H.R. 3892 — Flow Act

This section establishes an exception to private business use restrictions on tax-exempt governmental bonds by providing that qualified lead service line replacement use does not constitute private business use. (As background, private business use restrictions generally limit tax-exempt governmental bonds—issued by state and local governments for public purposes—to no more than 10% of proceeds benefiting private parties, with violations reclassifying bonds as taxable private activity bonds subject to annual state volume caps.) Qualified lead service line replacement use means the use of bond proceeds by a public water system to replace any privately owned portion of a lead service line to comply with national primary drinking water regulations for lead; the provision applies to obligations issued after December 31, 2025. (Thus, public water systems may finance such replacements with tax-exempt bonds without those expenditures counting toward the private business use limit.)