Lead-Free America Bonds Act of 2021
This bill allows issuers of qualified lead drinking water service line bonds a credit for interest payments under such bonds. The bill defines qualified lead drinking water service line bond as any bond issue (other than a private activity bond) if 100% of the available project proceeds of such issue are used to replace lead components of one or more eligible public water systems that are not lead free.
To amend the Internal Revenue Code of 1986 to provide for direct-pay 
  credit bonds in the case of certain bonds the proceeds of which are 
     used for the replacement of lead drinking water service lines.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Lead-Free America Bonds Act of 
2021''.

SEC. 2. CREDIT TO ISSUER FOR LEAD DRINKING WATER SERVICE LINE BONDS.

    (a) In General.--Subchapter B of chapter 65 of the Internal Revenue 
Code of 1986 is amended by adding at the end the following new section:

``SEC. 6431. CREDIT ALLOWED TO ISSUER FOR LEAD DRINKING WATER SERVICE 
              LINE BONDS.

    ``(a) In General.--In the case of a qualified lead drinking water 
service line bond, the issuer of such bond shall be allowed a credit 
with respect to each interest payment under such bond which shall be 
payable by the Secretary as provided in subsection (b).
    ``(b) Payment of Credit.--
            ``(1) In general.--The Secretary shall pay 
        (contemporaneously with each date on which interest is so 
        payable) to the issuer of such bond (or to any person who makes 
        such interest payments on behalf of such issuer) an amount 
        equal to so much of such interest that is payable at a rate not 
        in excess of the applicable interest rate determined under 
        paragraph (2).
            ``(2) Applicable interest rate.--
                    ``(A) In general.--The applicable interest rate 
                determined under this paragraph for any qualified lead 
                drinking water service line bond shall be the rate 
                which the Secretary estimates will permit the issuance 
                of qualified lead drinking water service line bonds 
                with a specified maturity or redemption date without 
                discount and without additional interest cost.
                    ``(B) Procedure for rate determinations.--
                            ``(i) In general.--Such rate with respect 
                        to any qualified lead drinking water service 
                        line bond shall be determined as of the first 
                        day on which there is a binding, written 
                        contract for the sale or exchange of the bond.
                            ``(ii) Method and frequency.--For purposes 
                        of this paragraph, the Secretary will determine 
                        and announce credit rates daily for qualified 
                        lead drinking water service line bonds based on 
                        the Secretary's estimate of the yields on 
                        outstanding bonds from market sectors selected 
                        at the discretion of the Secretary that, for 
                        the business day immediately preceding the sale 
                        date of the bonds, have an investment grade 
                        rating of between A and BBB for bonds of a 
                        similar maturity and for which the interest 
                        would be included in gross income.
    ``(c) Qualified Lead Drinking Water Service Line Bond.--
            ``(1) In general.--For purposes of this section, the term 
        `qualified lead drinking water service line bond' means any 
        bond (other than a private activity bond) issued as part of an 
        issue if--
                    ``(A) 100 percent of the available project proceeds 
                of such issue are to be used for replacing lead 
                components of 1 or more eligible public water systems 
                that are not lead free, including any publicly or 
                privately owned portion of a lead service line of the 
                eligible public water system,
                    ``(B) the interest on such bond would (but for this 
                section) be excludable from gross income under section 
                103,
                    ``(C) the issue price has not more than a de 
                minimis amount (determined under rules similar to the 
                rules of section 1273(a)(3)) of premium over the stated 
                principal amount of the bond, and
                    ``(D) prior to the issuance of such bond, the 
                issuer makes an irrevocable election to have this 
                section apply.
        Except upon approval by the Environmental Protection Agency for 
        circumstances in which there are emergent public health risks, 
        none of the available project proceeds of such issue shall be 
        used for a partial lead service line replacement.
            ``(2) Applicable rules.--For purposes of applying paragraph 
        (1)--
                    ``(A) Not treated as federally guaranteed.--For 
                purposes of section 149(b), a qualified lead drinking 
                water service line bond shall not be treated as 
                federally guaranteed by reason of the credit allowed 
                under this section.
                    ``(B) Application of arbitrage rules.--For purposes 
                of section 148, the yield on a qualified lead drinking 
                water service line bond shall be reduced by the credit 
                allowed under this section.
    ``(d) Definition and Special Rules.--For purposes of this section--
            ``(1) Interest includible in gross income.--For purposes of 
        this title, interest on any qualified lead drinking water 
        service line bond shall be includible in gross income.
            ``(2) Eligible public water system.--
                    ``(A) In general.--The term `eligible public water 
                system' means, with respect to any bond--
                            ``(i) in the case of a public water system 
                        with respect to which the owner or operator 
                        was, during the 6-year period preceding the 
                        date of enactment of the Lead-Free America 
                        Bonds Act of 2021, required to give lead action 
                        level notice, such bond was issued during the 
                        3-year period subsequent to the date of 
                        enactment of such Act, or
                            ``(ii) in the case of a public water system 
                        with respect to which the owner or operator 
                        was, at any time subsequent to the date of 
                        enactment of the Lead-Free America Bonds Act of 
                        2021, required to give lead action level 
                        notice, such bond was issued during the 3-year 
                        period subsequent to such notice.
                    ``(B) Public water system.--The term `public water 
                system' has the meaning given such term in section 
                1401(4) of such Act (42 U.S.C. 300f(4)).
                    ``(C) Lead free.--The term `lead free' has the 
                meaning given such term in section 1417(d) of such Act 
                (42 U.S.C. 300g-6(d)).
                    ``(D) Lead service line.--The term `lead service 
                line' has the meaning given such term in section 
                1459B(a)(4) of such Act (42 U.S.C. 300j-19b(a)(4)).
                    ``(E) Lead action level notice.--The term `lead 
                action level notice' means notice under section 
                1414(c)(1)(D) of the Safe Water Drinking Act (42 U.S.C. 
                300g- 3(c)(1)(D)) that the public water system exceeded 
                the lead action level.
            ``(3) Failure to spend required amount of bond proceeds 
        within 5 years.--
                    ``(A) In general.--If at the close of the 5-year 
                period beginning on the date of issuance less than 100 
                percent of the available project proceeds of the issue 
                are expended for the purposes specified in subsection 
                (c)(1)(A), the issuer shall redeem all of the 
                nonqualified bonds within 90 days after the end of such 
                period. For purposes of this paragraph, the amount of 
                the nonqualified bonds required to be redeemed shall be 
                determined in the same manner as under section 142.
                    ``(B) Extension of period.--Upon submission of a 
                request prior to the expiration of the 5-year period 
                under subparagraph (A), the Secretary may extend such 
                period if the issuer establishes that the failure to 
                expend the proceeds within such period is due to 
                reasonable cause and the expenditures for the purposes 
                described in subsection (c)(1)(A) will continue to 
                proceed with due diligence.
            ``(4) Available project proceeds.--The term `available 
        project proceeds' means--
                    ``(A) the excess of--
                            ``(i) the proceeds from the sale of an 
                        issue, over
                            ``(ii) the sum of--
                                    ``(I) issuance costs financed by 
                                the issue (the extent that such costs 
                                do not exceed 2 percent of such 
                                proceeds), and
                                    ``(II) amounts in a reasonably 
                                required reserve (within the meaning of 
                                section 150(a)(3)) with respect to such 
                                issue), and
                    ``(B) the proceeds from any investment of the 
                excess described in clause (i).
            ``(5) Current refundings allowed.--
                    ``(A) In general.--In the case of a bond issued to 
                refund a qualified lead drinking water service line 
                bond, such refunding bond shall be treated as a 
                qualified lead drinking water service line bond for 
                purposes of this section if--
                            ``(i) the average maturity date of the 
                        issue of which the refunding bond is a part is 
                        not later than the average maturity date of the 
                        bonds to be refunded by such issue,
                            ``(ii) the amount of the refunding bond 
                        does not exceed the outstanding amount of the 
                        refunded bond, and
                            ``(iii) the refunded bond is redeemed not 
                        later than 90 days after the date of the 
                        issuance of the refunding bond.
                    ``(B) Determination of average maturity.--For 
                purposes of subparagraph (A)(i), average maturity shall 
                be determined in accordance with section 147(b)(2)(A).
            ``(6) Application of davis-bacon act requirements with 
        respect to qualified lead drinking water service line bonds.--
        Subchapter IV of chapter 31 of title 40, United States Code, 
        shall apply to projects financed with the proceeds of qualified 
        lead drinking water service line bonds (other than bonds issued 
        to refund a bond originally issued before the date of the 
        enactment of this Act).
    ``(e) Regulations.--The Secretary may prescribe such regulations 
and other guidance as may be necessary or appropriate to carry out this 
section.''.
    (b) Payments Made Under Section 6431 of the Internal Revenue Code 
of 1986.--Section 255(g)(1)(A) of the Balanced Budget and Emergency 
Deficit Control Act of 1985 (2 U.S.C. 905(g)(1)(A)) is amended by 
inserting: ``Payments made under section 6431 of the Internal Revenue 
Code of 1986'' after the item related to Payment to Radiation Exposure 
Compensation Trust Fund.
    (c) Clerical Amendment.--The table of sections for subchapter B of 
chapter 65 of the Internal Revenue Code of 1986 is amended by adding at 
the end the following new item:

``Sec. 6431. Credit allowed to issuer for qualified lead drinking water 
                            service line bonds.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to bonds issued more than 30 days after the date of the enactment 
of this Act.
                                 <all>
Lead-Free America Bonds Act of 2021
A bill to amend the Internal Revenue Code of 1986 to provide for direct-pay credit bonds in the case of certain bonds the proceeds of which are used for the replacement of lead drinking water service lines.
Lead-Free America Bonds Act of 2021
Sen. Menendez, Robert