President Donald Trump’s One Big Beautiful Bill Act, which he signed into law earlier this month, preserves the current tax-exempt status of municipal bond interest — an important affordable infrastructure financing tool for water systems. Groups representing utilities called it a victory for the water sector.
The Association of Metropolitan Water Agencies, which represents large drinking water systems, has worked with other organizations to educate lawmakers on the significance of tax-exempt municipal bond interest, and warned that phasing out the interest exemption could increase local debt service costs by 25%. AMWA said there had been concern that tax-exempt municipal bond interest could be rolled back or eliminated, but ultimately neither the House or Senate version of the budget reconciliation bill made changes to the current tax status.
In addition, AMWA said the final ‘One Big Beautiful Bill’ moves up expirations of federal tax credits for investments in wind and solar power generation. However, existing tax incentives for other clean energy projects (involving resources like biogas and micro-hydropower) would remain in place through 2032.
The ‘One Big Beautiful Bill’ also includes an additional $1 billion for the U.S. Bureau of Reclamation. That money will support projects to increase the capacity of existing water storage facilities and an extension of the USDA Grassroots Source Water Protection Program, which addresses pollution of rural drinking water sources.
The National Association of Clean Water Agencies, which also follows legislation for public water utility financing, also described the securing of municipal bond interest as a positive for the sector. NACWA represents public wastewater and combined water/wastewater districts and authorities.
Sources: AMWA, NACWA
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