minimis amount (determined under rules similar to the rules of section 1273(a)(3)) of premium over the stated principal amount of the bond. (d) Special rules (1) Interest on American infrastructure bonds includible in gross income for Federal income tax purposes For purposes of this title, interest on any American infrastructure bond shall be includible in gross income. (2) Application of arbitrage rules For purposes of section 148, the yield on an issue of American infrastructure bonds shall be reduced by the credit allowed under this section, except that no such reduction shall apply with respect to determining the amount of gross proceeds of an issue that qualifies as a reasonably required reserve or replacement fund. (e) Regulations The Secretary may prescribe such regulations and other guidance as may be necessary or appropriate to carry out this section. . (b) Conforming amendments (1) The table of sections for subchapter B of chapter 65 of subtitle F of the Internal Revenue Code of 1986 is amended by adding at the end the following new item: Sec. 6431. Credit to issuer of american infrastructure bonds. . (2) Subparagraph (A) of section 6211(b)(4) of such Code is amended by inserting 6431, after 6428B, . (c) Transitional coordination with state law Except as otherwise provided by a State after the date of the enactment of this Act, the interest on any American infrastructure bond (as defined in section 6431 of the Internal Revenue Code of 1986 (as added by this Act)) and the amount of any credit determined under such section with respect to such bond shall be treated for purposes of the income tax laws of such State as being exempt from Federal income tax. (d) Adjustment to payment to issuers in case of sequestration (1) In general In the case of any payment under subsection (b) of section 6431 of the Internal Revenue Code of 1986 (as added by this Act) made after the date of enactment of this Act to which sequestration applies, the amount of such payment shall be increased to an amount equal to— (A) such