SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Public School Construction 
Partnership Act''.

SEC. 2. TREATMENT OF QUALIFIED PUBLIC EDUCATIONAL FACILITY BONDS AS 
              EXEMPT FACILITY BONDS.

    (a) Treatment as Exempt Facility Bond.--Subsection (a) of section 
142 of the Internal Revenue Code of 1986 (relating to exempt facility 
bond) is amended by striking ``or'' at the end of paragraph (11), by 
striking the period at the end of paragraph (12) and inserting ``, 
or'', and by adding at the end the following:
            ``(13) qualified public educational facilities.''
    (b) Qualified Public Educational Facilities.--Section 142 of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following:
    ``(k) Qualified Public Educational Facilities.--
            ``(1) In general.--For purposes of subsection (a)(13), the 
        term `qualified public educational facility' means any school 
        facility which is--
                    ``(A) part of a public elementary school or a 
                public secondary school,
                    ``(B) except as provided in paragraph (6)(B)(iii), 
                located in a high-growth school district, and
                    ``(C) owned by a private, for-profit corporation 
                pursuant to a public-private partnership agreement with 
                a State or local educational agency described in 
                paragraph (2).
            ``(2) Public-private partnership agreement described.--A 
        public-private partnership agreement is described in this 
        paragraph if it is an agreement--
                    ``(A) under which the corporation agrees--
                            ``(i) to do 1 or more of the following: 
                        construct, rehabilitate, refurbish, or equip a 
                        school facility, and
                            ``(ii) at the end of the contract term, to 
                        transfer the school facility to such agency for 
                        no additional consideration, and
                    ``(B) the term of which does not exceed the term of 
                the underlying issue.
            ``(3) School facility.--For purposes of this subsection, 
        the term `school facility' means--
                    ``(A) school buildings,
                    ``(B) functionally related and subordinate 
                facilities and land with respect to such buildings, 
                including any stadium or other facility primarily used 
                for school events, and
                    ``(C) any property, to which section 168 applies 
                (or would apply but for section 179), for use in the 
                facility.
            ``(4) Public schools.--For purposes of this subsection, the 
        terms `elementary school' and `secondary school' have the 
        meanings given such terms by section 14101 of the Elementary 
        and Secondary Education Act of 1965 (20 U.S.C. 8801), as in 
        effect on the date of the enactment of this subsection.
            ``(5) High-growth school district.--For purposes of this 
        subsection, the term `high-growth school district' means a 
        school district established under State law which had an 
        enrollment of at least 5,000 students in the second academic 
        year preceding the date of the issuance of the bond and an 
        increase in student enrollment of at least 20 percent during 
        the 5-year period ending with such academic year.
            ``(6) Annual aggregate face amount of tax-exempt 
        financing.--
                    ``(A) In general.--An issue shall not be treated as 
                an issue described in subsection (a)(13) if the 
                aggregate face amount of bonds issued by the State 
                pursuant thereto (when added to the aggregate face 
                amount of bonds previously so issued during the 
                calendar year) exceeds an amount equal to the greater 
                of--
                            ``(i) $10 multiplied by the State 
                        population, or
                            ``(ii) $5,000,000.
                    ``(B) Allocation rules.--
                            ``(i) In general.--Except as otherwise 
                        provided in this subparagraph, the State may 
                        allocate in a calendar year the amount 
                        described in subparagraph (A) for such year in 
                        such manner as the State determines 
                        appropriate.
                            ``(ii) Rules for carryforward of unused 
                        amount.--With respect to any calendar year, a 
                        State may make an election under rules similar 
                        to the rules of section 146(f), except that the 
                        sole carryforward purpose with respect to such 
                        election is the issuance of exempt facility 
                        bonds described in section 142(a)(13).
                            ``(iii) Special allocation rule for schools 
                        outside high-growth school districts.--A State 
                        may elect to allocate an aggregate face amount 
                        of bonds not to exceed $5,000,000 from the 
                        amount described in subparagraph (A) for each 
                        calendar year for qualified public educational 
                        facilities without regard to the requirement 
                        under paragraph (1)(A).''
    (c) Exemption From General State Volume Caps.--Paragraph (3) of 
section 146(g) of the Internal Revenue Code of 1986 (relating to 
exception for certain bonds) is amended--
            (1) by striking ``or (12)'' and inserting ``(12), or 
        (13)'', and
            (2) by striking ``and environmental enhancements of 
        hydroelectric generating facilities'' and inserting 
        ``environmental enhancements of hydroelectric generating 
        facilities, and qualified public educational facilities''.
    (d) Exemption From Limitation on Use for Land Acquisition.--Section 
147(h) of the Internal Revenue Code of 1986 (relating to certain rules 
not apply) is amended--
            (1) by adding at the end the following:
            ``(3) Exempt facility bonds for qualified public-private 
        schools.--Subsection (c) shall not apply to any exempt facility 
        bond issued as part of an issue described in section 142(a)(13) 
        (relating to qualified public-private schools).'', and
            (2) by striking ``Mortgage Revenue Bonds, Qualified Student 
        Loan Bonds, and Qualified 501(c)(3) Bonds'' in the heading and 
        inserting ``Certain Bonds''.
    (e) Effective Date.--The amendments made by this section shall 
apply to bonds issued after December 31, 1998.

SEC. 3. ADDITIONAL INCREASE IN ARBITRAGE REBATE EXCEPTION FOR 
              GOVERNMENTAL BONDS USED TO FINANCE EDUCATION FACILITIES.

    (a) In General.--Section 148(f)(4)(D)(vii) of the Internal Revenue 
Code of 1986 (relating to increase in exception for bonds financing 
public school capital expenditures) is amended by striking 
``$5,000,000'' the second place it appears and inserting 
``$10,000,000''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to obligations issued after December 31, 1998.
Public School Construction Partnership Act - Amends the Internal Revenue Code to authorize issuance of tax-exempt private activity bonds to finance construction and rehabilitation of high-growth area public elementary and secondary schools through public-private construction and ownership agreements. 
Limits the annual aggregate amount of a State's tax-exempt financing.  Sets forth State allocation rules, including a discretionary allocation for non high-growth school areas. 
Exempts such bonds from:  (1) State volume caps; and (2) land use or acquisition limitations. 
Increases the arbitrage rebate exception for State and local bonds used to finance public schools.
Public School Construction Partnership Act