American Infrastructure Bonds Act of 2025
The American Infrastructure Bonds Act of 2025 would create a new federal subsidy mechanism to encourage issuance of infrastructure-related bonds. It establishes a credit to be paid by the Treasury to issuers of “American infrastructure bonds” equal to 28 percent of each interest payment on the bond, with payments made on the same schedule as interest payments. To qualify, the bond must have interest that would be excludable from gross income under current law (section 103), must not be a private activity bond, and the issuer must make an irrevocable election to be treated as an American infrastructure bond. The bill also lays out defining rules, regulatory authority, state-law coordination, and adjustments for sequestration. Importantly, while the issuer receives a federal credit, the interest paid to investors on these bonds would remain taxable to the bondholder. The credits and bonds would apply to bonds issued after enactment. In short, the bill would subsidize the cost of infrastructure financing by providing issuers with a 28 percent credit on interest payments, while altering how the resulting bonds are treated for federal tax purposes. It also introduces several compliance and transitional rules, including state coordination and potential adjustments if federal spending is sequestration-restricted.
Key Points
- 1Credit to issuers: The issuer of an American infrastructure bond would receive a credit equal to 28 percent of each interest payment on the bond, paid by the Secretary contemporaneously with the interest payment date.
- 2Eligibility and election: A bond qualifies as an American infrastructure bond only if the interest would be excludable from gross income under section 103, the bond is not a private activity bond, and the issuer makes an irrevocable election to be treated as an American infrastructure bond. The bond cannot be treated as federally guaranteed for purposes of certain tax rules, and it must have only a de minimis premium over its stated principal amount.
- 3Tax treatment of bondholders: Interest on American infrastructure bonds would be includible in gross income for federal tax purposes (i.e., investors would pay taxes on interest, rather than it being tax-exempt).
- 4Regulatory and compliance framework: The bill authorizes the Secretary to issue regulations and guidance to implement the new credit. It also amends the internal revenue code to add the new Sec. 6431 and makes related conforming amendments to the table of sections and cross-references.
- 5State coordination and sequestration: There is transitional coordination with state tax law, treating bond interest and the credit as federally tax-exempt for state purposes unless a state opts otherwise. The bill includes an adjustment mechanism if any Treasury payments are subject to sequestration.
- 6Effective date: The amendments apply to American infrastructure bonds issued after the date of enactment of the bill.