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[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 912 Introduced in Senate (IS)]

110th CONGRESS
  1st Session
                                 S. 912

To amend the Internal Revenue Code of 1986 to expand the incentives for 
           the construction and renovation of public schools.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             March 19, 2007

Mr. Rockefeller (for himself, Mr. Harkin, and Mr. Kerry) 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 expand the incentives for 
           the construction and renovation of public schools.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``America's Better Classroom Act of 
2007''.

SEC. 2. EXPANSION OF INCENTIVES FOR PUBLIC SCHOOLS.

    (a) In General.--Chapter 1 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new subchapter:

         ``Subchapter Z--Public School Modernization Provisions

``Sec. 1400U. Credit to holders of qualified public school 
                            modernization bonds.
``Sec. 1400V. Qualified school construction bonds.
``Sec. 1400W. Qualified zone academy bonds.
``Sec. 1400X. Qualified tribal school modernization bonds.

``SEC. 1400U. CREDIT TO HOLDERS OF QUALIFIED PUBLIC SCHOOL 
              MODERNIZATION BONDS.

    ``(a) Allowance of Credit.--In the case of a taxpayer who holds a 
qualified public school modernization 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 credit allowance date 
        for a qualified public school modernization bond is 25 percent 
        of the annual credit determined with respect to such bond.
            ``(2) Annual credit.--The annual credit determined with 
        respect to any qualified public school modernization bond is 
        the product of--
                    ``(A) the applicable credit rate, multiplied by
                    ``(B) the outstanding face amount of the bond.
            ``(3) Applicable credit rate.--For purposes of paragraph 
        (1), the applicable credit rate with respect to an issue is the 
        rate equal to an average market yield (as of the day before the 
        date of issuance of the issue) on outstanding long-term 
        corporate debt obligations (determined under regulations 
        prescribed by the Secretary).
            ``(4) Special rule for issuance and redemption.--In the 
        case of a bond which is issued during the 3-month period ending 
        on a credit allowance date, the amount of the credit determined 
        under this subsection with respect to such credit allowance 
        date shall be a ratable portion of the credit otherwise 
        determined based on the portion of the 3-month period during 
        which the bond is outstanding. A similar rule shall apply when 
        the bond is redeemed.
    ``(c) Limitation Based on Amount of Tax.--
            ``(1) In general.--The credit allowed under subsection (a) 
        for any taxable year shall not exceed the excess of--
                    ``(A) the sum of the regular tax liability (as 
                defined in section 26(b)) plus the tax imposed by 
                section 55, over
                    ``(B) the sum of the credits allowable under part 
                IV of subchapter A (other than subpart C thereof, 
                relating to refundable credits, and subpart H thereof).
            ``(2) Carryover of unused credit.--If the credit allowable 
        under subsection (a) exceeds the limitation imposed by 
        paragraph (1) for such taxable year, such excess shall be 
        carried to the succeeding taxable year and added to the credit 
        allowable under subsection (a) for such taxable year.
    ``(d) Qualified Public School Modernization Bond; Credit Allowance 
Date.--For purposes of this section--
            ``(1) Qualified public school modernization bond.--The term 
        `qualified public school modernization bond' means--
                    ``(A) a qualified zone academy bond,
                    ``(B) a qualified school construction bond, and
                    ``(C) a qualified tribal school modernization bond.
            ``(2) Credit allowance date.--The term `credit allowance 
        date' means--
                    ``(A) March 15,
                    ``(B) June 15,
                    ``(C) September 15, and
                    ``(D) December 15.
        Such term includes the last day on which the bond is 
        outstanding.
    ``(e) Other Definitions.--For purposes of this subchapter--
            ``(1) Local educational agency.--The term `local 
        educational agency' has the meaning given to such term by 
        section 9101 of the Elementary and Secondary Education Act of 
        1965. Such term includes the local educational agency that 
        serves the District of Columbia but does not include any other 
        State agency.
            ``(2) Bond.--The term `bond' includes any obligation.
            ``(3) State.--The term `State' includes the District of 
        Columbia and any possession of the United States.
            ``(4) Public school facility.--The term `public school 
        facility' shall not include--
                    ``(A) any stadium or other facility primarily used 
                for athletic contests or exhibitions or other events 
                for which admission is charged to the general public, 
                or
                    ``(B) any facility which is not owned by a State or 
                local government or any agency or instrumentality of a 
                State or local government.
    ``(f) 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.
    ``(g) Credit Treated as Nonrefundable Bondholder Credit.--For 
purposes of this title, the credit allowed by this section shall be 
treated as a credit allowable under subpart H of part IV of subchapter 
A of this chapter.
    ``(h) S Corporations.--In the case of a qualified public school 
modernization bond held by an S corporation--
            ``(1) each shareholder shall take into account such 
        shareholder's pro rata share of the credit, and
            ``(2) no basis adjustments to the stock of the corporation 
        shall be made under section 1367 on account of this section.
    ``(i) Other Pass-Thru Entities.--
            ``(1) In general.--Under regulations prescribed by the 
        Secretary, in the case of a partnership, trust, 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).
            ``(2) No basis.--In the case of a bond held by a 
        partnership, rules similar to the rules under subsection (h)(2) 
        shall apply.
    ``(j) Bonds Held by Regulated Investment Companies.--If any 
qualified public school modernization 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.
    ``(k) Recapture of Portion of Credit Where Cessation of 
Compliance.--
            ``(1) In general.--If any bond which when issued purported 
        to be a qualified public school modernization bond ceases to be 
        a qualified public school modernization bond, the issuer shall 
        pay to the United States (at the time required by the 
        Secretary) an amount equal to the sum of--
                    ``(A) the aggregate of the credits allowable under 
                this section with respect to such bond (determined 
                without regard to subsection (c)) for taxable years 
                ending during the calendar year in which such cessation 
                occurs and the 2 preceding calendar years, and
                    ``(B) interest at the underpayment rate under 
                section 6621 on the amount determined under 
                subparagraph (A) for each calendar year for the period 
                beginning on the first day of such calendar year.
            ``(2) Failure to pay.--If the issuer fails to timely pay 
        the amount required by paragraph (1) with respect to such bond, 
        the tax imposed by this chapter on each holder of any such bond 
        which is part of such issue shall be increased (for the taxable 
        year of the holder in which such cessation occurs) by the 
        aggregate decrease in the credits allowed under this section to 
        such holder for taxable years beginning in such 3 calendar 
        years which would have resulted solely from denying any credit 
        under this section with respect to such issue for such taxable 
        years.
            ``(3) Special rules.--
                    ``(A) Tax benefit rule.--The tax for the taxable 
                year shall be increased under paragraph (2) only with 
                respect to credits allowed by reason of this section 
                which were used to reduce tax liability. In the case of 
                credits not so used to reduce tax liability, the 
                carryforwards and carrybacks under section 39 shall be 
                appropriately adjusted.
                    ``(B) No credits against tax.--Any increase in tax 
                under paragraph (2) shall not be treated as a tax 
                imposed by this chapter for purposes of determining--
                            ``(i) the amount of any credit allowable 
                        under this part, or
                            ``(ii) the amount of the tax imposed by 
                        section 55.
    ``(l) Credits May Be Stripped.--Under regulations prescribed by the 
Secretary--
            ``(1) In general.--There may be a separation (including at 
        issuance) of the ownership of a qualified public school 
        modernization bond and the entitlement to the credit under this 
        section with respect to such bond. In case of any such 
        separation, the credit under this section shall be allowed to 
        the person who on the credit allowance date holds the 
        instrument evidencing the entitlement to the credit and not to 
        the holder of the bond.
            ``(2) Certain rules to apply.--In the case of a separation 
        described in paragraph (1), the rules of section 1286 shall 
        apply to the qualified public school modernization bond as if 
        it were a stripped bond and to the credit under this section as 
        if it were a stripped coupon.
    ``(m) Treatment for Estimated Tax Purposes.--Solely for purposes of 
sections 6654 and 6655, the credit allowed by this section to a 
taxpayer by reason of holding a qualified public school modernization 
bonds on a credit allowance date shall be treated as if it were a 
payment of estimated tax made by the taxpayer on such date.
    ``(n) Credit May Be Transferred.--Nothing in any law or rule of law 
shall be construed to limit the transferability of the credit allowed 
by this section through sale and repurchase agreements.
    ``(o) Reporting.--Issuers of qualified public school modernization 
bonds shall submit reports similar to the reports required under 
section 149(e).
    ``(p) Termination.--This section shall not apply to any bond issued 
after September 30, 2008 (December 31, 2013, in the case of any 
qualified tribal school modernization bond).

``SEC. 1400V. QUALIFIED SCHOOL CONSTRUCTION BONDS.

    ``(a) Qualified School Construction Bond.--For purposes of this 
subchapter, the term `qualified school construction 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 used for the construction, rehabilitation, or repair of a 
        public school facility or for the acquisition of land on which 
        such a facility is to be constructed with part of the proceeds 
        of such issue,
            ``(2) the bond is issued by a State or local government 
        within the jurisdiction of which such school is located,
            ``(3) the issuer designates such bond for purposes of this 
        section, and
            ``(4) the term of each bond which is part of such issue 
        does not exceed 15 years.
    ``(b) Limitation on Amount of Bonds Designated.--The maximum 
aggregate face amount of bonds issued during any calendar year which 
may be designated under subsection (a) by any issuer shall not exceed 
the limitation amount allocated under subsection (d) for such calendar 
year to such issuer.
    ``(c) National Limitation on Amount of Bonds Designated.--There is 
a national qualified school construction bond limitation for each 
calendar year. Such limitation is--
            ``(1) $11,000,000,000 for 2007,
            ``(2) $11,000,000,000 for 2008, and
            ``(3) except as provided in subsection (f), zero after 
        2008.
    ``(d) Limitation Allocated Among States.--
            ``(1) In general.--The limitation applicable under 
        subsection (c) for any calendar year shall be allocated by the 
        Secretary among the States in proportion to the respective 
        amounts each such State received for basic grants under section 
        1124 of the Elementary and Secondary Education Act of 1965 for 
        the most recent fiscal year ending before such calendar year. 
        The limitation amount allocated to a State under the preceding 
        sentence shall be allocated by the State to issuers within such 
        State, recognizing the varying needs for rural, high growth, 
        and urban school districts.
            ``(2) Minimum allocations to states.--
                    ``(A) In general.--The Secretary shall adjust the 
                allocations under this subsection for any calendar year 
                for each State to the extent necessary to ensure that 
                the amount allocated to such State under this 
                subsection for such year is not less than an amount 
                equal to such State's minimum percentage of the amount 
                to be allocated under paragraph (1) for the calendar 
                year.
                    ``(B) Minimum percentage.--A State's minimum 
                percentage for any calendar year is the minimum 
                percentage described in section 1124(d) of the 
                Elementary and Secondary Education Act of 1965 for such 
                State for the most recent fiscal year ending before 
                such calendar year.
            ``(3) Allocations to certain possessions.--The amount to be 
        allocated under paragraph (1) to any possession of the United 
        States other than Puerto Rico shall be the amount which would 
        have been allocated if all allocations under paragraph (1) were 
        made on the basis of respective populations of individuals 
        below the poverty line (as defined by the Office of Management 
        and Budget). In making other allocations, the amount to be 
        allocated under paragraph (1) shall be reduced by the aggregate 
        amount allocated under this paragraph to possessions of the 
        United States.
    ``(e) Carryover of Unused Limitation.--If for any calendar year--
            ``(1) the amount allocated under subsection (d) to any 
        State, exceeds
            ``(2) the amount of bonds issued during such year which are 
        designated under subsection (a) pursuant to such allocation, 
        the limitation amount under such subsection for such State for 
        the following calendar year shall be increased by the amount of 
        such excess. A similar rule shall apply to the amounts 
        allocated under subsection (d)(4).
    ``(f) Special Rules Relating to Arbitrage.--
            ``(1) In general.--A bond shall not be treated as failing 
        to meet the requirement of subsection (a)(1) solely by reason 
        of the fact that the proceeds of the issue of which such bond 
        is a part are invested for a temporary period (but not more 
        than 36 months) until such proceeds are needed for the purpose 
        for which such issue was issued.
            ``(2) Binding commitment requirement.--Paragraph (1) shall 
        apply to an issue only if, as of the date of issuance, there is 
        a reasonable expectation that--
                    ``(A) at least 10 percent of the proceeds of the 
                issue will be spent within the 6-month period beginning 
                on such date for the purpose for which such issue was 
                issued, and
                    ``(B) the remaining proceeds of the issue will be 
                spent with due diligence for such purpose.
            ``(3) Earnings on proceeds.--Any earnings on proceeds 
        during the temporary period shall be treated as proceeds of the 
        issue for purposes of applying subsection (a)(1) and paragraph 
        (1) of this subsection.

``SEC. 1400W. QUALIFIED ZONE ACADEMY BONDS.

    ``(a) Qualified Zone Academy Bond.--For purposes of this 
subchapter--
            ``(1) In general.--The term `qualified zone academy 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 zone academy established by a 
                local educational agency,
                    ``(B) the bond is issued by a State or local 
                government within the jurisdiction of which such 
                academy is located,
                    ``(C) the issuer--
                            ``(i) designates such bond for purposes of 
                        this section,
                            ``(ii) certifies that it has written 
                        assurances that the private business 
                        contribution requirement of paragraph (2) will 
                        be met with respect to such academy, and
                            ``(iii) certifies that it has the written 
                        approval of the local educational agency for 
                        such bond issuance,
                    ``(D) the term of each bond which is part of such 
                issue does not exceed 15 years, and
                    ``(E) the issue meets the requirements of 
                subsections (c) and (d).
            ``(2) Private business contribution requirement.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the private business contribution requirement of this 
                paragraph is met with respect to any issue if the local 
                educational agency that established the qualified zone 
                academy has written commitments from private entities 
                to make qualified contributions having a present value 
                (as of the date of issuance of the issue) of not less 
                than 10 percent of the proceeds of the issue.
                    ``(B) Qualified contributions.--For purposes of 
                subparagraph (A), the term `qualified contribution' 
                means any contribution (of a type and quality 
                acceptable to the local educational agency) of--
                            ``(i) equipment for use in the qualified 
                        zone academy (including state-of-the-art 
                        technology and vocational equipment),
                            ``(ii) technical assistance in developing 
                        curriculum or in training teachers in order to 
                        promote appropriate market driven technology in 
                        the classroom,
                            ``(iii) services of employees as volunteer 
                        mentors,
                            ``(iv) internships, field trips, or other 
                        educational opportunities outside the academy 
                        for students, or
                            ``(v) any other property or service 
                        specified by the local educational agency.
            ``(3) Qualified zone academy.--The term `qualified zone 
        academy' means any public school (or academic program within a 
        public school) which is established by and operated under the 
        supervision of a local educational agency to provide education 
        or training below the postsecondary level if--
                    ``(A) such public school or program (as the case 
                may be) is designed in cooperation with business to 
                enhance the academic curriculum, increase graduation 
                and employment rates, and better prepare students for 
                the rigors of college and the increasingly complex 
                workforce,
                    ``(B) students in such public school or program (as 
                the case may be) will be subject to the same academic 
                standards and assessments as other students educated by 
                the local educational agency,
                    ``(C) the comprehensive education plan of such 
                public school or program is approved by the local 
                educational agency, and
                    ``(D)(i) such public school is located in an 
                empowerment zone or enterprise community (including any 
                such zone or community designated after the date of the 
                enactment of this section), or
                    ``(ii) there is a reasonable expectation (as of the 
                date of issuance of the bonds) that at least 35 percent 
                of the students attending such school or participating 
                in such program (as the case may be) will be eligible 
                for free or reduced-cost lunches under the school lunch 
                program established under the Richard B. Russell 
                National School Lunch Act.
            ``(4) Qualified purpose.--The term `qualified purpose' 
        means, with respect to any qualified zone academy--
                    ``(A) constructing, rehabilitating, or repairing 
                the public school facility in which the academy is 
                established,
                    ``(B) acquiring the land on which such facility is 
                to be constructed with part of the proceeds of such 
                issue,
                    ``(C) providing equipment for use at such academy,
                    ``(D) developing course materials for education to 
                be provided at such academy, and
                    ``(E) training teachers and other school personnel 
                in such academy.
    ``(b) Limitations on Amount of Bonds Designated.--
            ``(1) In general.--There is a national zone academy bond 
        limitation for each calendar year. Such limitation is--
                    ``(A) $1,400,000 for 2007,
                    ``(B) $1,400,000 for 2008, and
                    ``(C) except as provided in paragraph (3), zero 
                after 2008.
            ``(2) Allocation of limitation.--
                    ``(A) Allocation among states.--The national zone 
                academy bond limitations for any calendar year shall be 
                allocated by the Secretary among the States in 
                proportion to the respective amounts each such State 
                received for basic grants under section 1124 of the 
                Elementary and Secondary Education Act of 1965 for the 
                most recent fiscal year ending before such calendar 
                year.
                    ``(B) Allocation to local educational agencies.--
                The limitation amount allocated to a State under 
                subparagraph (A) shall be allocated by the State to 
                qualified zone academies within such State.
                    ``(C) Designation subject to limitation amount.--
                The maximum aggregate face amount of bonds issued 
                during any calendar year which may be designated under 
                subsection (a) with respect to any qualified zone 
                academy shall not exceed the limitation amount 
                allocated to such academy under subparagraph (B) for 
                such calendar year.
            ``(3) Carryover of unused limitation.--If for any calendar 
        year--
                    ``(A) the limitation amount under this subsection 
                for any State, exceeds
                    ``(B) the amount of bonds issued during such year 
                which are designated under subsection (a) (or the 
                corresponding provisions of prior law) with respect to 
                qualified zone academies within such State, the 
                limitation amount under this subsection for such State 
                for the following calendar year shall be increased by 
                the amount of such excess.
    ``(c) Special Rules Relating to Expenditures.--
            ``(1) In general.--An issue shall be treated as meeting the 
        requirements of this subsection if, as of the date of issuance, 
        the issuer reasonably expects--
                    ``(A) at least 95 percent of the proceeds from the 
                sale of the issue are to be spent for 1 or more 
                qualified purposes with respect to qualified zone 
                academies within the 5-year period beginning on the 
                date of issuance of the qualified zone academy bond,
                    ``(B) a binding commitment with a third party to 
                spend at least 10 percent of the proceeds from the sale 
                of the issue will be incurred within the 6-month period 
                beginning on the date of issuance of the qualified zone 
                academy bond, and
                    ``(C) such purposes will be completed with due 
                diligence and the proceeds from the sale of the issue 
                will be spent with due diligence.
            ``(2) Extension of period.--Upon submission of a request 
        prior to the expiration of the period described in paragraph 
        (1)(A), the Secretary may extend such period if the issuer 
        establishes that the failure to satisfy the 5-year requirement 
        is due to reasonable cause and the related purposes will 
        continue to proceed with due diligence.
            ``(3) Failure to spend required amount of bond proceeds 
        within 5 years.--To the extent that less than 95 percent of the 
        proceeds of such issue are expended by the close of the 5-year 
        period beginning on the date of issuance (or if an extension 
        has been obtained under paragraph (2), by the close of the 
        extended period), the issuer shall redeem all of the 
        nonqualified bonds within 90 days after the end of such period. 
        For purposes of this paragraph, the amount of the nonqualified 
        bonds required to be redeemed shall be determined in the same 
        manner as under section 142.
    ``(d) Special Rules Relating to Arbitrage.--An issue shall be 
treated as meeting the requirements of this subsection if the issuer 
satisfies the arbitrage requirements of section 148 with respect to 
proceeds of the issue.

``SEC. 1400X. QUALIFIED TRIBAL SCHOOL MODERNIZATION BONDS.

    ``(a) Qualified Tribal School Modernization Bond.--For purposes of 
this subchapter--
            ``(1) In general.--The term `qualified tribal school 
        modernization bond' means, subject to paragraph (2), any bond 
        issued as part of an issue under section 3(c) of the America's 
        Better Classroom Act of 2007, as in effect on the date of the 
        enactment of this section, if--
                    ``(A) 95 percent or more of the proceeds of such 
                issue are to be used for the construction, 
                rehabilitation, or repair of a school facility funded 
                by the Bureau of Indian Affairs of the Department of 
                the Interior or for the acquisition of land on which 
                such a facility is to be constructed with part of the 
                proceeds of such issue,
                    ``(B) the bond is issued by an Indian tribe,
                    ``(C) the issuer designates such bond for purposes 
                of this section, and
                    ``(D) the term of each bond which is part of such 
                issue does not exceed 15 years.
            ``(2) National limitation on amount of bonds designated.--
                    ``(A) National limitation.--There is a national 
                qualified tribal school modernization bond limitation 
                for each calendar year. Such limitation is--
                            ``(i) $200,000,000 for 2007,
                            ``(ii) $200,000,000 for 2008, and
                            ``(iii) zero after 2008.
                    ``(B) Allocation of limitation.--The national 
                qualified tribal school modernization bond limitation 
                shall be allocated to Indian tribes by the Secretary of 
                the Interior subject to the provisions of section 3 of 
                the America's Better Classroom Act of 2007, as in 
                effect on the date of the enactment of this section.
                    ``(C) Designation subject to limitation amount.--
                The maximum aggregate face amount of bonds issued 
                during any calendar year which may be designated under 
                paragraph (1) with respect to any Indian tribe shall 
                not exceed the limitation amount allocated to such 
                government under subparagraph (B) for such calendar 
                year.
                    ``(D) Carryover of unused limitation.--If for any 
                calendar year--
                            ``(i) the limitation amount under this 
                        paragraph, exceeds
                            ``(ii) the amount of qualified tribal 
                        school modernization bonds issued during such 
                        year, the limitation amount under this 
                        paragraph for the following calendar year shall 
                        be increased by the amount of such excess. The 
                        preceding sentence shall not apply if such 
                        following calendar year is after 2015.
    ``(b) Tribe.--For purposes of this section, the term `tribe' has 
the meaning given the term `Indian tribal government' by section 
7701(a)(40), including the application of section 7871(d). Such term 
includes any consortium of tribes approved by the Secretary of the 
Interior.''.
    (b) 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:
            ``(9) Reporting of credit on qualified public school 
        modernization bonds.--
                    ``(A) In general.--For purposes of subsection (a), 
                the term `interest' includes amounts includible in 
                gross income under section 1400U(f) and such amounts 
                shall be treated as paid on the credit allowance date 
                (as defined in section 1400U(d)(2)).
                    ``(B) Reporting to corporations, etc.--Except as 
                otherwise provided in regulations, in the case of any 
                interest described in subparagraph (A) of this 
                paragraph, subsection (b)(4) of this section shall be 
                applied without regard to subparagraphs (A), (H), (I), 
                (J), (K), and (L)(i).
                    ``(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.''.
    (c) Conforming Amendments.--
            (1) Subchapter U of chapter 1 of the Internal Revenue Code 
        of 1986 is amended by striking part IV, by redesignating part V 
        as part IV, and by redesignating section 1397F as section 
        1397E.
            (2) Sections 54(l)(3)(B) and 1400N(l)(7)(B)(ii) are each 
        amended by striking ``section 1397E(l)'' and inserting 
        ``section 1400U(h)''.
            (3) The table of subchapters for chapter 1 of such Code is 
        amended by adding at the end the following new item:

       ``subchapter z. public school modernization provisions.''.

            (4) The table of parts of subchapter U of chapter 1 of such 
        Code is amended by striking the last 2 items and inserting the 
        following new item:

                       ``Part IV. Regulations.''.

    (d) Sovereign Immunity.--This section and the amendments made by 
this section shall not be construed to impact, limit, or affect the 
sovereign immunity of the Federal Government or any State or tribal 
government.
    (e) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        obligations issued after December 31, 2006.
            (2) Repeal of restriction on zone academy bond holders.--In 
        the case of bonds to which section 1397E of the Internal 
        Revenue Code of 1986 (as in effect before the date of the 
        enactment of this Act) applies, the limitation of such section 
        to eligible taxpayers (as defined in subsection (d)(6) of such 
        section) shall not apply after the date of the enactment of 
        this Act.

SEC. 3. INDIAN SCHOOL CONSTRUCTION.

    (a) Definitions.--In this section:
            (1) Bureau.--The term ``Bureau'' means the Bureau of Indian 
        Affairs of the Department.
            (2) Department.--The term ``Department'' means the 
        Department of the Interior.
            (3) Escrow account.--The term ``escrow account'' means the 
        tribal school modernization escrow account established under 
        subsection (b)(6)(B)(i).
            (4) Indian.--The term ``Indian'' means any individual who 
        is a member of an Indian tribe.
            (5) Indian tribe.--
                    (A) In general.--The term ``Indian tribe'' has the 
                meaning given the term ``Indian tribal government'' by 
                section 7701(a)(40) of the Internal Revenue Code of 
                1986 (including the application of section 7871(d) of 
                that Code).
                    (B) Inclusion.--The term ``Indian tribe'' includes 
                a consortium of Indian tribes approved by the 
                Secretary.
            (6) Secretary.--The term ``Secretary'' means the Secretary 
        of the Interior.
            (7) Tribal school.--The term ``tribal school'' means an 
        elementary school, secondary school, or dormitory that--
                    (A) is operated by a tribal organization or the 
                Bureau for the education of Indian children; and
                    (B) under a contract, a grant, or an agreement, or 
                for a Bureau-operated school, receives financial 
                assistance to pay the costs of operation from funds 
                made available under--
                            (i) section 102, 103(a), or 208 of the 
                        Indian Self-Determination and Education 
                        Assistance Act (25 U.S.C. 450f, 450h(a), 458d); 
                        or
                            (ii) the Tribally Controlled Schools Act of 
                        1988 (25 U.S.C. 2501 et seq.).
    (b) Issuance of Bonds.--
            (1) In general.--The Secretary shall establish a pilot 
        program under which eligible Indian tribes may issue qualified 
        tribal school modernization bonds to provide funding for the 
        construction, rehabilitation, or repair of tribal schools 
        (including the advance planning and design of tribal schools).
            (2) Eligibility.--
                    (A) In general.--To be eligible to issue any 
                qualified tribal school modernization bond under the 
                program under paragraph (1), an Indian tribe shall--
                            (i) prepare and submit to the Secretary a 
                        plan of construction that meets the 
                        requirements of subparagraph (B);
                            (ii) provide for quarterly and final 
                        inspection of the project by the Bureau; and
                            (iii) pledge that the facilities financed 
                        by the bond will be used primarily for 
                        elementary and secondary educational purposes 
                        for not less than the period during which the 
                        bond remains outstanding.
                    (B) Plan of construction.--A plan of construction 
                referred to in subparagraph (A)(i) meets the 
                requirements of this subparagraph if the plan--
                            (i) contains a description of the 
                        construction to be carried out with funding 
                        provided under a qualified tribal school 
                        modernization bond;
                            (ii) demonstrates that a comprehensive 
                        survey has been completed to determine the 
                        construction needs of the tribal school 
                        involved;
                            (iii) contains assurances that funding 
                        under the bond will be used only for the 
                        activities described in the plan;
                            (iv) contains a response to the evaluation 
                        criteria contained in Instructions and 
                        Application for Replacement School 
                        Construction, Revision 6, dated February 6, 
                        1999; and
                            (v) contains any other reasonable and 
                        related information determined to be 
                        appropriate by the Secretary.
                    (C) Priority.--In determining whether an Indian 
                tribe is eligible to participate in the program under 
                this subsection, the Secretary shall give priority to 
                an Indian tribe that, as demonstrated by the relevant 
                plans of construction, will fund projects--
                            (i) described in the Education Facilities 
                        Replacement Construction Priorities List, as of 
                        fiscal year 2000, of the Bureau (65 Fed. Reg. 
                        4623);
                            (ii) described in any subsequent priorities 
                        list published in the Federal Register; or
                            (iii) that meet the criteria for ranking 
                        schools as described in Instructions and 
                        Application for Replacement School 
                        Construction, Revision 6, dated February 6, 
                        1999.
                    (D) Advance planning and design funding.--
                            (i) In general.--An Indian tribe may 
                        propose in the plan of construction of the 
                        Indian tribe to receive advance planning and 
                        design funding from the escrow account.
                            (ii) Conditions on allocation of funds.--As 
                        a condition to the allocation to an Indian 
                        tribe of advance planning and design funds from 
                        the escrow account under clause (i), the Indian 
                        tribe shall agree--
                                    (I) to issue qualified tribal 
                                school modernization bonds after the 
                                date of receipt of the funds; and
                                    (II) as a condition of each bond 
                                issuance, that the Indian tribe will 
                                deposit into the escrow account, or a 
                                fund managed by the trustee as 
                                described in paragraph (4)(C), an 
                                amount equal to the amount of funds 
                                received from the escrow account.
            (3) Permissible activities.--In addition to the use of 
        funds permitted under paragraph (1), an Indian tribe may use 
        amounts received through the issuance of a qualified tribal 
        school modernization bond--
                    (A) to enter into and make payments under contracts 
                with licensed and bonded architects, engineers, and 
                construction firms--
                            (i) to determine the needs of the tribal 
                        school; and
                            (ii) for the design and engineering of the 
                        tribal school;
                    (B) enter into and make payments under contracts 
                with financial advisers, underwriters, attorneys, 
                trustees, and other professionals who would be able to 
                provide assistance to the Indian tribe in issuing 
                bonds; and
                    (C) carry out other activities determined to be 
                appropriate by the Secretary.
            (4) Bond trustee.--
                    (A) In general.--Notwithstanding any other 
                provision of law, any qualified tribal school 
                modernization bond issued by an Indian tribe under this 
                subsection shall be subject to a trust agreement 
                between the Indian tribe and a trustee.
                    (B) Trustee.--Any bank or trust company that meets 
                requirements established by the Secretary may be 
                designated as a trustee under subparagraph (A).
                    (C) Content of trust agreement.--A trust agreement 
                entered into by an Indian tribe under this paragraph 
                shall specify that the trustee, with respect to any 
                bond issued under this subsection, shall--
                            (i) act as a repository for the proceeds of 
                        the bond;
                            (ii) make payments to bondholders;
                            (iii) receive, as a condition to the 
                        issuance of the bond, a transfer of funds from 
                        the escrow account, or from other funds 
                        furnished by or on behalf of the Indian tribe, 
                        in an amount that (including interest earnings 
                        from the investment of the funds in obligations 
                        of, or fully guaranteed by, the United States, 
                        or from other investments authorized by 
                        paragraph (10)) will produce funds sufficient 
                        to timely pay in full the entire principal 
                        amount of the bond on the stated maturity date 
                        of the bond;
                            (iv) invest the funds transferred under 
                        clause (iii) in an investment described in that 
                        clause; and
                            (v)(I) hold and invest the funds 
                        transferred under clause (iii) in a segregated 
                        fund or account under the agreement; and
                            (II) use the fund or account solely for 
                        payment of the costs of items described in 
                        paragraph (3).
                    (D) Requirements for making direct payments.--
                            (i) Payments.--
                                    (I) In general.--Notwithstanding 
                                any other provision of law, the trustee 
                                shall make any payment referred to in 
                                subparagraph (C)(v) in accordance with 
                                such requirements as the Indian tribe 
                                shall prescribe in the trust agreement 
                                entered into under subparagraph (C).
                                    (II) Inspection.--Before making a 
                                payment for a project to a contractor 
                                under subparagraph (C)(v), to ensure 
                                completion of the project, the trustee 
                                shall require an inspection of the 
                                project by--
                                            (aa) a local financial 
                                        institution; or
                                            (bb) an independent 
                                        inspecting architect or 
                                        engineer.
                            (ii) Contracts.--Each contract referred to 
                        in paragraph (3) shall specify, or be 
                        renegotiated to specify, that payments under 
                        the contract shall be made in accordance with 
                        this paragraph.
            (5) Payments of principal and interest.--
                    (A) Principal.--
                            (i) In general.--No principal payment on 
                        any qualified tribal school modernization bond 
                        shall be required under this subsection until 
                        the final, stated date on which the bond 
                        reaches maturity.
                            (ii) Maturity; outstanding principal.--With 
                        respect to a qualified tribal school 
                        modernization bond issued under this 
                        subsection--
                                    (I) the bond shall reach maturity 
                                not later than 15 years after the date 
                                of issuance of the bond; and
                                    (II) on the date on which the bond 
                                reaches maturity, the entire 
                                outstanding principal under the bond 
                                shall become due and payable.
                    (B) Interest.--There shall be awarded a tax credit 
                under section 1400U of the Internal Revenue Code of 
                1986 in lieu of interest on a qualified tribal school 
                modernization bond issued under this subsection.
            (6) Bond guarantees.--
                    (A) In general.--Payment of the principal portion 
                of a qualified tribal school modernization bond issued 
                under this subsection shall be guaranteed solely by 
                amounts deposited with each respective bond trustee as 
                described in paragraph (4)(C)(iii).
                    (B) Establishment of account.--
                            (i) In general.--Notwithstanding any other 
                        provision of law, the Secretary may--
                                    (I) establish a tribal school 
                                modernization escrow account; and
                                    (II) beginning in fiscal year 2008, 
                                from amounts made available for school 
                                replacement under the construction 
                                account of the Bureau, deposit not more 
                                than $30,000,000 for each fiscal year 
                                into the escrow account.
                            (ii) Transfers of excess proceeds.--Excess 
                        proceeds held under any trust agreement that 
                        are not needed for any of the purposes 
                        described in clauses (iii) and (v) of paragraph 
                        (4)(C) shall be transferred, from time to time, 
                        by the trustee for deposit into the escrow 
                        account.
                            (iii) Payments.--The Secretary shall use 
                        any amounts deposited in the escrow account 
                        under clauses (i) and (ii)--
                                    (I) to make payments to trustees 
                                appointed and acting in accordance with 
                                paragraph (4); or
                                    (II) to make payments described in 
                                paragraph (2)(D).
            (7) Limitations.--
                    (A) Obligation to repay.--
                            (i) In general.--Notwithstanding any other 
                        provision of law, the principal amount on any 
                        qualified tribal school modernization bond 
                        issued under this subsection shall be repaid 
                        only to the extent of any escrowed funds 
                        provided under paragraph (4)(C)(iii).
                            (ii) No guarantee.--No qualified tribal 
                        school modernization bond issued by an Indian 
                        tribe under this subsection shall be an 
                        obligation of, and no payment of the principal 
                        of such a bond shall be guaranteed by--
                                    (I) the United States;
                                    (II) the Indian tribe; or
                                    (III) the tribal school for which 
                                the bond was issued.
                    (B) Land and facilities.--No land or facility 
                purchased or improved with amounts derived from a 
                qualified tribal school modernization bond issued under 
                this subsection shall be mortgaged or used as 
                collateral for the bond.
            (8) Sale of bonds.--A qualified tribal school modernization 
        bond may be sold at a purchase price equal to, in excess of, or 
        at a discount from, the par amount of the bond.
            (9) Treatment of trust agreement earnings.--No amount 
        earned through the investment of funds under the control of a 
        trustee under any trust agreement described in paragraph (4) 
        shall be subject to Federal income taxation.
            (10) Investment of sinking funds.--A sinking fund 
        established for the purpose of the payment of principal on a 
        qualified tribal school modernization bond issued under this 
        subsection shall be invested in--
                    (A) obligations issued by or guaranteed by the 
                United States; or
                    (B) such other assets as the Secretary of the 
                Treasury may by regulation allow.

SEC. 4. APPLICATION OF CERTAIN LABOR STANDARDS ON CONSTRUCTION PROJECTS 
              FINANCED UNDER PUBLIC SCHOOL MODERNIZATION PROGRAM.

    Section 439 of the General Education Provisions Act (20 U.S.C. 
1232b) is amended--
            (1) by inserting ``(a)'' before ``All laborers and 
        mechanics'', and
            (2) by adding at the end the following new subsection:
    ``(b)(1) For purposes of this section, the term `applicable 
program' also includes the qualified zone academy bond provisions 
enacted by section 226 of the Taxpayer Relief Act of 1997 and the 
program established by section 2 of the America's Better Classroom Act 
of 2007.
    ``(2) A State or local government participating in a program 
described in paragraph (1) shall--
            ``(A) in the awarding of contracts, give priority to 
        contractors with substantial numbers of employees residing in 
        the local education area to be served by the school being 
        constructed; and
            ``(B) include in the construction contract for such school 
        a requirement that the contractor give priority in hiring new 
        workers to individuals residing in such local education area.
    ``(3) In the case of a program described in paragraph (1), nothing 
in this subsection or subsection (a) shall be construed to deny any tax 
credit allowed under such program. If amounts are required to be 
withheld from contractors to pay wages to which workers are entitled, 
such amounts shall be treated as expended for construction purposes in 
determining whether the requirements of such program are met.''.

SEC. 5. EMPLOYMENT AND TRAINING ACTIVITIES RELATING TO CONSTRUCTION OR 
              RECONSTRUCTION OF PUBLIC SCHOOL FACILITIES.

    (a) In General.--Section 134 of the Workforce Investment Act of 
1998 (29 U.S.C. 2864) is amended by adding at the end the following new 
subsection:
    ``(f) Local Employment and Training Activities Relating to 
Construction or Reconstruction of Public School Facilities.--
            ``(1) In general.--In order to provide training services 
        related to construction or reconstruction of public school 
        facilities receiving funding assistance under an applicable 
        program, each State shall establish a specialized program of 
        training meeting the following requirements:
                    ``(A) The specialized program provides training for 
                jobs in the construction industry.
                    ``(B) The program provides trained workers for 
                projects for the construction or reconstruction of 
                public school facilities receiving funding assistance 
                under an applicable program.
                    ``(C) The program ensures that skilled workers 
                (residing in the area to be served by the school 
                facilities) will be available for the construction or 
                reconstruction work.
            ``(2) Coordination.--The specialized program established 
        under paragraph (1) shall be integrated with other activities 
        under this Act, with the activities carried out under the 
        National Apprenticeship Act of 1937 by the State Apprenticeship 
        Council or through the Bureau of Apprenticeship and Training in 
        the Department of Labor, as appropriate, and with activities 
        carried out under the Carl D. Perkins Career and Technical 
        Education Act of 2006. Nothing in this subsection shall be 
        construed to require services duplicative of those referred to 
        in the preceding sentence.
            ``(3) Applicable program.--In this subsection, the term 
        `applicable program' has the meaning given the term in section 
        439(b) of the General Education Provisions Act (relating to 
        labor standards).''.
    (b) State Plan.--Section 112(b)(17)(A) of the Workforce Investment 
Act of 1998 (29 U.S.C. 2822(b)(17)(A)) is amended--
            (1) in clause (iii), by striking ``and'' at the end;
            (2) by redesignating clause (iv) as clause (v); and
            (3) by inserting after clause (iii) the following new 
        clause:
                            ``(iv) how the State will establish and 
                        carry out a specialized program of training 
                        under section 134(f); and''.
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