Coalition pushes Congress to reinstate advance refunded bonds

Last week, water sector organizations joined a broad coalition of stakeholders asking members of Congress to support legislation to reinstate the ability of communities to issue tax-free advance refunded bonds, several months after the new tax reform bill eliminated this cost-saving option.

Water groups participating in the coalition’s efforts include the American Water Works Association (AWWA), the Association of Metropolitan Water Agencies (AMWA), National Association of Clean Water Agencies (NACWA) and the WateReuse Association.

The letter requested support for passage of H.R. 5003, a bill that would reinstate the federal tax exemption on interest earned on advance refunded bonds. Before the recent tax reform, federal law gave communities a one-time opportunity to advance refund a bond and reissue new tax-free municipal debt when interest rates fell, thereby reducing interest costs by effectively allowing cities and towns to refinance tax-exempt bonds. However, last year, Congress ended the tax exemption for interest earned on advance refunded bonds, thus reducing their attractiveness to investors and their savings potential to communities.

Republican congressional leaders are not eager to roll back portions of the tax code overhaul they approved last year, but continued advocacy in support of H.R. 5003 could prompt Congress to revisit the advance refund issue in the future.

Source: AMWA

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