Broadband Bonds and Carbon Capture Bonds: Two New Tax-Exempt Bond Categories in Bipartisan Infrastructure Bill

Two new categories of tax-exempt bonds were created by the Infrastructure Investment and Jobs Act (H.R. 3684) (the Act) adopted by the House on Nov. 6, 2021: “Qualified Broadband Projects” and “Carbon Dioxide Capture Facilities.” In addition to the many infrastructure spending authorizations and the expansion of qualified private activity bond categories under the Internal Revenue Code (IRC), the Act also increases the nationwide volume cap for qualified highway or surface freight transportation facilities bonds from $15 billion to $30 billion. President Joe Biden announced that he will sign the bill this week.

“Qualified broadband projects” generally include broadband service to rural areas where at least 50% of the residential households do not have access to fixed service, as well as projects designed to provide higher speed broadband services in areas where no service is provided or the current service falls below certain minimum requirements. Qualified broadband projects bonds will be 75% exempt from volume cap and government-owned broadband projects will not be subject to volume cap. This amendment will go into effect in 2022 and apply to all bonds issued after Dec. 31, 2021.

“Qualified carbon dioxide capture facilities,” the other new type of exempt facility bond under Section 142 of the IRC, are either stand-alone facilities that capture carbon dioxide from ambient air, or equipment installed at certain industrial facilities that emit carbon dioxide as a result of their operations, which equipment captures and handles carbon dioxide or is part of a process that produces synthesis gas composed primarily of carbon dioxide and hydrogen. The carbon and direct air capture equipment remove carbon dioxide and other “noxious chemicals” from a facility’s emissions and help to purify the emission stream of the facility. Qualified carbon dioxide capture facilities will also be 75% exempt from volume cap. This amendment will likewise go into effect in 2022 and apply to all bonds issued after Dec. 31, 2021.

For assistance in determining whether your broadband or carbon capture project may be eligible for tax-exempt financing under these new provisions in the IRC, please contact your Dinsmore attorney.