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American infrastructure bond

A new type of bond issued by state and local governments to fund public projects, where the federal government directly pays 28% of the interest to the issuer, and the interest earned by investors is subject to federal tax.

Tax credit

A direct reduction in the amount of tax owed or, in this context, a direct payment from the government to an entity.

Issuer

The entity (like a state or local government) that creates and sells bonds to borrow money.

Internal Revenue Code (IRC)

The body of law that contains all federal tax laws in the United States.

Private activity bond

A type of bond issued by state or local governments where more than a small percentage of the bond proceeds are used by a private business, or the debt is repaid primarily from private sources. Interest on these bonds is often taxable.

Sequestration

Automatic, across-the-board spending cuts to federal programs, typically triggered if Congress fails to meet certain budget targets.

Gross income

All income from any source, including (but not limited to) wages, salaries, commissions, tips, and interest earned.