To amend the Internal Revenue Code of 1986 to encourage new school construction through the creation of a new class of bond.

Summary: Expand and Rebuild America's Schools Act of 2006 - Amends the Internal Revenue Code to allow a nonrefundable tax credit to holders of school construction bonds. Sets forth requirements for issues of school construction bonds, including that: (1) 95% of the proceeds of such bonds must be used to construct new elementary and secondary school facilities and provide equipment for such schools; (2) local education agencies must require private business contributions of not less than 10% of the proceeds of an issue; and (3) bonds must be used for schools which meet specified criteria relating to curriculum, the alleviation of classroom overcrowding, and student-teacher ratios. Provides for a national school construction bond limitation of $400 million in 2007 and 2008.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Expand and Rebuild America's Schools 
Act of 2006''.

SEC. 2. FINDINGS.

    The Congress finds the following:
            (1) The National Center for Education Statistics projects 
        that public school enrollment will reach 53,000,000 in 2010, an 
        increase of 3,500,000 from the 2003 enrollment level. Many 
        States and school districts will need to build new schools in 
        order to accommodate this increase in student enrollments.
            (2) In response to reduced class mandates enforced by State 
        governments and increased enrollment, many school districts 
        have been forced to utilize temporary classrooms and other 
        structures to accommodate increased school populations, along 
        with resorting to year-round schedules for students.
            (3) Research has proven a direct correlation between the 
        condition of school facilities and student achievement. 
        Research has shown that students assigned to schools in poor 
        condition can be expected to fall 10.9 percentage points behind 
        those in buildings in excellent condition. Similar studies have 
        demonstrated up to a 20 percent improvement in test scores when 
        students were moved from a school with poor facilities to a new 
        facility.
            (4) While school construction and maintenance are primarily 
        a State and local concern, States and communities have not, on 
        their own, met the increasing burden of providing acceptable 
        school facilities, and the poorest communities have had the 
        greatest difficulty meeting this need.
            (5) Many local educational agencies have difficulties 
        securing financing for school facility construction and 
        renovation, especially in States that require a \2/3\ majority 
        of voter approval for the passage of local bond initiatives.
            (6) The Federal Government, by providing interest subsidies 
        and similar types of support, can lower the costs of State and 
        local school infrastructure investment, creating an incentive 
        for businesses to support local school infrastructure 
        improvement efforts.
            (7) The United States competitive position within the world 
        economy is vulnerable if America's future workforce continues 
        to be educated in schools not equipped for the 21st century. 
        America must do everything in its power to properly educate its 
        people to compete in the global marketplace.

SEC. 3. PURPOSES.

    The purposes of this Act are--
            (1) to encourage public-private partnerships for the 
        financing of school construction and expansion, and
            (2) to help local educational agencies bring all public 
        school facilities up to an acceptable standard and build the 
        additional classrooms needed to educate the growing number of 
        students who will enroll in the next decade.

SEC. 4. CREDIT TO HOLDERS OF SCHOOL CONSTRUCTION BONDS.

    (a) In General.--Subpart B of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business-related 
credits) is amended by adding at the end the following new section:

``SEC. 30D. CREDIT TO HOLDERS OF SCHOOL CONSTRUCTION BONDS.

    ``(a) Allowance of Credit.--In the case of an eligible taxpayer who 
holds a school construction bond on the credit allowance date of such 
bond which occurs during the taxable year, there shall be allowed as a 
credit against the tax imposed by this chapter for such taxable year 
the amount determined under subsection (b).
    ``(b) Amount of Credit.--The amount of the credit determined under 
this subsection with respect to any school construction bond is the 
amount equal to the product of--
            ``(1) the credit rate determined by the Secretary under 
        section 1397E(b)(2) for the month in which such bond was 
        issued, multiplied by
            ``(2) the face amount of the bond held by the taxpayer on 
        the credit allowance date.
    ``(c) Limitation Based on Amount of Tax.--The credit allowed under 
subsection (a) for any taxable year shall not exceed the excess of--
            ``(1) the sum of the regular tax liability (as defined in 
        section 26(b)) plus the tax imposed by section 55, over
            ``(2) the sum of the credits allowable under this part 
        (other than under this section and subpart C thereof, relating 
        to refundable credits) and section 1397E.
    ``(d) School Construction Bond.--For purposes of this section--
            ``(1) In general.--The term `school construction bond' 
        means any bond issued as part of an issue if--
                    ``(A) 95 percent or more of the proceeds of such 
                issue are to be used for a qualified purpose with 
                respect to a new qualified school established by an 
                eligible local education agency,
                    ``(B) the bond is issued by a State or local 
                government within the jurisdiction of which such school 
                is located,
                    ``(C) the issuer--
                            ``(i) designates such bond for purposes of 
                        this section,
                            ``(ii) certifies that it has written 
                        assurances that the private business 
                        contribution requirement of paragraph (2) will 
                        be met with respect to such school, and
                            ``(iii) certifies that it has the written 
                        approval of the eligible local education agency 
                        for such bond issuance, and
                    ``(D) the term of each bond which is part of such 
                issue does not exceed the maximum term permitted under 
                section 1397E(d)(3).
            ``(2) Private business contribution requirement.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the private business contribution requirement of this 
                paragraph is met with respect to any issue if the 
                eligible local education agency that established the 
                qualified school has written commitments from private 
                entities to make qualified contributions having a 
                present value (as of the date of issuance of the issue) 
                of not less than 10 percent of the proceeds of the 
                issue.
                    ``(B) Qualified contributions.--For purposes of 
                subparagraph (A), the term `qualified contribution' 
                means any contribution (of a type and quality 
                acceptable to the eligible local education agency) of--
                            ``(i) equipment for use in the qualified 
                        school (including state-of-the-art technology 
                        and vocational equipment),
                            ``(ii) technical assistance in developing 
                        curriculum or in training teachers in order to 
                        promote appropriate market driven technology in 
                        the classroom,
                            ``(iii) services of employees as volunteer 
                        mentors,
                            ``(iv) internships, field trips, or other 
                        educational opportunities outside the school 
                        for students, or
                            ``(v) any other property or service 
                        specified by the eligible local education 
                        agency.
            ``(3) Qualified school.--
                    ``(A) In general.--The term `qualified school' 
                means any public school which is established by and 
                operated under the supervision of an eligible local 
                education agency to provide education or training below 
                the postsecondary level if--
                            ``(i) such public school is designed in 
                        cooperation with business to enhance the 
                        academic curriculum, increase graduation and 
                        employment rates, and better prepare students 
                        for the rigors of college and the increasingly 
                        complex workforce,
                            ``(ii) students in such public school will 
                        be subject to the same academic standards and 
                        assessments as other students educated by the 
                        local education agency,
                            ``(iii) a well-structured program to 
                        alleviate overcrowding and to improve students' 
                        education has been constructed and implemented 
                        in the opinion of the Secretary of Education, 
                        and
                            ``(iv) at least 2 of the following 
                        requirements are met:
                                    ``(I) There is a reasonable 
                                expectation (as of the date of issuance 
                                of the bonds) that at least 35 percent 
                                of the population attending such public 
                                school will be eligible for free or 
                                reduced-cost lunches under the school 
                                lunch program established under the 
                                National School Lunch Act.
                                    ``(II) There is a reasonable 
                                expectation (as of the date of issuance 
                                of the bonds) that the student growth 
                                rate over the next 5 years for the 
                                school district in which such public 
                                school is to be located will be at 
                                least 10 percent.
                                    ``(III) The average student-teacher 
                                ratio for such district as of the date 
                                of issuance of the bonds is at least 28 
                                to 1.
                    ``(B) Eligible local education agency.--The term 
                `eligible local education agency' means any local 
                educational agency as defined in section 14101 of the 
                Elementary and Secondary Education Act of 1965.
            ``(4) Qualified purpose.--
                    ``(A) In general.--The term `qualified purpose' 
                means, with respect to any qualified school--
                            ``(i) constructing a new school facility, 
                        and
                            ``(ii) providing equipment for use at such 
                        facility.
                    ``(B) School facility.--The term `school facility' 
                means a new public structure suitable for use as a 
                classroom, laboratory, library, media center, or 
                related facility whose primary purpose is the 
                instruction of public elementary or secondary students. 
                Such term does not include an athletic stadium, or any 
                other structure or facility intended primarily for 
                athletic exhibitions, contests, games, or events for 
                which admission is charged to the general public.
    ``(e) Limitation on Amount of Bonds Designated.--
            ``(1) National limitation.--There is a national school 
        construction bond limitation for each calendar year. Such 
        limitation is $400,000,000 for 2007 and 2008, and, except for 
        carryovers as provided under the rules applicable under 
        paragraph (4), zero thereafter.
            ``(2) Allocation of limitation.--The national school 
        construction bond limitation for a calendar year shall be 
        allocated by the Secretary among the States on the basis of 
        their respective populations of individuals below the poverty 
        line (as defined by the Office of Management and Budget). The 
        limitation amount allocated to a State under the preceding 
        sentence shall be allocated by the Secretary of Education to 
        qualified schools within such State.
            ``(3) Designation subject to limitation amount.--The 
        maximum aggregate face amount of bonds issued during any 
        calendar year which may be designated under subsection (d)(1) 
        with respect to any qualified school shall not exceed the 
        limitation amount allocated to such school under paragraph (2) 
        for such calendar year.
            ``(4) Carryover of unused limitation.--If for any calendar 
        year--
                    ``(A) the limitation amount for any State, exceeds
                    ``(B) the amount of bonds issued during such year 
                which are designated under subsection (d)(1) with 
                respect to qualified schools within such State, the 
                limitation amount for such State for the following 
                calendar year shall be increased by the amount of such 
                excess.
    ``(f) Other Definitions.--The definitions in subsections (d)(6) and 
(f) of section 1397E shall apply for purposes of this section.
    ``(g) Credit Included in Gross Income.--Gross income includes the 
amount of the credit allowed to the taxpayer under this section.''
    (b) Conforming Amendment.--The table of sections for subpart B of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end the following new item:

``Sec. 30D. Credit to holders of school construction bonds.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to obligations issued after December 31, 2006.