LIFT Act
- Bill Number
- H.R. 8864
- Origin Chamber
- House
- Congress
- 119th Congress, Session 2
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2026-05-15: Referred to the House Committee on Ways and Means.
- Last Updated
- 2026-05-29T15:29:51Z
AI-Generated Summary
Purpose The legislation, titled the Local Infrastructure Financing Tools Act (LIFT Act), amends the Internal Revenue Code of 1986 to create a federal tax credit for issuers of certain infrastructure bonds. It also updates rules on advance refunding of bonds and expands exceptions for small issuers regarding tax-exempt interest expense allocation.
Key Provisions
- American Infrastructure Bonds Credit (Section 2): Introduces a new credit under IRC Section 6436. Issuers of qualifying bonds receive a direct payment from the Treasury equal to a percentage of interest costs (42% for bonds issued 2026–2030, declining to 30% thereafter). Bonds must use 100% of proceeds for capital or operations/maintenance expenditures, meet tax-exempt bond requirements (except interest is taxable to holders), and include an irrevocable election.
- Refunding Rules (Section 3): Modifies IRC Section 149(d) to permit limited advance refundings for private activity bonds and other bonds under specific conditions, such as debt service savings, redemption timelines, and temporary investment limits. Prohibits abusive arbitrage transactions.
- Small Issuer Exception (Section 4): Permanently raises the threshold for the small issuer exception from $10 million to $30 million (with inflation adjustments after 2026). Applies special rules for qualified 501(c)(3) bonds and qualified financings, treating portions of issues separately under certain conditions.
- Additional Requirements: Applies Davis-Bacon prevailing wage rules to projects financed by these bonds. Allows current refundings with a 30% credit rate.
Significant Changes to Existing Law
- Creates a new direct-pay tax credit mechanism for infrastructure bonds, shifting from traditional tax-exempt status to taxable bonds with issuer subsidies.
- Expands flexibility for advance refundings while adding safeguards against arbitrage abuse, reversing some prior restrictions.
- Increases and makes permanent the small issuer limit for financial institutions' interest expense deductions, with inflation indexing.
Potential Impacts
- Government Agencies: Reduces borrowing costs for state and local governments financing infrastructure; requires Treasury to administer credits and enforce rules.
- Citizens: Enables more infrastructure projects (e.g., roads, facilities) potentially improving public services; bond interest becomes taxable income for investors.
- International Relations: No direct effects identified.
Main Stakeholders Affected
- State, local, and tribal governments as bond issuers.
- Financial institutions holding or issuing tax-exempt obligations.
- Bond investors and underwriters.
- Construction contractors and workers on covered projects.
- Federal agencies, particularly the Treasury and IRS for credit payments and compliance.
Notable Legal, Constitutional, or Political Implications
- Relies on Congress's taxing and spending powers under Article I; treats bonds as federally supported without direct guarantees.
- Introduces new compliance requirements (e.g., Davis-Bacon, arbitrage rules) that could affect bond validity and issuer liability.
- Balances infrastructure incentives with fiscal controls on refundings and small issuers.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Rep. Sewell, Terri A. [D-AL-7]
Recent Actions
- 2026-05-15: Referred to the House Committee on Ways and Means.
- 2026-05-15: Introduced in House
- 2026-05-15: Introduced in House
Bill Versions
- Local Infrastructure Financing Tools Act — issued 2026-05-15 — PDF (15 pages)