Financing Lead Out of Water Act of 2025
The Financing Lead Out of Water Act of 2025 would amend the Internal Revenue Code to change how private business use is treated for certain bonds. Specifically, it adds a new provision stating that proceeds used to replace privately-owned portions of lead service lines (connected to a public water system) to comply with national drinking water lead standards shall not count as private business use. In other words, public water systems could issue tax-exempt bonds to fund the replacement of lead service lines—even the privately-owned portions on private property—without jeopardizing the bonds’ tax-exempt status as long as the use is aimed at complying with lead regulations. The definitions tie to the Safe Drinking Water Act and the national primary drinking water regulation for lead. The change would apply to bond obligations issued after December 31, 2025.
Key Points
- 1Adds a new subparagraph (D) to Section 141(b)(6) clarifying that qualified lead service line replacement use is not private business use for tax-exempt bonds.
- 2Defines “qualified lead service line replacement use” as using bond proceeds to replace privately-owned portions of a lead service line to facilitate, achieve, or maintain compliance with a national primary drinking water regulation for lead.
- 3Uses SDWA terms to define “lead service line,” “national primary drinking water regulation for lead,” and “public water system.”
- 4Applies to obligations issued after December 31, 2025 (effective date).
- 5Aims to expand financing flexibility for lead service line replacement projects, potentially accelerating the removal of lead lines without compromising tax-exempt status.