Cities and states would once again be able to advance refund their bonds on a tax-exempt basis if a bill floated by a Democrat and Republican senator becomes law.
Sen. Roger Wicker, R-Miss., and Sen. Michael Bennet, D-Colo., on Wednesday introduced the Lifting Our Communities through Advance Liquidity for Infrastructure, or LOCAL Infrastructure Act, of 2025. The bill would amend the current federal tax code to restore state and local governments' ability to advance refund tax-exempt bonds.
The measure follows a
"Restoring advance refunding would help community leaders manage their existing debts and allow for more investment to improve their existing infrastructure," Wicker said. "Local leaders know what their states need best, and it's important to give them the resources to ensure their community's success."
It's the latest in a series of legislative efforts to restore the tool to the municipal bond market, which lost tax-exempt advance refunding in the 2017 Tax Cuts and Jobs Act. For several years, regaining the tool remained a top muni lobby priority — but the new legislation comes as the industry is now fighting to preserve the tax-exemption on all municipal bonds, which some fear are in lawmakers' crosshairs as Congress crafts a major tax reform package.
Before the ability was eliminated, advance refunding represented about 20% of bond activity.
Wicker and a bipartisan group of senators and representatives also introduced the Local act in 2020, 2021 and 2023.
None of the previous bills gained traction, and the fate of this year's version remains uncertain as the muni market fends off larger threats to the bond's tax exemption.
The Securities Industry and Financial Markets Association thanked Wicker and Bennett for the bill. "Our nation benefits by allowing for a robust capital market to flourish, which in turn helps local communities build affordable infrastructure specifically related to their needs," said SIFMA President Kenneth Bentsen. "Reinstating the prior tax-exemption for advance refunding bonds is essential to making that happen and the LOCAL Infrastructure Act does just that."
The National Association of Counties also weighed in supporting the measure. "Tax-exempt municipal bonds are a critical tool enabling counties to finance infrastructure projects for our communities" said National Association of Counties Executive Director Matthew Chase. The bill would "give counties the flexibility to respond to market conditions and lower borrowing costs for residents."
