A bill to amend the Internal Revenue Code of 1986 to provide funding for Indian tribal prison facilities, and for other purposes.

Summary: Amends the Internal Revenue Code to allow a nonrefundable tax credit for investment in Indian tribal prison facility bonds. Requires that 95 percent of the proceeds of such bonds be used for the construction, acquisition, rehabilitation, expansion, or operating expenses of Indian tribal prison facilities and that the term of such bonds not exceed ten years.

Establishes a national limitation for Indian tribal prison facility bonds in 2005 through 2007, with no limitation after 2007. Allows a carryover of unused bond limitation amounts to succeeding calendar years. Directs the Secretary of the Treasury to allocate bond amounts to Indian tribes based upon specified criteria, including overcrowding, the condition of existing facilities, the health and safety of both inmates and prison employees, and other financial resources available to an Indian tribe.

SECTION 1. CREDIT TO HOLDERS OF INDIAN TRIBAL PRISON FACILITY BONDS.

    (a) In General.--Part IV of subchapter A of chapter 1 of the 
Internal Revenue Code of 1986 (relating to credits against tax) is 
amended by adding at the end the following new subpart:

 ``Subpart H--Nonrefundable Credit for Holders of Indian Tribal Prison 
                             Facility Bonds

                              ``Sec. 54. Credit to holders of Indian 
                                        tribal prison facility bonds.

``SEC. 54. CREDIT TO HOLDERS OF INDIAN TRIBAL PRISON FACILITY BONDS.

    ``(a) Allowance of Credit.--In the case of a taxpayer who holds an 
Indian tribal prison facility bond on a 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 an 
amount equal to the sum of the credits determined under subsection (b) 
with respect to credit allowance dates during such year on which the 
taxpayer holds such bond.
    ``(b) Amount of Credit.--
            ``(1) In general.--The amount of the credit determined 
        under this subsection with respect to any Indian tribal prison 
        facility bond is the amount equal to the product of--
                    ``(A) the credit rate determined by the Secretary 
                under paragraph (2) for the month in which such bond 
                was issued, multiplied by
                    ``(B) the face amount of the bond held by the 
                taxpayer on the credit allowance date.
            ``(2) Determination.--During each calendar month, the 
        Secretary shall determine a credit rate which shall apply to 
        bonds issued during the following calendar month. The credit 
        rate for any month is the percentage which the Secretary 
        estimates will permit the issuance of Indian tribal prison 
        facility bonds without discount and without interest cost to 
        the issuer.
    ``(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 this subpart and subpart C).
    ``(d) Credit Included in Gross Income.--Gross income includes the 
amount of the credit allowed to the taxpayer under this section 
(determined without regard to subsection (c)) and the amount so 
included shall be treated as interest income.
    ``(e) Indian Tribal Prison Facility Bond.--For purposes of this 
part, the term `Indian tribal prison facility bond' means any bond 
issued as part of an issue if--
            ``(1) 95 percent or more of the proceeds of such issue are 
        to be invested in investment grade obligations and the proceeds 
        from such investment are used for the construction, 
        acquisition, rehabilitation, expansion, or operating expanses 
        of a qualified Indian tribal prison facility,
            ``(2) the bond is issued by the Indian tribe within the 
        jurisdiction of which such facility is located,
            ``(3) the bond is issued pursuant to a plan developed by 
        the Indian tribe,
            ``(4) the issuer designates such bond for purposes of this 
        section,
            ``(5) the term of each bond which is part of such issue 
        does not exceed 10 years, and
            ``(6) no amount of proceeds of such issue (including 
        proceeds from any investment under paragraph (1)) may be used 
        to pay the costs of issuance to the extent such amount exceeds 
        2 percent of the sale proceeds of such issue.
    ``(f) Qualified Indian Tribal Prison Facility.--For purposes of 
this section, the term `qualified Indian tribal prison facility' means 
any residential correctional or detention facility located on the 
qualified Indian land of the issuing Indian tribe substantially all of 
the inmates of which are adult or juvenile members of such Indian 
tribe.
    ``(g) Limitation on Amount of Bonds Designated; Allocation of 
Bonds.--
            ``(1) National limitation.--There is an Indian tribal 
        prison facility bond limitation for each calendar year. Such 
        limitation is--
                    ``(A) $200,000,000 for 2005,
                    ``(B) $200,000,000 for 2006,
                    ``(C) $200,000,000 for 2007, and
                    ``(D) except as provided in paragraph (3), zero 
                thereafter.
            ``(2) Allocation of bonds.--
                    ``(A) In general.--The Secretary, after 
                consultation with the Secretary of the Interior, shall 
                allocate the Indian tribal prison facility bond 
                limitation among those Indian tribes which submit a 
                plan which contains a description of the proposed use 
                of investment proceeds, assurances that such proceeds 
                will be used only for such use, a proposed expenditure 
                schedule, information relevant to the criteria 
                described in subparagraph (B), and any other 
                information determined appropriate by the Secretary.
                    ``(B) Approval criteria.--In allocating the 
                limitation among plan requests of Indian tribes under 
                subparagraph (A), the Secretary shall consider--
                            ``(i) the percentage of prison overcrowding 
                        in excess of the facility occupancy level as 
                        determined by the Bureau of Indian Affairs,
                            ``(ii) the condition of existing 
                        facilities,
                            ``(iii) the health and safety of both 
                        inmates and prison employees,
                            ``(iv) the type of offenders incarcerated, 
                        and
                            ``(v) other financial resources available 
                        to the Indian tribe.
            ``(3) Carryover of unused issuance limitation.--If for any 
        calendar year the limitation amount imposed by paragraph (1) 
        exceeds the amount of Indian tribal prison facility bonds 
        issued during such year, such excess shall be carried forward 
        to one or more succeeding calendar years as an addition to the 
        limitation imposed by paragraph (1) and until used by issuance 
        of such bonds.
    ``(h) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Credit allowance date.--The term `credit allowance 
        date' means, with respect to any issue, the last day of the 1-
        year period beginning on the date of the issuance of such issue 
        and the last day of each successive 1-year period thereafter.
            ``(2) Bond.--The term `bond' includes any obligation.
            ``(3) Indian tribe.--The term `Indian tribe' has the 
        meaning given such term by section 7871(c)(3)(E)(ii).
            ``(4) Qualified indian lands.--The term `qualified Indian 
        lands' has the meaning given such term by section 
        7871(c)(3)(E)(i).
            ``(5) Partnership; s corporation; and other pass-thru 
        entities.--In the case of a partnership, trust, S corporation, 
        or other pass-thru entity, rules similar to the rules of 
        section 41(g) shall apply with respect to the credit allowable 
        under subsection (a).
            ``(6) Bonds held by regulated investment companies.--If any 
        Indian tribal prison facility bond is held by a regulated 
        investment company, the credit determined under subsection (a) 
        shall be allowed to shareholders of such company under 
        procedures prescribed by the Secretary.
            ``(7) Reporting.--Each Indian tribe with an allocation of 
        Indian tribal prison facility bonds under an approved plan 
        shall submit reports similar to the reports required under 
        section 149(e).''.
    (b) Conforming Amendments.--
            (1) Reporting.--Subsection (d) of section 6049 of the 
        Internal Revenue Code of 1986 (relating to returns regarding 
        payments of interest) is amended by adding at the end the 
        following new paragraph:
            ``(8) Reporting of credit on indian tribal prison facility 
        bonds.--
                    ``(A) In general.--For purposes of subsection (a), 
                the term `interest' includes amounts includible in 
                gross income under section 54(d) and such amounts shall 
                be treated as paid on the credit allowance date (as 
                defined in section 54(h)(1)).
                    ``(B) Reporting to corporations, etc.--Except as 
                otherwise provided in regulations, in the case of any 
                interest described in subparagraph (A), subsection 
                (b)(4) shall be applied without regard to subparagraphs 
                (A), (H), (I), (J), (K), and (L)(i) of such subsection.
                    ``(C) Regulatory authority.--The Secretary may 
                prescribe such regulations as are necessary or 
                appropriate to carry out the purposes of this 
                paragraph, including regulations which require more 
                frequent or more detailed reporting.''.
            (2) Treatment for estimated tax purposes.--
                    (A) Individual.--Section 6654 of such Code 
                (relating to failure by individual to pay estimated 
                income tax) is amended by redesignating subsection (m) 
                as subsection (n) and by inserting after subsection (l) 
                the following new subsection:
    ``(m) Special Rule for Holders of Indian Tribal Prison Facility 
Bonds.--For purposes of this section, the credit allowed by section 54 
to a taxpayer by reason of holding an Indian tribal prison facility 
bond on a credit allowance date shall be treated as if it were a 
payment of estimated tax made by the taxpayer on such date.''.
                    (B) Corporate.--Subsection (g) of section 6655 of 
                such Code (relating to failure by corporation to pay 
                estimated income tax) is amended by adding at the end 
                the following new paragraph:
            ``(5) Special rule for holders of indian tribal prison 
        facility bonds.--For purposes of this section, the credit 
        allowed by section 54 to a taxpayer by reason of holding an 
        Indian tribal prison facility bond on a credit allowance date 
        shall be treated as if it were a payment of estimated tax made 
        by the taxpayer on such date.''.
    (c) Clerical Amendments.--
            (1) The table of subparts for part IV of subchapter A of 
        chapter 1 of the Internal Revenue Code of 1986 is amended by 
        adding at the end the following new item:

                              ``Subpart H. Nonrefundable Credit for 
                                        Holders of Indian Tribal Prison 
                                        Facility Bonds.''.
            (2) Section 6401(b)(1) of such Code is amended by striking 
        ``and G'' and inserting ``G, and H''.
    (d) Effective Date.--The amendments made by this section shall 
apply to obligations issued after December 31, 2004.