Senate introduces FLOW Act to streamline LSL replacement financing

A Senate version of the Financing Lead Out of Water (FLOW) Act was introduced last week after months of work by water sector stakeholders. The legislation, which has a companion bill in the House of Representatives, is sponsored by Sen. Michael Bennet (D-Colo.), and was introduced with the support of six original Senate co-sponsors.

The bill was developed by the Association of Metropolitan Water Agencies (AMWA) earlier this year. According to AMWA, it comes in response to the experience of Denver Water after the utility tried to use tax-exempt debt to finance lead service line replacement on both the public and homeowner side. But Denver Water faced IRS rules that require documentation of how many private businesses operated out of homes where a private lead service line was to be replaced. According to Denver Water, this process added cost and months of administrative work to the project.

The FLOW Act would amend Section 141 of the federal tax code to allow public water systems to pay for the replacement of privately-owned lead service lines with tax-exempt bonds, without first navigating IRS’ “private business use test.” Currently, water systems must certify to IRS that proceeds from a tax-exempt debt issuance do not benefit private entities above a certain threshold – a requirement that in practice has meant that water systems must verify whether a business operates out of any residence with a privately owned lead service line that would be replaced with those funds.

The FLOW Act was first introduced in the House of Representatives in March with strong industry support including from AMWA and the American Water Works Association (AWWA). The Senate version of the bill is identical to the House measure, AMWA says.

This legislation would serve as another significant step forward in protecting public health. I commend Sen. Bennet on his extensive efforts to develop this legislation and his recognition of its importance to the nationwide work to eliminate exposure to lead in drinking water. The senator continues to be a leader on this critical issue and we thank him for his ongoing focus,” said Jim Lochhead, CEO of Denver Water.

While passage of the Senate measure and its House companion is not certain before the end of the year, AMWA has said it plans to enlist its members to help build support for the proposal on Capitol Hill and position it for inclusion in a future package of tax legislation.

Sources: AMWA, AWWA. Some information contained in this news piece was first reported in the Association of Metropolitan Water Agencies’ Monday Morning Briefing.

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