A bill to amend the Internal Revenue Code of 1986 to restore treatment of State and local bonds which are guaranteed by a Federal home loan bank as not federally guaranteed for purposes of determining their tax-exempt status.

# Bill Summary: S 3941 - State and Local Bond Tax-Exempt Status **What the Bill Would Do** This bill would change how the federal government treats certain state and local bonds (loans that cities and states issue to raise money) that are backed by Federal Home Loan Banks. Currently, these bonds are classified as "federally guaranteed," which affects their tax status. The bill would reclassify them so they're treated as if they were *not* federally guaranteed.

This distinction matters because it affects whether the interest earned on these bonds is taxed at the federal level. **Who It Affects** The primary beneficiaries would be state and local governments that issue bonds through Federal Home Loan Banks, as well as investors who buy these bonds. By restoring tax-exempt status, the bill could make these bonds more attractive to investors (since earnings wouldn't be federally taxed), potentially making it cheaper for states and municipalities to borrow money for housing and infrastructure projects. **Current Status** S 3941 is currently in committee, meaning it has been introduced but has not yet been voted on by the full Senate. It was sponsored by Senator Catherine Cortez Masto (D-Nevada).