a major tax reform package.
Kustoff in 2023 introduced the same bill, joined by then-House Municipal Finance Caucus leader Dutch Ruppersberger, D-Md., who has since retired. Yakym is now the Republican leader of the caucus.
Before the ability was eliminated, advance refunding represented about 20% of bond activity.
"This bipartisan legislation will help our local and state governments by providing them with the option to refinance debt," Yakym said in a statement. "This will lower borrowing costs and free up valuable resources to ensure our communities can continue to develop projects that advance economic growth."
The bill is endorsed by a myriad of municipal market groups including: the National Association of State Treasurers, Airports Council International - North America, Bond Dealers of America, Securities Industry and Financial Markets Association, National Association of Health and Educational Facility Finance Authorities, Association of Metropolitan Water Agencies, National Association of Counties, American Society of Civil Engineers, and Government Finance Officers Association.
The American Securities Association said it applauds the bill. "Advance refunding for municipal bonds allows state and local governments to efficiently invest in their communities, saving taxpayers money and stimulating economic growth across the nation," said ASA President and CEO Chris Iacovella in a statement.
The Large Public Power Council said the bill will help keep costs down as energy demand surges across the U.S. "Restoring advance refunding is a simple, commonsense fix that will lower borrowing costs and save 30 million electric customers an estimated $715 million over the next five years," said LPPC president Tom Falcone in a statement.
Rep. Terri Sewell, D-Ala., introduced similar legislation last May called the Local Infrastructure Financing Tools, or LIFT, Act. That was also a re-introduction of a bill that Sewell introduced in 2021 that also failed to advance.
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