Washington, D.C. – The Association of Metropolitan Water Agencies (AMWA) applauds the reintroduction of the bipartisan Financing Lead Out of Water Act of 2025 (FLOW Act). This legislation will make it easier for drinking water systems nationwide to finance the replacement of lead service lines with tax-exempt bonds. As water systems initiate programs to identify and remove lead service lines in compliance with the 10-year federal regulatory deadline, bonds are a cost-effective financing tool for these projects.
The first version of the FLOW Act was introduced in 2022, after AMWA identified IRS regulations that make it more difficult for public water systems to finance the private side of lead service line replacement projects. This year’s version of the bill, introduced in the House and Senate on June 10, was sponsored by Rep. Claudia Tenney (R-N.Y.), Rep. Gwen Moore (D-Wisc.), Sen. Michael Bennet (D-Colo.), and Sen. Jim Justice (R-W.V.).
The FLOW Act would reduce IRS red tape by amending the tax code to simplify the process for public water systems to qualify for tax-exempt bonds for replacing the private portion of lead service lines. It does so by exempting qualified lead service line replacement projects from the “business use test,” which is a current requirement in order to finance a project with municipal bonds. The business use test is a process by which water systems certify to the IRS that proceeds from a bond do not benefit private businesses above a certain threshold. This process requires water systems to individually verify whether a business operates out of each residence with a planned private-side lead service line replacement, which has delayed implementation of these replacements and increased costs.
Denver Water, an AMWA member, went through this process when attempting to secure financing for its lead service line replacement program. The documentation required by the IRS added months of work and administrative expense for Denver. Through this experience, AMWA has worked with Congress to champion the FLOW Act as a solution to reduce burdens on water systems and complete these projects more efficiently in the future.
“Community water systems across the country are working hard to remove and replace lead service lines, but current IRS rules make it hard for utilities to finance these projects with tax-exempt bonds carrying the lowest interest rates,” said AMWA CEO Tom Dobbins. “The FLOW Act will simply allow these replacement projects to proceed more quickly, while minimizing costly interest charges that are ultimately borne by ratepayers. AMWA commends Rep. Tenney and Sen. Bennet for their leadership on this issue.”
On June 6, AMWA led a letter of support for the FLOW Act to Representatives Tenney and Moore, and Senators Bennet and Justice, signed by seven organizations from the water sector, local government, and public finance. Passage of the legislation is a top legislative priority for AMWA, as water systems across the country are ramping up efforts to replace all lead service lines in compliance with federal regulations.
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The Association of Metropolitan Water Agencies (AMWA) has been the unified and definitive voice for the nation's largest publicly owned water systems for over 40 years. AMWA's membership serves more than 160 million people with safe drinking water.
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