SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Expand and Rebuild America's Schools 
Act of 1998''.

SEC. 2. FINDINGS.

    The Congress finds the following:
            (1) Many States and school districts will need to build new 
        schools to accommodate increasing student enrollments; the 
        Department of Education has predicted that the Nation will need 
        6,000 more schools by the year 2006.
            (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. 
        Recently, researchers found that the test scores of students 
        assigned to schools in poor condition can be expected to fall 
        10.9 percentage points behind the test scores of students 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. PURPOSE.

    The purpose of this Act is 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 D 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. 45D. CREDIT TO HOLDERS OF SCHOOL CONSTRUCTION BONDS.

    ``(a) Allowance of Credit.--In the case of a 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 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, and
                            ``(ii) 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).
            ``(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 to 
                        enhance the academic curriculum, increase 
                        graduation and employment rates, and better 
                        prepare students for postsecondary education 
                        and the workforce,
                            ``(ii) students in such public school will 
                        be subject to the academic achievement 
                        standards and assessments established by the 
                        State,
                            ``(iii) a program to alleviate overcrowding 
                        and to improve students' education has been 
                        constructed,
                            ``(iv) the average student-teacher ratio 
                        for the school district in which such school is 
                        located as of the date of the issuance of the 
                        bonds is at least 28 to 1, and
                            ``(v) at least 1 of the following 
                        requirements is met:
                                    ``(I) The proceeds from the 
                                issuance of the bonds will be used for 
                                new school construction, the 
                                rehabilitation of school facilities 
                                which are more than 30 years old as of 
                                the date of such issuance, or the 
                                provision of advanced or improved 
                                communications infrastructure.
                                    ``(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) Construction or 
                                rehabilitation activities are needed as 
                                the result of natural disasters or to 
                                mitigate the cost of potential 
                                disasters.
                    ``(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, 
                constructing or rehabilitating a school facility.
                    ``(B) School facility.--The term `school facility' 
                means a 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 $1,400,000,000 for 1999 and 2000, and, except for 
        carryovers as provided under the rules applicable under 
        paragraph (2), zero thereafter.
            ``(2) Allocation of limitation.--
                    ``(A) State allocation.--The national school 
                construction bond limitation for a calendar year shall 
                be allocated by the Secretary among the States on the 
                combined basis of the following factors:
                            ``(i) The respective populations of 
                        individuals below the poverty line (as defined 
                        by the Office of Management and Budget).
                            ``(ii) The respective projected growth 
                        rates in the number of students over the next 5 
                        years and 10 years (as determined by the 
                        Secretary of Education).
                    ``(B) School allocation.--The limitation amount 
                allocated to a State under the subparagraph (A) 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)(B) 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 D of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end the following new item:

                              ``Sec. 45D. Credit to holders of school 
                                        construction bonds.''
    (c) Effective Date.--The amendments made by this section shall 
apply to obligations issued after December 31, 1998.
Expand and Rebuild America's Schools Act of 1998 - Amends the Internal Revenue Code to allow a limited credit to taxpayers holding school construction bonds.  Defines such bonds.  Sets a national school construction bond limit.
Expand and Rebuild America's Schools Act of 1998