In early March, Democrats Dan Kildee (D-MI) and Senator Michael Bennett (D-CO) reintroduced their “Financing Lead Out of Water (FLOW) Act,” which would amend the Federal Tax Code to allow public water systems to pay for replacement of privately owned Lead Service Lines (LSL) with tax-exempt bonds.

Currently, in order to qualify for tax exempt bonds, water system replacement efforts by large municipalities must pass the IRS’ “private business use test” to access tax-exempt bonds. Under the test, municipalities must certify that the funds will not be used to benefit private business above a certain threshold.

The FLOW Act would amend Section 141 of the Tax Code to exempt qualified LSL replacement projects from the business use test, and allow water systems to cover the cost of replacing any privately owned service line.

The Bill is designed ease LSL replacement costs in advance of the EPA’s expected update to its drinking water Lead and Copper Rule that is expected to include a strict replacement requirement.

The draft Bill has the support of the Association of Metropolitan Water Agencies (AMWA) which has urged legislators to support it in order to facilitate their efforts to remove and replace LSLs. For more information, please contact one of the attorneys in SGR’s Environmental Practice.