On November 15, President Biden signed the Infrastructure Investment and Jobs Act (PL 117-58) in the law. This law introduces more than $ 550 billion in new infrastructure spending on top of re-authorizations of existing programs for a total of $ 1.2 trillion in federal infrastructure investments in local communities over the next eight years. Expenses cover broadband infrastructure; air quality improvements; repair and reconstruction of roads, bridges and tunnels; railroad and transit improvements; and drinking water supply infrastructure.
The law amends the tax-exempt bond provisions of the Internal Revenue Code (Code) to improve the funding options available to state and local governments to meet identified infrastructure needs. Specifically, the package adds two new categories of private activity obligations (PABs) of exempt facilities and an additional volume cap for transport PABs.
Here’s what you need to know about the new PAB provisions:
Broadband projects. The law introduces qualifying broadband projects as a new category of PAB of facilities exempt under Section 142 (a) of the Code. Eligible broadband projects include facilities for the provision of broadband Internet access to census tracts in which a majority of households do not have broadband access before the date of issuance of the eligible bonds. In particular, this new category of PAB benefits from a 75% exemption from the volume cap requirements for private projects and a 100% exemption from the volume cap for public projects.
Carbon capture facilities. The Act also adds carbon dioxide capture facilities that qualify as a new category of PAB of facilities exempt under section 142 (a) of the Code. Qualified carbon capture facilities include key clean energy technologies such as eligible components of industrial carbon dioxide emitting facilities used to capture and process carbon dioxide, and direct air capture facilities. An eligible component is further defined by the Act as any equipment used to capture, process or store carbon dioxide produced by industrial carbon dioxide facilities or that is related to the conversion of coal and gas by-products. in syngas. Article 45Q (e) of the Code, relating to the commercial tax credit for carbon capture, defines a direct air capture installation as any installation that uses carbon capture equipment to capture carbon dioxide. directly into the air. Together, these technologies aim to capture and sequester emissions produced by power plants and industrial facilities that contribute to climate change. This new category of PAB of exempt installations also benefits from a 75% exemption from the volume cap requirements for eligible projects. However, as partial compensation, any carbon capture credit otherwise available is reduced by up to half if bonds are issued under this provision to fund qualifying assets.
Qualified transport PABs. In addition, the law adds $ 15 billion to the limit on the national volume available for qualified road or surface freight transfer facilities. The previous limit on the volume cap of $ 15 billion had been greatly exceeded. The limitation for qualified highway or surface freight facilities is available on request from the US Department of Transportation.