What This Bill Does
This bill changes federal tax law to allow governments to issue certain types of bonds for replacing lead service lines (pipes that carry water to homes) without counting those projects as private business use. Lead service lines are pipes made of lead that can contaminate drinking water, and this bill makes it easier for public water systems to finance their replacement.
Who It Affects
Public water systems (government-run water utilities) and property owners with privately-owned portions of lead service lines connected to public water systems.
Key Provisions
- Qualified lead service line replacement projects will not count as private business use when determining if bonds meet federal tax rules (Sec. 2(a))
- Qualified lead service line replacement use means using bond money to replace privately-owned portions of lead service lines connected to public water systems in order to comply with federal drinking water standards for lead (Sec. 2(a))
- The bill applies these changes to bonds issued after December 31, 2023 (Sec. 2(b))
What Changes
Governments will be able to issue tax-favored bonds to pay for replacing lead service lines on private property without violating rules about private business use of public bonds. This removes a legal obstacle that previously made it harder to finance these replacements.
Important Definitions
- Lead service line: Not specified in bill text (the bill says to use the definition from the Safe Drinking Water Act)
- Public water system: Not specified in bill text (the bill says to use the definition from the Safe Drinking Water Act)
Effective Date
Obligations issued after December 31, 2023.
II
118TH CONGRESS
1ST SESSION
S. 726
To amend the Internal Revenue Code of 1986 to modify the private business
use requirements for bonds issued for lead service line replacement projects.
IN THE SENATE OF THE UNITED STATES
MARCH 9, 2023
Mr. BENNET (for himself, Mr. CARDIN, Mr. BROWN, Mrs. FEINSTEIN, Mr.
BOOKER, Ms. KLOBUCHAR, and Mr. VAN HOLLEN) introduced the fol-
lowing bill; which was read twice and referred to the Committee on Fi-
nance
A BILL
To amend the Internal Revenue Code of 1986 to modify
the private business use requirements for bonds issued
for lead service line replacement projects.
Be it enacted by the Senate and House of Representa-
1
tives of the United States of America in Congress assembled,
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SECTION 1. SHORT TITLE.
3
This Act may be cited as the ‘‘Financing Lead Out
4
of Water Act of 2023’’.
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•S 726 IS
SEC. 2. MODIFICATION OF PRIVATE BUSINESS USE RE-
1
QUIREMENTS FOR CERTAIN BONDS.
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(a) IN GENERAL.—Section 141(b)(6) of the Internal
3
Revenue Code of 1986 is amended by adding at the end
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the following new subparagraph:
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‘‘(D) CLARIFICATION RELATING TO QUALI-
6
FIED
LEAD
SERVICE
LINE
REPLACEMENT
7
USE.—
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‘‘(i) IN
GENERAL.—For purposes of
9
this subsection, qualified lead service line
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replacement use shall not constitute pri-
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vate business use.
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‘‘(ii) DEFINITIONS.—For purposes of
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this subparagraph—
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‘‘(I) QUALIFIED
LEAD
SERVICE
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LINE REPLACEMENT USE.—The term
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‘qualified lead service line replacement
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use’ means, with respect to any public
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water system, use of the proceeds of
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an issue to replace any privately-
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owned portion of a lead service line
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connected to such system to facilitate,
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achieve or maintain compliance with a
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national primary drinking water regu-
24
lation for lead.
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•S 726 IS
‘‘(II) LEAD SERVICE LINE.—The
1
term ‘lead service line’ has the mean-
2
ing given such term in section
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1459B(a)(4) of the Safe Drinking
4
Water Act.
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‘‘(III)
NATIONAL
PRIMARY
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DRINKING
WATER
REGULATION
FOR
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LEAD.—The term ‘national primary
8
drinking water regulation for lead’
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means a national primary drinking
10
water regulation for lead promulgated
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under section 1412 of such Act.
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‘‘(IV) PUBLIC WATER SYSTEM.—
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The term ‘public water system’ has
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the meaning given such term in sec-
15
tion 1401(4) of such Act.’’.
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(b) EFFECTIVE DATE.—The amendments made by
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this section shall apply to obligations issued after Decem-
18
ber 31, 2023.
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Æ
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