S.1480 - American Infrastructure Bonds Act of 2025 (119th Congress)
Summary
The American Infrastructure Bonds Act of 2025 (S.1480) aims to amend the Internal Revenue Code of 1986 by introducing a credit for issuers of 'American infrastructure bonds.' This bill proposes that the Secretary of the Treasury will pay 28% of the interest payable on these bonds to the issuer, contemporaneously with each interest payment date. The bonds must meet specific criteria, including being eligible for tax exemption under section 103, not being private activity bonds, and the issuer making an irrevocable election to participate in this program.
Expected Effects
The primary effect of this bill would be to incentivize the issuance of bonds for infrastructure projects by reducing the cost of borrowing for state and local governments. This could lead to increased investment in infrastructure projects, such as roads, bridges, and public transportation. Interest on these bonds would be includible in gross income for federal income tax purposes, and the bill includes provisions to address sequestration and coordination with state law.
Potential Benefits
- Reduced borrowing costs: The 28% credit on interest payments would significantly lower the cost of financing infrastructure projects.
- Increased infrastructure investment: Lower costs would likely lead to more infrastructure projects being undertaken.
- Job creation: Infrastructure projects typically create construction and related jobs.
- Economic stimulus: Increased infrastructure spending can stimulate economic activity.
- State law coordination: Transitional coordination with state law ensures the bonds are treated favorably for state income tax purposes.
Potential Disadvantages
- Federal debt increase: The credit provided to bond issuers would increase federal spending and potentially the national debt.
- Potential for misuse: There is a risk that the funds could be used for projects that are not truly infrastructure-related or are not economically viable.
- Complexity: The rules and regulations surrounding the bonds could be complex, leading to administrative burdens.
- Impact of sequestration: While the bill addresses sequestration, the mechanism for adjusting payments could add complexity.
- Tax revenue impact: While interest is includible in gross income, the overall impact on tax revenue needs careful consideration.
Most Disadvantaged Areas:
Constitutional Alignment
The bill appears to align with the Constitution's general welfare clause (Preamble). By promoting infrastructure development, the bill aims to 'promote the general Welfare.' Article I, Section 8, Clause 1 grants Congress the power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States. The bill's use of tax credits to incentivize infrastructure investment falls under this power. However, the extent to which the bill adheres to principles of federalism, particularly concerning the balance of power between the federal government and the states in infrastructure development, warrants careful consideration.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).