II 

109TH CONGRESS 

2D SESSION S. 2347 

To amend the Internal Revenue Code of 1986 to extend and modify the 

tax credit for holders of qualified zone academy bonds. 

IN THE SENATE OF THE UNITED STATES 

MARCH 1, 2006 

Mr. CONRAD (for himself and Mr. ROCKEFELLER) introduced the following 

bill; which was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to extend 

and modify the tax credit for holders of qualified zone 

academy bonds. 

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

3 SECTION 1. EXTENSION AND MODIFICATION OF TREAT4 MENT OF QUALIFIED ZONE ACADEMY BONDS. 

5 (a) EXTENSION AND ALLOCATION OF CREDIT AU6 THORITY.— 

7 (1) EXTENSION.—Paragraph (1) of section 

8 1397E(e) of the Internal Revenue Code of 1986 is 

9 amended by striking ‘‘and 2005’’ and inserting 

10 ‘‘2005, 2006, and 2007’’. 


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1 (2) ALLOCATION OF LIMITATION.—Section 

2 1397E(e)(2) of such Code is amended to read as fol3 lows: 

4 ‘‘(2) ALLOCATION OF LIMITATION.— 

5 ‘‘(A) ALLOCATION AMONG STATES.— 

6 ‘‘(i) LIMITATION BEFORE 2006.—The 

7 national zone academy bond limitations for 

8 calendar years 1998, 1999, 2000, 2001, 

9 2002, 2003, 2004, and 2005 shall be allo10 cated by the Secretary among the States 

11 on the basis of their respective populations 

12 of individuals below the poverty line (as de13 fined by the Office of Management and 

14 Budget). 

15 ‘‘(ii) LIMITATION AFTER 2005.— 

16 ‘‘(I) IN GENERAL.—The national 

17 zone academy bond limitation for any 

18 calendar year after 2005 shall be allo19 cated by the Secretary among the 

20 States in proportion to the respective 

21 amounts each such State received for 

22 basic grants under subpart 2 of part 

23 A of title I of the Elementary and 

24 Secondary Education Act of 1965 (20 

25 U.S.C. 6331 et seq.) for the most reVerDate Aug 31 2005 16:47 Mar 04, 2006 Jkt 049200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2347.IS S2347

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1 cent fiscal year ending before such 

2 calendar year. 

3 ‘‘(II) MINIMUM ALLOCATION.— 

4 The allocation under subclause (I) to 

5 any State shall in no event be less 

6 than 1 percent of the national zone 

7 academy bond limitation. The Sec8 retary shall ratably reduce the alloca9 tions of States to which this subclause 

10 does not apply by the amount re11 quired to offset increases in alloca12 tions of other States under this sub13 clause. 

14 ‘‘(B) ALLOCATION TO ACADEMIES.—The 

15 limitation amount allocated to a State under 

16 subparagraph (A) shall be allocated by the 

17 State to qualified zone academies within such 

18 State. 

19 ‘‘(C) DESIGNATION SUBJECT TO LIMITA20 TION AMOUNT.—The maximum aggregate face 

21 amount of bonds issued during any calendar 

22 year which may be designated under subsection 

23 (a) with respect to any qualified zone academy 

24 shall not exceed the limitation amount allocated 


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1 to such academy under subparagraph (B) for 

2 such calendar year.’’. 

3 (3) UNUSED AUTHORITY.—Section 1397E(e) of 

4 such Code (relating to limitation on amount of 

5 bonds designated) is amended— 

6 (A) by striking ‘‘If’’ in paragraph (4) and 

7 inserting ‘‘Except as provided in paragraph (5), 

8 if’’, and 

9 (B) by adding at the end the following: 

10 ‘‘(5) REALLOCATION FOR AMOUNTS UNUSED

11 FOR TWO YEARS.—Notwithstanding paragraph (4), 

12 rules similar to the rules of section 42(h)(3)(D) shall 

13 apply for purposes of this section.’’. 

14 (b) PROCEEDS OF BONDS MAY BE USED FOR CON15 STRUCTION.—Paragraph (5) of section 1397E(d) of the 

16 Internal Revenue Code of 1986 (defining qualified pur17 pose) is amended— 

18 (1) by striking ‘‘rehabilitating or repairing’’ in 

19 subparagraph (A) and inserting ‘‘constructing, reha20 bilitating, or repairing’’, and 

21 (2) by redesignating subparagraphs (B), (C), 

22 and (D) as subparagraphs (C), (D), and (E), respec23 tively, and by inserting after subparagraph (A) the 

24 following: 


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1 ‘‘(B) acquiring the land on which the facil2 ity is to be constructed,’’. 

3 (c) REPEAL OF LIMITATION ON TAXPAYERS ELIGI4 BLE FOR CREDIT.— 

5 (1) IN GENERAL.—Section 1397E(a) of the In6 ternal Revenue Code of 1986 (relating to allowance 

7 of credit) is amended by striking ‘‘an eligible tax8 payer’’ and inserting ‘‘a taxpayer’’. 

9 (2) CONFORMING AMENDMENT.—Section 

10 1397E(d)(6) of such Code is amended to read as fol11 lows: 

12 ‘‘(6) BONDS HELD BY REGULATED INVEST13 MENT COMPANIES.—If any qualified zone academy 

14 bond is held by a regulated investment company, the 

15 credit determined under subsection (a) shall be al16 lowed to shareholders of such company under proce17 dures prescribed by the Secretary.’’. 

18 (d) CREDITS MAY BE STRIPPED.—Section 1397E of 

19 the Internal Revenue Code of 1986 is amended by adding 

20 at the end the following new subsection: 

21 ‘‘(j) CREDITS MAY BE STRIPPED.—Under regula22 tions prescribed by the Secretary— 

23 ‘‘(1) IN GENERAL.—There may be a separation 

24 (including at issuance) of the ownership of a quali25 fied zone academy bond and the entitlement to the 


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1 credit under this section with respect to such bond. 

2 In case of any such separation, the credit under this 

3 section shall be allowed to the person who on the 

4 credit allowance date holds the instrument evidenc5 ing the entitlement to the credit and not to the hold6 er of the bond. 

7 ‘‘(2) CERTAIN RULES TO APPLY.—In the case 

8 of a separation described in paragraph (1), the rules 

9 of section 1286 shall apply to the qualified zone 

10 academy bond as if it were a stripped bond and to 

11 the credit under this section as if it were a stripped 

12 coupon.’’ 

13 (e) EFFECTIVE DATES.— 

14 (1) IN GENERAL.—Except as otherwise pro15 vided in this subsection, the amendments made by 

16 this section shall apply to obligations issued after 

17 December 31, 2005. 

18 (2) REPEAL OF RESTRICTION ON ZONE ACAD19 EMY BOND HOLDERS.—In the case of bonds to 

20 which section 1397E of the Internal Revenue Code 

21 of 1986 (as in effect before the date of the enact22 ment of this Act) applies, the limitation of such sec23 tion to eligible taxpayers (as defined in subsection 


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1 (d)(6) of such section) shall not apply after the date 

2 of the enactment of this Act. 

Æ 


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