Investing in Our Communities Act

Key Points

• This bill reinstates advance refunding bonds, a financing tool that was eliminated by the 2017 Tax Cuts and Jobs Act. Advance refunding lets state and local governments refinance their existing bonds before the original call date, similar to how a homeowner refinances a mortgage to lock in a lower interest rate.
• The bill restores the ability for governments to do one advance refunding per bond issued after 1985, or up to two for bonds issued before 1986. This gives local officials a tool to reduce debt payments on projects like schools, roads, and water systems, freeing up money for other community needs.
• The bill includes safeguards against abuse. Bonds cannot be used for advance refunding if the transaction is designed to gain a financial advantage through arbitrage rather than genuine interest rate savings.
• Private activity bonds (except qualified 501(c)(3) bonds) are still excluded from advance refunding. This means non-profit hospitals, universities, and similar organizations can benefit, but private developers using tax-exempt bonds generally cannot.
• The bill has bipartisan support, introduced by Republicans Kustoff and Yakym alongside Democrats Moore and Panetta. The changes would apply to advance refunding bonds issued after the bill becomes law.