The American Infrastructure Bonds Act of 2025 creates a federal tax credit for state and local governments that issue bonds to finance infrastructure projects. Under the bill, the federal government would reimburse bond issuers for 28 percent of the interest payments they owe to investors, effectively reducing the cost of borrowing for public infrastructure. The legislation applies to traditional tax-exempt municipal bonds used for infrastructure—excluding bonds for private activities—and gives state and local governments the option to elect this credit program. The bill takes effect for bonds issued after its enactment and includes a safeguard to ensure that if automatic spending reductions (sequestration) occur, the government will increase reimbursements to compensate issuers for any reduced payments. This approach aims to make infrastructure financing cheaper and more attractive for states and municipalities by having the federal government share the interest burden.
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