Flow Act
The Flow Act (Financing Lead Out of Water Act of 2025) amends the Internal Revenue Code to clarify how certain bonds can be used to fund lead service line replacement, specifically addressing private business use rules. It creates a new category called “qualified lead service line replacement use” and explicitly states that this use does not count as private business use for purposes of private activity bonds. The definition ties to replacing privately owned portions of lead service lines in public water systems in order to meet national primary drinking water standards for lead. The change applies to bond obligations issued after December 31, 2025. In short, the bill seeks to make it easier and potentially cheaper for local governments to finance lead service line replacement projects by preserving the tax-exempt status of bonds that fund eligible portions of those projects.
Key Points
- 1Adds a new subparagraph (D) to Section 141(b)(6) of the Internal Revenue Code, clarifying that qualified lead service line replacement use is not private business use.
- 2Defines “qualified lead service line replacement use” as using bond proceeds to replace privately-owned portions of a lead service line connected to a public water system to facilitate, achieve, or maintain compliance with a national primary drinking water regulation for lead.
- 3Provides definitions aligned with the Safe Drinking Water Act (SDWA): lead service line, national primary drinking water regulation for lead, public water system (as used in the bill’s context).
- 4Effective date: applies to bond obligations issued after December 31, 2025.
- 5Purpose: to facilitate financing of lead service line replacement projects by extending tax-exempt treatment to these specific uses of bond proceeds, potentially lowering financing costs for such projects.