The School Infrastructure Finance and Innovation Act (SIFIA Act) would create a new category of tax credit bonds, called SIFIA bonds, to finance public school facilities through private, for-profit developers working with a state or local educational agency. The bonds would be issued to fund design, construction, expansion, renovation, furnishing, or equipping of qualified school facilities, with a strong emphasis on net-zero energy buildings. Investors who hold SIFIA bonds would receive a federal income tax credit equal to 25% of the bond’s annual credit, applied on designated credit allowance dates during each taxable year, effectively subsidizing the cost of raising capital for school projects. The program is subject to annual and total borrowing limits, allocation rules, and strict spend-out requirements, and includes reporting and oversight provisions to ensure project goals (including energy performance and student outcomes) are tracked. In short, the bill would use federal tax credits to attract private investment for school infrastructure projects, especially net-zero energy buildings, while imposing caps, performance, and reporting conditions to control costs and ensure the money is spent on qualifying facilities.
Key Points
- 1Creation and mechanics of SIFIA bonds: A new Subpart K authorizes SIFIA bonds, with a 25% annual credit on the bond’s face amount for each credit allowance date (March 15, June 15, September 15, December 15). The credit is the amount allowed against a taxpayer’s regular federal tax liability, and unused credits can carry forward to future years. The credit calculation uses an annual credit determined by an “applicable credit rate” chosen by the Secretary to allow issuance without discount or interest costs to the issuer.
- 2Private-for-profit, net-zero school facilities; 6-year expenditure rule: SIFIA bonds finance projects where a private, for-profit entity designs, finances, operates (at least until the facilities are in service and functioning at design level), and then transfers the facilities to the school district for no additional consideration. All financed buildings must be net-zero energy buildings, and 100% of available proceeds must be spent within six years, or nonqualified bonds must be redeemed. The private entity must meet allocation and reporting requirements, and the project must meet specific energy and performance criteria.
- 3Program size, allocation, and rural set-aside: The program places hard caps on bond issuance—up to $10 billion total, with up to $2.5 billion in designated bonds per calendar year. At least $1 billion of the overall cap is reserved for rural projects. Allocation is first-come, first-served, with rules to limit per-district allocations (no more than $1.5 billion per district) and per-project allocations for nonprofit-operated facilities. Preference is given to financings where the private for-profit developer is a “preferred concern” (small business, minority-owned, or woman-owned).
- 4Requirements for private entities and reporting: To qualify, the private entity must have demonstrated experience with net-zero, publicly funded school projects and with leasing school facilities to a local education agency. The entity must periodically report to the Secretary on costs and benefits, including tax benefits to the federal government, cost savings for the district, and any impacts on student performance or teacher retention.
- 5Tax and structural rules; direct purchases; effective date: Interest on SIFIA bonds would be includible in gross income, but the credit is treated as interest for purposes of the tax code. SIFIA bonds would not be federally guaranteed, and the yield is determined without regard to the credit. The Secretary could directly purchase any unsold SIFIA bonds. The bill applies to obligations issued after December 31, 2025.