New SIFIA Bonds Offer $10 Billion Tax Credit for Net-Zero School Construction, Starting 2026

The School Infrastructure Finance and Innovation Act (SIFIA Act) introduces a new, highly specific way to fund school construction: the SIFIA bond. If you’re a taxpayer, here’s the deal: this bill uses federal tax credits—up to $10 billion total—to encourage private companies to build or renovate public schools. The catch? These schools must be expected to be “net-zero energy buildings,” meaning they produce as much energy as they consume, and the bonds can only be issued starting in 2026 (SEC. 2).

The Trade-Off: Tax Credits for Green Schools

This isn't your standard municipal bond. Instead of paying interest, SIFIA bondholders get a federal tax credit, calculated quarterly, based on 25% of the bond's annual credit (SEC. 2). The Treasury Secretary is tasked with setting the underlying rate so these bonds can be sold without paying traditional interest. For investors, this tax credit is valuable because if it exceeds their tax bill for the year, they can carry the remainder forward. However, the credit itself is treated as taxable income, meaning the federal government is essentially subsidizing the construction through the tax code.

The Public-Private Mandate

The most distinctive feature of SIFIA is the required public-private partnership structure. To qualify, 100% of the bond money must fund a project where a private, for-profit company designs, builds, and operates the school for a period before transferring it for free to the local school district (SEC. 2). This means districts get a new, high-tech, energy-efficient building without the initial capital outlay, but they rely heavily on the private developer’s expertise and solvency during the operational phase.

Crucially, the private company needs serious credentials. They must prove to the Secretary that they have experience developing, owning, and operating net-zero public schools, including managing key systems (like solar or HVAC) and paying utility bills for at least two prior projects for a minimum of four years (SEC. 2). This high barrier to entry could favor large, established developers, even though the bill gives allocation preference to “preferred concerns”—small, minority-owned, or woman-owned businesses.

Where the Money Goes: Caps and Rural Focus

There’s a hard limit on this program: only $10 billion in SIFIA bonds can ever be designated. No more than $2.5 billion can be issued in any single year, which means the funding will roll out slowly. If you live in a rural area, pay attention: $1 billion of that total is specifically reserved for projects in your community. However, no single school district can grab more than $1.5 billion total, ensuring the funds are spread across multiple projects (SEC. 2).

If you’re a private developer, you need to be quick. The Secretary allocates the bond amounts on a first-come, first-served basis. And once the bond is issued, the project must spend all the proceeds within six years. If they don't, the issuer has to buy back the unspent portion of the bonds within 90 days. This six-year clock puts pressure on developers to move quickly and efficiently, which is often a challenge in large-scale construction.

The Treasury as Backstop: A Safety Net for Investors

One provision that stands out is the mandate that the Secretary of the Treasury must step in and purchase SIFIA bonds if the issuer can’t sell them otherwise (SEC. 2). This acts as a government guarantee, making the bonds more attractive to investors by reducing market risk. While this ensures the bonds sell and the schools get built, it also means that if the market doesn't value these bonds highly, the federal government—and by extension, the taxpayers—will be the ones holding the bag, potentially exposing the Treasury to significant financial risk.