I

106TH CONGRESS

1ST SESSION H. R. 996

To amend the Internal Revenue Code of 1986 to provide a source of interestfree capital, in addition to that recommended in the President’s budget

proposal, for the construction and renovation of public schools in States

experiencing large increases in public school enrollment.

IN THE HOUSE OF REPRESENTATIVES

MARCH 4, 1999

Mr. ETHERIDGE (for himself, Mr. PRICE of North Carolina, Mr. RANGEL, Mr.

MCINTYRE, Mr. FRANK of Massachusetts, Ms. CARSON, Mr. MCGOVERN,

Ms. PELOSI, Mr. MORAN of Virginia, Mr. TOWNS, Mr. WAXMAN, Mr.

FILNER, Mr. FROST, Mr. GREEN of Texas, Mr. FORBES, Mr. LEWIS of

Georgia, Mr. GORDON, Mr. PAYNE, Mr. HINCHEY, Mr. DELAHUNT, Mrs.

MALONEY of New York, Mr. SANDLIN, Mr. LAMPSON, Mr. ACKERMAN,

Mr. MARTINEZ, Mr. PASTOR, Mr. ORTIZ, Mr. NEAL of Massachusetts,

Mrs. CLAYTON, Mrs. MEEK of Florida, Mr. PALLONE, Mr. ROMEROBARCELO ́, Mrs. TAUSCHER, Mr. CROWLEY, Mr. CLEMENT, Mr. SHOWS,

Mr. KENNEDY of Rhode Island, Mr. BONIOR, Ms. MILLENDER-MCDONALD, Mr. CAPUANO, Mr. EVANS, Mr. MEEHAN, Ms. KILPATRICK, Mr.

OLVER, Mr. WEXLER, Mr. BROWN of California, Ms. NORTON, Mr.

BAIRD, Mr. WATT of North Carolina, Mr. DOOLEY of California, Mr.

INSLEE, Ms. BROWN of Florida, Mrs. CAPPS, Mr. DAVIS of Florida, Mr.

PHELPS, Mr. CONYERS, Mr. DINGELL, Mr. GONZALEZ, Ms. BERKLEY,

Mr. HILL of Indiana, Mr. WEINER, Ms. EDDIE BERNICE JOHNSON of

Texas, Mrs. JONES of Ohio, Mr. WU, and Ms. BALDWIN) introduced the

following bill; which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to provide

a source of interest-free capital, in addition to that recommended in the President’s budget proposal, for the
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construction and renovation of public schools in States

experiencing large increases in public school enrollment.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘School Construction

5 Act of 1999’’.

6 SEC. 2. INCENTIVES FOR PUBLIC SCHOOL CONSTRUCTION.

7 (a) IN GENERAL.—Part IV of subchapter A of chap8 ter 1 of the Internal Revenue Code of 1986 (relating to

9 credits against tax) is amended by inserting after subpart

10 G the following new subpart:

11 ‘‘Subpart H—Credit to Holders of Qualified Public

12 School Construction Bonds

‘‘Sec. 54. Credit to holders of qualified public school construction

bonds.

‘‘Sec. 54A. Qualified public school construction bonds.

13 ‘‘SEC. 54. CREDIT TO HOLDERS OF QUALIFIED PUBLIC

14 SCHOOL CONSTRUCTION BONDS.

15 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of a tax16 payer who holds a qualified public school construction

17 bond on the credit allowance date of such bond which oc18 curs during the taxable year, there shall be allowed as a

19 credit against the tax imposed by this chapter for such

20 taxable year the amount determined under subsection (b).

21 ‘‘(b) AMOUNT OF CREDIT.—
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1 ‘‘(1) IN GENERAL.—The amount of the credit

2 determined under this subsection with respect to any

3 qualified public school construction bond is the

4 amount equal to the product of—

5 ‘‘(A) the credit rate determined by the Sec6 retary under paragraph (2) for the month in

7 which such bond was issued, multiplied by

8 ‘‘(B) the face amount of the bond held by

9 the taxpayer on the credit allowance date.

10 ‘‘(2) DETERMINATION.—During each calendar

11 month, the Secretary shall determine a credit rate

12 which shall apply to bonds issued during the follow13 ing calendar month. The credit rate for any month

14 is the percentage which the Secretary estimates will

15 on average permit the issuance of qualified public

16 school construction bonds without discount and with17 out interest cost to the issuer.

18 ‘‘(c) LIMITATION BASED ON AMOUNT OF TAX.—

19 ‘‘(1) IN GENERAL.—The credit allowed under

20 subsection (a) for any taxable year shall not exceed

21 the excess of—

22 ‘‘(A) the sum of the regular tax liability

23 (as defined in section 26(b)) plus the tax im24 posed by section 55, over
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1 ‘‘(B) the sum of the credits allowable

2 under this part (other than subpart C thereof,

3 relating to refundable credits).

4 ‘‘(2) CARRYOVER OF UNUSED CREDIT.—If the

5 credit allowable under subsection (a) exceeds the

6 limitation imposed by paragraph (1) for such taxable

7 year, such excess shall be carried to the succeeding

8 taxable year and added to the credit allowable under

9 subsection (a) for such taxable year.

10 ‘‘(d) DEFINITIONS.—For purposes of this subpart—

11 ‘‘(1) CREDIT ALLOWANCE DATE.—The term

12 ‘credit allowance date’ means, with respect to any

13 issue, the last day of the 1-year period beginning on

14 the date of issuance of such issue and the last day

15 of each successive 1-year period thereafter.

16 ‘‘(2) BOND.—The term ‘bond’ includes any ob17 ligation.

18 ‘‘(3) STATE.—The term ‘State’ includes the

19 District of Columbia and any possession of the

20 United States.

21 ‘‘(4) PUBLIC SCHOOL FACILITY.—The term

22 ‘public school facility’ shall not include any stadium

23 or other facility primarily used for athletic contests

24 or exhibitions or other events for which admission is

25 charged to the general public.
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1 ‘‘(e) CREDIT INCLUDED IN GROSS INCOME.—Gross

2 income includes the amount of the credit allowed to the

3 taxpayer under this section and the amount so included

4 shall be treated as interest income.

5 ‘‘(f) BONDS HELD BY REGULATED INVESTMENT

6 COMPANIES.—If any qualified public school construction

7 bond is held by a regulated investment company, the credit

8 determined under subsection (a) shall be allowed to share9 holders of such company under procedures prescribed by

10 the Secretary.

11 ‘‘SEC. 54A. QUALIFIED PUBLIC SCHOOL CONSTRUCTION

12 BONDS.

13 ‘‘(a) QUALIFIED PUBLIC SCHOOL CONSTRUCTION

14 BOND.—For purposes of this subpart—

15 ‘‘(1) IN GENERAL.—The term ‘qualified public

16 school construction bond’ means any bond issued as

17 part of an issue if—

18 ‘‘(A) 95 percent or more of the proceeds of

19 such issue are to be used for the construction,

20 rehabilitation, or repair of a public school facil21 ity,

22 ‘‘(B) the bond is issued by a State or local

23 government within the jurisdiction of which

24 such school is located,
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1 ‘‘(C) the issuer designates such bond for

2 purposes of this section, and

3 ‘‘(D) the term of each bond which is part

4 of such issue does not exceed 15 years.

5 ‘‘(2) TEMPORARY PERIOD EXCEPTION.—A bond

6 shall not be treated as failing to meet the require7 ment of paragraph (1)(A) solely by reason of the

8 fact that the proceeds of the issue of which such

9 bond is a part are invested for a reasonable tem10 porary period (but not more than 36 months) until

11 such proceeds are needed for the purpose for which

12 such issue was issued. Any earnings on such pro13 ceeds during such period shall be treated as proceeds

14 of the issue for purposes of applying paragraph

15 (1)(A).

16 ‘‘(b) LIMITATION ON AMOUNT OF BONDS DES17 IGNATED.—The maximum aggregate face amount of

18 bonds issued during any calendar year which may be des19 ignated under subsection (a) by any issuer shall not exceed

20 the limitation amount allocated under subsection (d) for

21 such calendar year to such issuer.

22 ‘‘(c) NATIONAL LIMITATION ON AMOUNT OF BONDS

23 DESIGNATED.—There is a national qualified school con24 struction bond limitation for each calendar year. Such lim25 itation is—
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1 ‘‘(1) $3,600,000,000 for 2000,

2 ‘‘(2) $3,600,000,000 for 2001, and

3 ‘‘(3) except as provided in subsection (e), zero

4 after 2001.

5 ‘‘(d) ALLOCATION OF LIMITATION AMONG STATES.—

6 ‘‘(1) IN GENERAL.—The Secretary shall allo7 cate the national qualified school construction bond

8 limitation for any calendar year among the States

9 with projected enrollment increases. The amount al10 located to a State under the preceding sentence shall

11 be allocated by the State education agency to issuers

12 within such State and such allocations may be made

13 only if there is an approved State application.

14 ‘‘(2) ALLOCATION FORMULA.—

15 ‘‘(A) IN GENERAL.—The national qualified

16 school construction bond limitation shall be al17 located among the States with projected enroll18 ment increases in proportion to their respective

19 shares of the national projected enrollment in20 crease.

21 ‘‘(B) PROJECTED ENROLLMENT IN22 CREASE.—The amount of projected enrollment

23 increase for the United States or any State is

24 the amount of the increase (as projected by the

25 Secretary of Education using data as of Janu-
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1 ary 1, 1998) in enrollment in public elementary

2 and secondary schools in the United States or

3 in such State (as the case may be) during the

4 10-year period beginning with 1997.

5 ‘‘(3) APPROVED STATE APPLICATION.—For

6 purposes of paragraph (1), the term ‘approved State

7 application’ means an application which is approved

8 by the Secretary of Education and which includes—

9 ‘‘(A) the results of a recent publicly-avail10 able survey (undertaken by the State with the

11 involvement of local education officials, mem12 bers of the public, and experts in school con13 struction and management) of such State’s

14 needs for public school facilities, including de15 scriptions of—

16 ‘‘(i) health and safety problems at

17 such facilities,

18 ‘‘(ii) the capacity of public schools in

19 the State to house projected enrollments,

20 and

21 ‘‘(iii) the extent to which the public

22 schools in the State offer the physical in23 frastructure needed to provide a high-qual24 ity education to all students, and
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1 ‘‘(B) a description of how the State will al2 locate to local educational agencies, or other3 wise use, its allocation under this subsection to

4 address the needs identified under subpara5 graph (A), including a description of how it

6 will—

7 ‘‘(i) give priority to localities experi8 encing the largest increases in enrollment,

9 ‘‘(ii) use its allocation under this sub10 section to assist localities that lack the fis11 cal capacity to issue bonds on their own,

12 and

13 ‘‘(iii) ensure that its allocation under

14 this subsection is used only to supplement,

15 and not supplant, the amount of school

16 construction, rehabilitation, and repair in

17 the State that would have occurred in the

18 absence of such allocation.

19 Any allocation under paragraph (1) by a State edu20 cation agency shall be binding if such agency reason21 ably determined that the allocation was in accord22 ance with the plan approved under this paragraph.

23 ‘‘(e) CARRYOVER OF UNUSED LIMITATION.—If for

24 any calendar year—
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1 ‘‘(1) the amount allocated under subsection (d)

2 to any State, exceeds

3 ‘‘(2) the amount of bonds issued during such

4 year which are designated under subsection (a) pur5 suant to such allocation,

6 the limitation amount under such subsection for such

7 State for the following calendar year shall be increased

8 by the amount of such excess. The subsection shall not

9 apply if such following calendar year is after 2003.’’

10 (b) REPORTING.—Subsection (d) of section 6049 of

11 such Code (relating to returns regarding payments of in12 terest) is amended by adding at the end the following new

13 paragraph:

14 ‘‘(8) REPORTING OF CREDIT ON QUALIFIED

15 PUBLIC SCHOOL CONSTRUCTION BONDS.—

16 ‘‘(A) IN GENERAL.—For purposes of sub17 section (a), the term ‘interest’ includes amounts

18 includible in gross income under section 54(e)

19 and such amounts shall be treated as paid on

20 the credit allowance date (as defined in section

21 54(d)(1)).

22 ‘‘(B) REPORTING TO CORPORATIONS,

23 ETC.—Except as otherwise provided in regula24 tions, in the case of any interest described in

25 subparagraph (A) of this paragraph, subsection
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1 (b)(4) of this section shall be applied without

2 regard to subparagraphs (A), (H), (I), (J), (K),

3 and (L)(i).

4 ‘‘(C) REGULATORY AUTHORITY.—The Sec5 retary may prescribe such regulations as are

6 necessary or appropriate to carry out the pur7 poses of this paragraph, including regulations

8 which require more frequent or more detailed

9 reporting.’’

10 (c) CLERICAL AMENDMENT.—The table of subparts

11 for part IV of subchapter A of chapter 1 of such Code

12 is amended by adding at the end the following new item:

‘‘Subpart H. Credit to holders of qualified public school construction bonds.’’.

13 (d) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to obligations issued after Decem15 ber 31, 1999.

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