States and cities get cheaper refinancing tool back—saving on debt costs

What it does

This bill reinstates the federal tax exemption for advance refunding bonds—a financing tool that allows state and local governments to refinance existing municipal bonds at lower interest rates to save money. The bill restores rules that were previously restricted, permitting municipalities to issue new tax-exempt bonds to pay off older bonds early, with safeguards against abuse (limits on how many times a bond can be refinanced, requirements for genuine debt-service savings, and restrictions on arbitrage profits). The primary beneficiaries are state and local governments seeking to reduce borrowing costs and free up funds for public services.

Why we flagged it

The bill's sole operative mechanism is to restore a specific tax-code provision governing advance refunding bonds—a technical municipal finance instrument. It is not a broad tax cut or subsidy, but a restoration of a prior financing mechanism with embedded safeguards.

What the text implies

• Reinstatement may increase demand for municipal bond underwriting and advisory services, benefiting investment banks and financial advisors who structure these deals.
• Lower municipal refinancing costs could reduce pressure on state/local budgets to cut services or raise taxes, with indirect benefits to public employees and service recipients.
• The bill's safeguards (debt-service-savings requirement, arbitrage restrictions) may limit the tool's use to genuinely cost-saving scenarios, reducing speculative refinancing.

Section numbers refer to the bill text the analysis read — linked under Primary records below.

Who it affects

State and local governments can refinance debt at lower rates, reducing long-term borrowing costs and freeing resources for public services, schools, and infrastructure. The bill includes safeguards (limits on refunding frequency, arbitrage restrictions, debt-service-savings requirements) to prevent abuse, protecting the tax-exempt bond market's integrity.

Who stands to gain

• state and local governments
• municipal bond underwriters
• financial advisors and bond counsel

Named in the bill

Internal Revenue Code of 1986, Section 149(d), Section 148, state and local governments, municipal bonds, private activity bonds, qualified 501(c)(3) bonds

Where it stands

7 cosponsors: 4 Democrats, 3 Republicans.

• Feb 12, 2025 — Introduced · Congress.gov: “Introduced in House”
• Feb 12, 2025 — Referred to House Committee on Ways and Means · Congress.gov: “Referred to the House Committee on Ways and Means”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.

Money around this bill

19 lobbying clients named this bill on 31 disclosure filings across 2 quarters, Dec 2025 to Jun 2026. Those filings disclosed $8,431,578 in lobbying spend. A filing names 14 bills on average, so that figure is what each filing reported, not a share belonging to this bill.

More lobbying clients named this bill than 96% of bills with at least one filing.

David Kustoff, the sponsor, reported $1,066,250 in PAC receipts in the 2026 cycle.

• Securities Industry and Financial Markets Association — $5,090,000 on 2 filings
• American Public Transportation Association — $1,100,000 on 2 filings
• Airports Council International -- North America — $775,201 on 1 filing
• American Public Power Association — $310,000 on 1 filing
• Salt River Project — $250,000 on 1 filing

Lobbying Disclosure Act filings through Jul 20, 2026. A filing shows who paid to lobby on a bill it names, not what changed.