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Congressman Randy Hultgren

Representing the 14th District of ILLINOIS

Hultgren, Ruppersberger Introduce Bipartisan Infrastructure Legislation

Feb 13, 2018
Press Release
Reinstatement of advance refunding bonds would save millions of dollars for Illinois communities

Washington, DC — U.S. Representatives Randy Hultgren (R-IL-14) and C.A. Dutch Ruppersberger (D-MD-02) introduced legislation to restore the tax exemption for advance refunding bonds that was repealed in the Tax Cuts and Jobs Act. This financing tool allows states and local governments to take advantage of favorable interest rates to build essential infrastructure projects.

“States and local governments need flexibility for managing their finances so they can invest in infrastructure like roads, bridges, hospitals, libraries and schools to support our communities,” said Rep. Hultgren. “In recent years, tax-exempt advance refunding bonds have saved Illinois taxpayers $80 million per year on average. Given that interest rates are expected to increase, this tool is especially important to states and local governments responsibly planning for the future.”

“I’m proud to lead this bipartisan effort on behalf of local governments in Maryland who rely on this tool to finance projects that benefit everyone,” Congressman Ruppersberger said. “We need to do what we can to help local governments create jobs while building roads, schools, hospitals, fire and police stations. When counties can issue an advance refunding bond, it saves taxpayers billions nationwide – and an average of nearly $37 million annually here in Maryland. This can translate into lower property taxes.”

“Utilizing advance refunding bonds has saved my community almost $1 million dollars in the last five years, said Joseph Mancino, Mayor of the Village of Hawthorn Woods. “These savings have been passed on directly to our residents and would not have been possible without the use of tax-exempt bonds. I urge Congress to consider restoring the tax-exempt status of these bonds so that we may continue to invest in our critical infrastructure.”

“The City of Harvard has taken advantage of the benefits of this tool in years past to provide savings to bond holders when the situation of reduced interest rates has been realized,” said Michael Kelly, Mayor of the City of Harvard. “The loss of the tax-exempt status removes the additional incentive which helps make this an attractive tool and inhibits municipalities like the City of Harvard to better manage their debt service.”

“Local governments rely on many different financial tools to improve their communities,” said Brad Cole, Executive Director of the Illinois Municipal League. “Tax-exempt advance refunding bonds allow cities a one-time opportunity to refinance their debt, which then allows them to save money when lower interest rates are available.”

While the Tax Cuts and Jobs Act protected the vast majority of municipal bonds—a key tool to finance infrastructure projects—the law repealed the exclusion of interest income earned on advance refunding bonds from federal income taxation. This change to the tax code makes it more expensive for states and local governments to take advantage of a favorable interest rate environment.

Congressman Hultgren fought to preserve tax-exempt private activity bonds and advance refunding bonds during consideration of the Tax Cuts and Jobs Act. While the law preserved tax-exempt private activity bonds, the tax-exemption for advance refunding bonds expired December 31, 2017. This legislation would restore its tax-exempt status.

Original co-sponsors include Reps. Randy Hultgren (R-IL-14), C.A. Dutch Ruppersberger (D-MD-02), Luke Messer (R-IN-06), Ed Royce (R-CA-39), Dan Kildee (D-MI-06) and Michael Capuano (D-MA-07).

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