II 

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. 

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 ‘‘America’s Better 

5 Classroom Act of 2007’’. 

6 SEC. 2. EXPANSION OF INCENTIVES FOR PUBLIC SCHOOLS. 

7 (a) IN GENERAL.—Chapter 1 of the Internal Rev8 enue Code of 1986 is amended by adding at the end the 

9 following new subchapter: 

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1 ‘‘Subchapter Z—Public School Modernization 

2 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. 

3 ‘‘SEC. 1400U. CREDIT TO HOLDERS OF QUALIFIED PUBLIC 

4 SCHOOL MODERNIZATION BONDS. 

5 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of a tax6 payer who holds a qualified public school modernization 

7 bond on a credit allowance date of such bond which occurs 

8 during the taxable year, there shall be allowed as a credit 

9 against the tax imposed by this chapter for such taxable 

10 year an amount equal to the sum of the credits determined 

11 under subsection (b) with respect to credit allowance dates 

12 during such year on which the taxpayer holds such bond. 

13 ‘‘(b) AMOUNT OF CREDIT.— 

14 ‘‘(1) IN GENERAL.—The amount of the credit 

15 determined under this subsection with respect to any 

16 credit allowance date for a qualified public school 

17 modernization bond is 25 percent of the annual 

18 credit determined with respect to such bond. 

19 ‘‘(2) ANNUAL CREDIT.—The annual credit de20 termined with respect to any qualified public school 

21 modernization bond is the product of— 

22 ‘‘(A) the applicable credit rate, multiplied 

23 by 

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1 ‘‘(B) the outstanding face amount of the 

2 bond. 

3 ‘‘(3) APPLICABLE CREDIT RATE.—For purposes 

4 of paragraph (1), the applicable credit rate with re5 spect to an issue is the rate equal to an average 

6 market yield (as of the day before the date of 

7 issuance of the issue) on outstanding long-term cor8 porate debt obligations (determined under regula9 tions prescribed by the Secretary). 

10 ‘‘(4) SPECIAL RULE FOR ISSUANCE AND RE11 DEMPTION.—In the case of a bond which is issued 

12 during the 3-month period ending on a credit allow13 ance date, the amount of the credit determined 

14 under this subsection with respect to such credit al15 lowance date shall be a ratable portion of the credit 

16 otherwise determined based on the portion of the 3- 

17 month period during which the bond is outstanding. 

18 A similar rule shall apply when the bond is re19 deemed. 

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

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

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

23 the excess of— 

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

2 (as defined in section 26(b)) plus the tax im3 posed by section 55, over 

4 ‘‘(B) the sum of the credits allowable 

5 under part IV of subchapter A (other than sub6 part C thereof, relating to refundable credits, 

7 and subpart H thereof). 

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

9 credit allowable under subsection (a) exceeds the 

10 limitation imposed by paragraph (1) for such taxable 

11 year, such excess shall be carried to the succeeding 

12 taxable year and added to the credit allowable under 

13 subsection (a) for such taxable year. 

14 ‘‘(d) QUALIFIED PUBLIC SCHOOL MODERNIZATION

15 BOND; CREDIT ALLOWANCE DATE.—For purposes of this 

16 section— 

17 ‘‘(1) QUALIFIED PUBLIC SCHOOL MODERNIZA18 TION BOND.—The term ‘qualified public school mod19 ernization bond’ means— 

20 ‘‘(A) a qualified zone academy bond, 

21 ‘‘(B) a qualified school construction bond, 

22 and 

23 ‘‘(C) a qualified tribal school moderniza24 tion bond. 

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

2 ‘credit allowance date’ means— 

3 ‘‘(A) March 15, 

4 ‘‘(B) June 15, 

5 ‘‘(C) September 15, and 

6 ‘‘(D) December 15. 

7 Such term includes the last day on which the bond 

8 is outstanding. 

9 ‘‘(e) OTHER DEFINITIONS.—For purposes of this 

10 subchapter— 

11 ‘‘(1) LOCAL EDUCATIONAL AGENCY.—The term 

12 ‘local educational agency’ has the meaning given to 

13 such term by section 9101 of the Elementary and 

14 Secondary Education Act of 1965. Such term in15 cludes the local educational agency that serves the 

16 District of Columbia but does not include any other 

17 State agency. 

18 ‘‘(2) BOND.—The term ‘bond’ includes any ob19 ligation. 

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

21 District of Columbia and any possession of the 

22 United States. 

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

24 ‘public school facility’ shall not include— 

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1 ‘‘(A) any stadium or other facility pri2 marily used for athletic contests or exhibitions 

3 or other events for which admission is charged 

4 to the general public, or 

5 ‘‘(B) any facility which is not owned by a 

6 State or local government or any agency or in7 strumentality of a State or local government. 

8 ‘‘(f) CREDIT INCLUDED IN GROSS INCOME.—Gross 

9 income includes the amount of the credit allowed to the 

10 taxpayer under this section (determined without regard to 

11 subsection (c)) and the amount so included shall be treat12 ed as interest income. 

13 ‘‘(g) CREDIT TREATED AS NONREFUNDABLE BOND14 HOLDER CREDIT.—For purposes of this title, the credit 

15 allowed by this section shall be treated as a credit allow16 able under subpart H of part IV of subchapter A of this 

17 chapter. 

18 ‘‘(h) S CORPORATIONS.—In the case of a qualified 

19 public school modernization bond held by an S corpora20 tion— 

21 ‘‘(1) each shareholder shall take into account 

22 such shareholder’s pro rata share of the credit, and 

23 ‘‘(2) no basis adjustments to the stock of the 

24 corporation shall be made under section 1367 on ac25 count of this section. 

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1 ‘‘(i) OTHER PASS-THRU ENTITIES.— 

2 ‘‘(1) IN GENERAL.—Under regulations pre3 scribed by the Secretary, in the case of a partner4 ship, trust, or other pass-thru entity, rules similar to 

5 the rules of section 41(g) shall apply with respect to 

6 the credit allowable under subsection (a). 

7 ‘‘(2) NO BASIS.—In the case of a bond held by 

8 a partnership, rules similar to the rules under sub9 section (h)(2) shall apply. 

10 ‘‘(j) BONDS HELD BY REGULATED INVESTMENT

11 COMPANIES.—If any qualified public school modernization 

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

13 determined under subsection (a) shall be allowed to share14 holders of such company under procedures prescribed by 

15 the Secretary. 

16 ‘‘(k) RECAPTURE OF PORTION OF CREDIT WHERE

17 CESSATION OF COMPLIANCE.— 

18 ‘‘(1) IN GENERAL.—If any bond which when 

19 issued purported to be a qualified public school mod20 ernization bond ceases to be a qualified public school 

21 modernization bond, the issuer shall pay to the 

22 United States (at the time required by the Sec23 retary) an amount equal to the sum of— 

24 ‘‘(A) the aggregate of the credits allowable 

25 under this section with respect to such bond 

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1 (determined without regard to subsection (c)) 

2 for taxable years ending during the calendar 

3 year in which such cessation occurs and the 2 

4 preceding calendar years, and 

5 ‘‘(B) interest at the underpayment rate 

6 under section 6621 on the amount determined 

7 under subparagraph (A) for each calendar year 

8 for the period beginning on the first day of 

9 such calendar year. 

10 ‘‘(2) FAILURE TO PAY.—If the issuer fails to 

11 timely pay the amount required by paragraph (1) 

12 with respect to such bond, the tax imposed by this 

13 chapter on each holder of any such bond which is 

14 part of such issue shall be increased (for the taxable 

15 year of the holder in which such cessation occurs) by 

16 the aggregate decrease in the credits allowed under 

17 this section to such holder for taxable years begin18 ning in such 3 calendar years which would have re19 sulted solely from denying any credit under this sec20 tion with respect to such issue for such taxable 

21 years. 

22 ‘‘(3) SPECIAL RULES.— 

23 ‘‘(A) TAX BENEFIT RULE.—The tax for 

24 the taxable year shall be increased under para25 graph (2) only with respect to credits allowed 

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1 by reason of this section which were used to re2 duce tax liability. In the case of credits not so 

3 used to reduce tax liability, the carryforwards 

4 and carrybacks under section 39 shall be appro5 priately adjusted. 

6 ‘‘(B) NO CREDITS AGAINST TAX.—Any in7 crease in tax under paragraph (2) shall not be 

8 treated as a tax imposed by this chapter for 

9 purposes of determining— 

10 ‘‘(i) the amount of any credit allow11 able under this part, or 

12 ‘‘(ii) the amount of the tax imposed 

13 by section 55. 

14 ‘‘(l) CREDITS MAY BE STRIPPED.—Under regula15 tions prescribed by the Secretary— 

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

17 (including at issuance) of the ownership of a quali18 fied public school modernization bond and the enti19 tlement to the credit under this section with respect 

20 to such bond. In case of any such separation, the 

21 credit under this section shall be allowed to the per22 son who on the credit allowance date holds the in23 strument evidencing the entitlement to the credit 

24 and not to the holder of the bond. 

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

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

3 of section 1286 shall apply to the qualified public 

4 school modernization bond as if it were a stripped 

5 bond and to the credit under this section as if it 

6 were a stripped coupon. 

7 ‘‘(m) TREATMENT FOR ESTIMATED TAX PUR8 POSES.—Solely for purposes of sections 6654 and 6655, 

9 the credit allowed by this section to a taxpayer by reason 

10 of holding a qualified public school modernization bonds 

11 on a credit allowance date shall be treated as if it were 

12 a payment of estimated tax made by the taxpayer on such 

13 date. 

14 ‘‘(n) CREDIT MAY BE TRANSFERRED.—Nothing in 

15 any law or rule of law shall be construed to limit the trans16 ferability of the credit allowed by this section through sale 

17 and repurchase agreements. 

18 ‘‘(o) REPORTING.—Issuers of qualified public school 

19 modernization bonds shall submit reports similar to the 

20 reports required under section 149(e). 

21 ‘‘(p) TERMINATION.—This section shall not apply to 

22 any bond issued after September 30, 2008 (December 31, 

23 2013, in the case of any qualified tribal school moderniza24 tion bond). 

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1 ‘‘SEC. 1400V. QUALIFIED SCHOOL CONSTRUCTION BONDS. 

2 ‘‘(a) QUALIFIED SCHOOL CONSTRUCTION BOND.— 

3 For purposes of this subchapter, the term ‘qualified school 

4 construction bond’ means any bond issued as part of an 

5 issue if— 

6 ‘‘(1) 95 percent or more of the proceeds of such 

7 issue are to be used for the construction, rehabilita8 tion, or repair of a public school facility or for the 

9 acquisition of land on which such a facility is to be 

10 constructed with part of the proceeds of such issue, 

11 ‘‘(2) the bond is issued by a State or local gov12 ernment within the jurisdiction of which such school 

13 is located, 

14 ‘‘(3) the issuer designates such bond for pur15 poses of this section, and 

16 ‘‘(4) the term of each bond which is part of 

17 such issue does not exceed 15 years. 

18 ‘‘(b) LIMITATION ON AMOUNT OF BONDS DES19 IGNATED.—The maximum aggregate face amount of 

20 bonds issued during any calendar year which may be des21 ignated under subsection (a) by any issuer shall not exceed 

22 the limitation amount allocated under subsection (d) for 

23 such calendar year to such issuer. 

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

25 DESIGNATED.—There is a national qualified school conmstockstill on PROD1PC66 with BILLS

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1 struction bond limitation for each calendar year. Such lim2 itation is— 

3 ‘‘(1) $11,000,000,000 for 2007, 

4 ‘‘(2) $11,000,000,000 for 2008, and 

5 ‘‘(3) except as provided in subsection (f), zero 

6 after 2008. 

7 ‘‘(d) LIMITATION ALLOCATED AMONG STATES.— 

8 ‘‘(1) IN GENERAL.—The limitation applicable 

9 under subsection (c) for any calendar year shall be 

10 allocated by the Secretary among the States in pro11 portion to the respective amounts each such State 

12 received for basic grants under section 1124 of the 

13 Elementary and Secondary Education Act of 1965 

14 for the most recent fiscal year ending before such 

15 calendar year. The limitation amount allocated to a 

16 State under the preceding sentence shall be allocated 

17 by the State to issuers within such State, recog18 nizing the varying needs for rural, high growth, and 

19 urban school districts. 

20 ‘‘(2) MINIMUM ALLOCATIONS TO STATES.— 

21 ‘‘(A) IN GENERAL.—The Secretary shall 

22 adjust the allocations under this subsection for 

23 any calendar year for each State to the extent 

24 necessary to ensure that the amount allocated 

25 to such State under this subsection for such 

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1 year is not less than an amount equal to such 

2 State’s minimum percentage of the amount to 

3 be allocated under paragraph (1) for the cal4 endar year. 

5 ‘‘(B) MINIMUM PERCENTAGE.—A State’s 

6 minimum percentage for any calendar year is 

7 the minimum percentage described in section 

8 1124(d) of the Elementary and Secondary Edu9 cation Act of 1965 for such State for the most 

10 recent fiscal year ending before such calendar 

11 year. 

12 ‘‘(3) ALLOCATIONS TO CERTAIN POSSES13 SIONS.—The amount to be allocated under para14 graph (1) to any possession of the United States 

15 other than Puerto Rico shall be the amount which 

16 would have been allocated if all allocations under 

17 paragraph (1) were made on the basis of respective 

18 populations of individuals below the poverty line (as 

19 defined by the Office of Management and Budget). 

20 In making other allocations, the amount to be allo21 cated under paragraph (1) shall be reduced by the 

22 aggregate amount allocated under this paragraph to 

23 possessions of the United States. 

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

25 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, the limitation amount 

6 under such subsection for such State for the fol7 lowing calendar year shall be increased by the 

8 amount of such excess. A similar rule shall apply to 

9 the amounts allocated under subsection (d)(4). 

10 ‘‘(f) SPECIAL RULES RELATING TO ARBITRAGE.— 

11 ‘‘(1) IN GENERAL.—A bond shall not be treated 

12 as failing to meet the requirement of subsection 

13 (a)(1) solely by reason of the fact that the proceeds 

14 of the issue of which such bond is a part are in15 vested for a temporary period (but not more than 36 

16 months) until such proceeds are needed for the pur17 pose for which such issue was issued. 

18 ‘‘(2) BINDING COMMITMENT REQUIREMENT.— 

19 Paragraph (1) shall apply to an issue only if, as of 

20 the date of issuance, there is a reasonable expecta21 tion that— 

22 ‘‘(A) at least 10 percent of the proceeds of 

23 the issue will be spent within the 6-month pe24 riod beginning on such date for the purpose for 

25 which such issue was issued, and 

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1 ‘‘(B) the remaining proceeds of the issue 

2 will be spent with due diligence for such pur3 pose. 

4 ‘‘(3) EARNINGS ON PROCEEDS.—Any earnings 

5 on proceeds during the temporary period shall be 

6 treated as proceeds of the issue for purposes of ap7 plying subsection (a)(1) and paragraph (1) of this 

8 subsection. 

9 ‘‘SEC. 1400W. QUALIFIED ZONE ACADEMY BONDS. 

10 ‘‘(a) QUALIFIED ZONE ACADEMY BOND.—For pur11 poses of this subchapter— 

12 ‘‘(1) IN GENERAL.—The term ‘qualified zone 

13 academy bond’ means any bond issued as part of an 

14 issue if— 

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

16 such issue are to be used for a qualified pur17 pose with respect to a qualified zone academy 

18 established by a local educational agency, 

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

20 government within the jurisdiction of which 

21 such academy is located, 

22 ‘‘(C) the issuer— 

23 ‘‘(i) designates such bond for purposes 

24 of this section, 

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1 ‘‘(ii) certifies that it has written as2 surances that the private business con3 tribution requirement of paragraph (2) will 

4 be met with respect to such academy, and 

5 ‘‘(iii) certifies that it has the written 

6 approval of the local educational agency 

7 for such bond issuance, 

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

9 of such issue does not exceed 15 years, and 

10 ‘‘(E) the issue meets the requirements of 

11 subsections (c) and (d). 

12 ‘‘(2) PRIVATE BUSINESS CONTRIBUTION RE13 QUIREMENT.— 

14 ‘‘(A) IN GENERAL.—For purposes of para15 graph (1), the private business contribution re16 quirement of this paragraph is met with respect 

17 to any issue if the local educational agency that 

18 established the qualified zone academy has writ19 ten commitments from private entities to make 

20 qualified contributions having a present value 

21 (as of the date of issuance of the issue) of not 

22 less than 10 percent of the proceeds of the 

23 issue. 

24 ‘‘(B) QUALIFIED CONTRIBUTIONS.—For 

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1 fied contribution’ means any contribution (of a 

2 type and quality acceptable to the local edu3 cational agency) of— 

4 ‘‘(i) equipment for use in the qualified 

5 zone academy (including state-of-the-art 

6 technology and vocational equipment), 

7 ‘‘(ii) technical assistance in developing 

8 curriculum or in training teachers in order 

9 to promote appropriate market driven tech10 nology in the classroom, 

11 ‘‘(iii) services of employees as volun12 teer mentors, 

13 ‘‘(iv) internships, field trips, or other 

14 educational opportunities outside the acad15 emy for students, or 

16 ‘‘(v) any other property or service 

17 specified by the local educational agency. 

18 ‘‘(3) QUALIFIED ZONE ACADEMY.—The term 

19 ‘qualified zone academy’ means any public school (or 

20 academic program within a public school) which is 

21 established by and operated under the supervision of 

22 a local educational agency to provide education or 

23 training below the postsecondary level if— 

24 ‘‘(A) such public school or program (as the 

25 case may be) is designed in cooperation with 

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1 business to enhance the academic curriculum, 

2 increase graduation and employment rates, and 

3 better prepare students for the rigors of college 

4 and the increasingly complex workforce, 

5 ‘‘(B) students in such public school or pro6 gram (as the case may be) will be subject to the 

7 same academic standards and assessments as 

8 other students educated by the local educational 

9 agency, 

10 ‘‘(C) the comprehensive education plan of 

11 such public school or program is approved by 

12 the local educational agency, and 

13 ‘‘(D)(i) such public school is located in an 

14 empowerment zone or enterprise community 

15 (including any such zone or community des16 ignated after the date of the enactment of this 

17 section), or 

18 ‘‘(ii) there is a reasonable expectation (as 

19 of the date of issuance of the bonds) that at 

20 least 35 percent of the students attending such 

21 school or participating in such program (as the 

22 case may be) will be eligible for free or reduced23 cost lunches under the school lunch program es24 tablished under the Richard B. Russell National 

25 School Lunch Act. 

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1 ‘‘(4) QUALIFIED PURPOSE.—The term ‘quali2 fied purpose’ means, with respect to any qualified 

3 zone academy— 

4 ‘‘(A) constructing, rehabilitating, or repair5 ing the public school facility in which the acad6 emy is established, 

7 ‘‘(B) acquiring the land on which such fa8 cility is to be constructed with part of the pro9 ceeds of such issue, 

10 ‘‘(C) providing equipment for use at such 

11 academy, 

12 ‘‘(D) developing course materials for edu13 cation to be provided at such academy, and 

14 ‘‘(E) training teachers and other school 

15 personnel in such academy. 

16 ‘‘(b) LIMITATIONS ON AMOUNT OF BONDS DES17 IGNATED.— 

18 ‘‘(1) IN GENERAL.—There is a national zone 

19 academy bond limitation for each calendar year. 

20 Such limitation is— 

21 ‘‘(A) $1,400,000 for 2007, 

22 ‘‘(B) $1,400,000 for 2008, and 

23 ‘‘(C) except as provided in paragraph (3), 

24 zero after 2008. 

25 ‘‘(2) ALLOCATION OF LIMITATION.— 

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1 ‘‘(A) ALLOCATION AMONG STATES.—The 

2 national zone academy bond limitations for any 

3 calendar year shall be allocated by the Sec4 retary among the States in proportion to the re5 spective amounts each such State received for 

6 basic grants under section 1124 of the Elemen7 tary and Secondary Education Act of 1965 for 

8 the most recent fiscal year ending before such 

9 calendar year. 

10 ‘‘(B) ALLOCATION TO LOCAL EDU11 CATIONAL AGENCIES.—The limitation amount 

12 allocated to a State under subparagraph (A) 

13 shall be allocated by the State to qualified zone 

14 academies within such State. 

15 ‘‘(C) DESIGNATION SUBJECT TO LIMITA16 TION AMOUNT.—The maximum aggregate face 

17 amount of bonds issued during any calendar 

18 year which may be designated under subsection 

19 (a) with respect to any qualified zone academy 

20 shall not exceed the limitation amount allocated 

21 to such academy under subparagraph (B) for 

22 such calendar year. 

23 ‘‘(3) CARRYOVER OF UNUSED LIMITATION.—If 

24 for any calendar year— 

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1 ‘‘(A) the limitation amount under this sub2 section for any State, exceeds 

3 ‘‘(B) the amount of bonds issued during 

4 such year which are designated under sub5 section (a) (or the corresponding provisions of 

6 prior law) with respect to qualified zone acad7 emies within such State, the limitation amount 

8 under this subsection for such State for the fol9 lowing calendar year shall be increased by the 

10 amount of such excess. 

11 ‘‘(c) SPECIAL RULES RELATING TO EXPENDI12 TURES.— 

13 ‘‘(1) IN GENERAL.—An issue shall be treated as 

14 meeting the requirements of this subsection if, as of 

15 the date of issuance, the issuer reasonably expects— 

16 ‘‘(A) at least 95 percent of the proceeds 

17 from the sale of the issue are to be spent for 

18 1 or more qualified purposes with respect to 

19 qualified zone academies within the 5-year pe20 riod beginning on the date of issuance of the 

21 qualified zone academy bond, 

22 ‘‘(B) a binding commitment with a third 

23 party to spend at least 10 percent of the pro24 ceeds from the sale of the issue will be incurred 

25 within the 6-month period beginning on the 

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1 date of issuance of the qualified zone academy 

2 bond, and 

3 ‘‘(C) such purposes will be completed with 

4 due diligence and the proceeds from the sale of 

5 the issue will be spent with due diligence. 

6 ‘‘(2) EXTENSION OF PERIOD.—Upon submis7 sion of a request prior to the expiration of the period 

8 described in paragraph (1)(A), the Secretary may 

9 extend such period if the issuer establishes that the 

10 failure to satisfy the 5-year requirement is due to 

11 reasonable cause and the related purposes will con12 tinue to proceed with due diligence. 

13 ‘‘(3) FAILURE TO SPEND REQUIRED AMOUNT

14 OF BOND PROCEEDS WITHIN 5 YEARS.—To the ex15 tent that less than 95 percent of the proceeds of 

16 such issue are expended by the close of the 5-year 

17 period beginning on the date of issuance (or if an 

18 extension has been obtained under paragraph (2), by 

19 the close of the extended period), the issuer shall re20 deem all of the nonqualified bonds within 90 days 

21 after the end of such period. For purposes of this 

22 paragraph, the amount of the nonqualified bonds re23 quired to be redeemed shall be determined in the 

24 same manner as under section 142. 

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1 ‘‘(d) SPECIAL RULES RELATING TO ARBITRAGE.— 

2 An issue shall be treated as meeting the requirements of 

3 this subsection if the issuer satisfies the arbitrage require4 ments of section 148 with respect to proceeds of the issue. 

5 ‘‘SEC. 1400X. QUALIFIED TRIBAL SCHOOL MODERNIZATION 

6 BONDS. 

7 ‘‘(a) QUALIFIED TRIBAL SCHOOL MODERNIZATION

8 BOND.—For purposes of this subchapter— 

9 ‘‘(1) IN GENERAL.—The term ‘qualified tribal 

10 school modernization bond’ means, subject to para11 graph (2), any bond issued as part of an issue under 

12 section 3(c) of the America’s Better Classroom Act 

13 of 2007, as in effect on the date of the enactment 

14 of this section, if— 

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

16 such issue are to be used for the construction, 

17 rehabilitation, or repair of a school facility 

18 funded by the Bureau of Indian Affairs of the 

19 Department of the Interior or for the acquisi20 tion of land on which such a facility is to be 

21 constructed with part of the proceeds of such 

22 issue, 

23 ‘‘(B) the bond is issued by an Indian tribe, 

24 ‘‘(C) the issuer designates such bond for 

25 purposes of this section, and 

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

2 of such issue does not exceed 15 years. 

3 ‘‘(2) NATIONAL LIMITATION ON AMOUNT OF

4 BONDS DESIGNATED.— 

5 ‘‘(A) NATIONAL LIMITATION.—There is a 

6 national qualified tribal school modernization 

7 bond limitation for each calendar year. Such 

8 limitation is— 

9 ‘‘(i) $200,000,000 for 2007, 

10 ‘‘(ii) $200,000,000 for 2008, and 

11 ‘‘(iii) zero after 2008. 

12 ‘‘(B) ALLOCATION OF LIMITATION.—The 

13 national qualified tribal school modernization 

14 bond limitation shall be allocated to Indian 

15 tribes by the Secretary of the Interior subject 

16 to the provisions of section 3 of the America’s 

17 Better Classroom Act of 2007, as in effect on 

18 the date of the enactment of this section. 

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 paragraph 

23 (1) with respect to any Indian tribe shall not 

24 exceed the limitation amount allocated to such 

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1 government under subparagraph (B) for such 

2 calendar year. 

3 ‘‘(D) CARRYOVER OF UNUSED LIMITA4 TION.—If for any calendar year— 

5 ‘‘(i) the limitation amount under this 

6 paragraph, exceeds 

7 ‘‘(ii) the amount of qualified tribal 

8 school modernization bonds issued during 

9 such year, the limitation amount under 

10 this paragraph for the following calendar 

11 year shall be increased by the amount of 

12 such excess. The preceding sentence shall 

13 not apply if such following calendar year is 

14 after 2015. 

15 ‘‘(b) TRIBE.—For purposes of this section, the term 

16 ‘tribe’ has the meaning given the term ‘Indian tribal gov17 ernment’ by section 7701(a)(40), including the application 

18 of section 7871(d). Such term includes any consortium of 

19 tribes approved by the Secretary of the Interior.’’. 

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

21 the Internal Revenue Code of 1986 (relating to returns 

22 regarding payments of interest) is amended by adding at 

23 the end the following new paragraph: 

24 ‘‘(9) REPORTING OF CREDIT ON QUALIFIED

25 PUBLIC SCHOOL MODERNIZATION BONDS.— 

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1 ‘‘(A) IN GENERAL.—For purposes of sub2 section (a), the term ‘interest’ includes amounts 

3 includible in gross income under section 

4 1400U(f) and such amounts shall be treated as 

5 paid on the credit allowance date (as defined in 

6 section 1400U(d)(2)). 

7 ‘‘(B) REPORTING TO CORPORATIONS, 

8 ETC.—Except as otherwise provided in regula9 tions, in the case of any interest described in 

10 subparagraph (A) of this paragraph, subsection 

11 (b)(4) of this section shall be applied without 

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

13 and (L)(i). 

14 ‘‘(C) REGULATORY AUTHORITY.—The Sec15 retary may prescribe such regulations as are 

16 necessary or appropriate to carry out the pur17 poses of this paragraph, including regulations 

18 which require more frequent or more detailed 

19 reporting.’’. 

20 (c) CONFORMING AMENDMENTS.— 

21 (1) Subchapter U of chapter 1 of the Internal 

22 Revenue Code of 1986 is amended by striking part 

23 IV, by redesignating part V as part IV, and by re24 designating section 1397F as section 1397E. 

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1 (2) Sections 54(l)(3)(B) and 1400N(l)(7)(B)(ii) 

2 are each amended by striking ‘‘section 1397E(l)’’ 

3 and inserting ‘‘section 1400U(h)’’. 

4 (3) The table of subchapters for chapter 1 of 

5 such Code is amended by adding at the end the fol6 lowing new item: 

‘‘SUBCHAPTER Z. PUBLIC SCHOOL MODERNIZATION PROVISIONS.’’. 

7 (4) The table of parts of subchapter U of chap8 ter 1 of such Code is amended by striking the last 

9 2 items and inserting the following new item: 

‘‘PART IV. REGULATIONS.’’. 

10 (d) SOVEREIGN IMMUNITY.—This section and the 

11 amendments made by this section shall not be construed 

12 to impact, limit, or affect the sovereign immunity of the 

13 Federal Government or any State or tribal government. 

14 (e) EFFECTIVE DATES.— 

15 (1) IN GENERAL.—Except as otherwise pro16 vided in this subsection, the amendments made by 

17 this section shall apply to obligations issued after 

18 December 31, 2006. 

19 (2) REPEAL OF RESTRICTION ON ZONE ACAD20 EMY BOND HOLDERS.—In the case of bonds to 

21 which section 1397E of the Internal Revenue Code 

22 of 1986 (as in effect before the date of the enact23 ment of this Act) applies, the limitation of such sec24 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. 

3 SEC. 3. INDIAN SCHOOL CONSTRUCTION. 

4 (a) DEFINITIONS.—In this section: 

5 (1) BUREAU.—The term ‘‘Bureau’’ means the 

6 Bureau of Indian Affairs of the Department. 

7 (2) DEPARTMENT.—The term ‘‘Department’’ 

8 means the Department of the Interior. 

9 (3) ESCROW ACCOUNT.—The term ‘‘escrow ac10 count’’ means the tribal school modernization escrow 

11 account established under subsection (b)(6)(B)(i). 

12 (4) INDIAN.—The term ‘‘Indian’’ means any in13 dividual who is a member of an Indian tribe. 

14 (5) INDIAN TRIBE.— 

15 (A) IN GENERAL.—The term ‘‘Indian 

16 tribe’’ has the meaning given the term ‘‘Indian 

17 tribal government’’ by section 7701(a)(40) of 

18 the Internal Revenue Code of 1986 (including 

19 the application of section 7871(d) of that 

20 Code). 

21 (B) INCLUSION.—The term ‘‘Indian tribe’’ 

22 includes a consortium of Indian tribes approved 

23 by the Secretary. 

24 (6) SECRETARY.—The term ‘‘Secretary’’ means 

25 the Secretary of the Interior. 

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1 (7) TRIBAL SCHOOL.—The term ‘‘tribal school’’ 

2 means an elementary school, secondary school, or 

3 dormitory that— 

4 (A) is operated by a tribal organization or 

5 the Bureau for the education of Indian chil6 dren; and 

7 (B) under a contract, a grant, or an agree8 ment, or for a Bureau-operated school, receives 

9 financial assistance to pay the costs of oper10 ation from funds made available under— 

11 (i) section 102, 103(a), or 208 of the 

12 Indian Self-Determination and Education 

13 Assistance Act (25 U.S.C. 450f, 450h(a), 

14 458d); or 

15 (ii) the Tribally Controlled Schools 

16 Act of 1988 (25 U.S.C. 2501 et seq.). 

17 (b) ISSUANCE OF BONDS.— 

18 (1) IN GENERAL.—The Secretary shall establish 

19 a pilot program under which eligible Indian tribes 

20 may issue qualified tribal school modernization 

21 bonds to provide funding for the construction, reha22 bilitation, or repair of tribal schools (including the 

23 advance planning and design of tribal schools). 

24 (2) ELIGIBILITY.— 

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1 (A) IN GENERAL.—To be eligible to issue 

2 any qualified tribal school modernization bond 

3 under the program under paragraph (1), an In4 dian tribe shall— 

5 (i) prepare and submit to the Sec6 retary a plan of construction that meets 

7 the requirements of subparagraph (B); 

8 (ii) provide for quarterly and final in9 spection of the project by the Bureau; and 

10 (iii) pledge that the facilities financed 

11 by the bond will be used primarily for ele12 mentary and secondary educational pur13 poses for not less than the period during 

14 which the bond remains outstanding. 

15 (B) PLAN OF CONSTRUCTION.—A plan of 

16 construction referred to in subparagraph (A)(i) 

17 meets the requirements of this subparagraph if 

18 the plan— 

19 (i) contains a description of the con20 struction to be carried out with funding 

21 provided under a qualified tribal school 

22 modernization bond; 

23 (ii) demonstrates that a comprehen24 sive survey has been completed to determstockstill on PROD1PC66 with BILLS

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1 mine the construction needs of the tribal 

2 school involved; 

3 (iii) contains assurances that funding 

4 under the bond will be used only for the 

5 activities described in the plan; 

6 (iv) contains a response to the evalua7 tion criteria contained in Instructions and 

8 Application for Replacement School Con9 struction, Revision 6, dated February 6, 

10 1999; and 

11 (v) contains any other reasonable and 

12 related information determined to be ap13 propriate by the Secretary. 

14 (C) PRIORITY.—In determining whether an 

15 Indian tribe is eligible to participate in the pro16 gram under this subsection, the Secretary shall 

17 give priority to an Indian tribe that, as dem18 onstrated by the relevant plans of construction, 

19 will fund projects— 

20 (i) described in the Education Facili21 ties Replacement Construction Priorities 

22 List, as of fiscal year 2000, of the Bureau 

23 (65 Fed. Reg. 4623); 

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1 (ii) described in any subsequent prior2 ities list published in the Federal Register; 

3 or 

4 (iii) that meet the criteria for ranking 

5 schools as described in Instructions and 

6 Application for Replacement School Con7 struction, Revision 6, dated February 6, 

8 1999. 

9 (D) ADVANCE PLANNING AND DESIGN

10 FUNDING.— 

11 (i) IN GENERAL.—An Indian tribe 

12 may propose in the plan of construction of 

13 the Indian tribe to receive advance plan14 ning and design funding from the escrow 

15 account. 

16 (ii) CONDITIONS ON ALLOCATION OF

17 FUNDS.—As a condition to the allocation 

18 to an Indian tribe of advance planning and 

19 design funds from the escrow account 

20 under clause (i), the Indian tribe shall 

21 agree— 

22 (I) to issue qualified tribal school 

23 modernization bonds after the date of 

24 receipt of the funds; and 

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1 (II) as a condition of each bond 

2 issuance, that the Indian tribe will de3 posit into the escrow account, or a 

4 fund managed by the trustee as de5 scribed in paragraph (4)(C), an 

6 amount equal to the amount of funds 

7 received from the escrow account. 

8 (3) PERMISSIBLE ACTIVITIES.—In addition to 

9 the use of funds permitted under paragraph (1), an 

10 Indian tribe may use amounts received through the 

11 issuance of a qualified tribal school modernization 

12 bond— 

13 (A) to enter into and make payments 

14 under contracts with licensed and bonded archi15 tects, engineers, and construction firms— 

16 (i) to determine the needs of the tribal 

17 school; and 

18 (ii) for the design and engineering of 

19 the tribal school; 

20 (B) enter into and make payments under 

21 contracts with financial advisers, underwriters, 

22 attorneys, trustees, and other professionals who 

23 would be able to provide assistance to the In24 dian tribe in issuing bonds; and 

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1 (C) carry out other activities determined to 

2 be appropriate by the Secretary. 

3 (4) BOND TRUSTEE.— 

4 (A) IN GENERAL.—Notwithstanding any 

5 other provision of law, any qualified tribal 

6 school modernization bond issued by an Indian 

7 tribe under this subsection shall be subject to a 

8 trust agreement between the Indian tribe and a 

9 trustee. 

10 (B) TRUSTEE.—Any bank or trust com11 pany that meets requirements established by 

12 the Secretary may be designated as a trustee 

13 under subparagraph (A). 

14 (C) CONTENT OF TRUST AGREEMENT.—A 

15 trust agreement entered into by an Indian tribe 

16 under this paragraph shall specify that the 

17 trustee, with respect to any bond issued under 

18 this subsection, shall— 

19 (i) act as a repository for the proceeds 

20 of the bond; 

21 (ii) make payments to bondholders; 

22 (iii) receive, as a condition to the 

23 issuance of the bond, a transfer of funds 

24 from the escrow account, or from other 

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1 dian tribe, in an amount that (including 

2 interest earnings from the investment of 

3 the funds in obligations of, or fully guaran4 teed by, the United States, or from other 

5 investments authorized by paragraph (10)) 

6 will produce funds sufficient to timely pay 

7 in full the entire principal amount of the 

8 bond on the stated maturity date of the 

9 bond; 

10 (iv) invest the funds transferred under 

11 clause (iii) in an investment described in 

12 that clause; and 

13 (v)(I) hold and invest the funds trans14 ferred under clause (iii) in a segregated 

15 fund or account under the agreement; and 

16 (II) use the fund or account solely for 

17 payment of the costs of items described in 

18 paragraph (3). 

19 (D) REQUIREMENTS FOR MAKING DIRECT

20 PAYMENTS.— 

21 (i) PAYMENTS.— 

22 (I) IN GENERAL.—Notwith23 standing any other provision of law, 

24 the trustee shall make any payment 

25 referred to in subparagraph (C)(v) in 

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1 accordance with such requirements as 

2 the Indian tribe shall prescribe in the 

3 trust agreement entered into under 

4 subparagraph (C). 

5 (II) INSPECTION.—Before mak6 ing a payment for a project to a con7 tractor under subparagraph (C)(v), to 

8 ensure completion of the project, the 

9 trustee shall require an inspection of 

10 the project by— 

11 (aa) a local financial institu12 tion; or 

13 (bb) an independent inspect14 ing architect or engineer. 

15 (ii) CONTRACTS.—Each contract re16 ferred to in paragraph (3) shall specify, or 

17 be renegotiated to specify, that payments 

18 under the contract shall be made in ac19 cordance with this paragraph. 

20 (5) PAYMENTS OF PRINCIPAL AND INTEREST.— 

21 (A) PRINCIPAL.— 

22 (i) IN GENERAL.—No principal pay23 ment on any qualified tribal school mod24 ernization bond shall be required under 

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1 this subsection until the final, stated date 

2 on which the bond reaches maturity. 

3 (ii) MATURITY; OUTSTANDING PRIN4 CIPAL.—With respect to a qualified tribal 

5 school modernization bond issued under 

6 this subsection— 

7 (I) the bond shall reach maturity 

8 not later than 15 years after the date 

9 of issuance of the bond; and 

10 (II) on the date on which the 

11 bond reaches maturity, the entire out12 standing principal under the bond 

13 shall become due and payable. 

14 (B) INTEREST.—There shall be awarded a 

15 tax credit under section 1400U of the Internal 

16 Revenue Code of 1986 in lieu of interest on a 

17 qualified tribal school modernization bond 

18 issued under this subsection. 

19 (6) BOND GUARANTEES.— 

20 (A) IN GENERAL.—Payment of the prin21 cipal portion of a qualified tribal school mod22 ernization bond issued under this subsection 

23 shall be guaranteed solely by amounts deposited 

24 with each respective bond trustee as described 

25 in paragraph (4)(C)(iii). 

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1 (B) ESTABLISHMENT OF ACCOUNT.— 

2 (i) IN GENERAL.—Notwithstanding 

3 any other provision of law, the Secretary 

4 may— 

5 (I) establish a tribal school mod6 ernization escrow account; and 

7 (II) beginning in fiscal year 

8 2008, from amounts made available 

9 for school replacement under the con10 struction account of the Bureau, de11 posit not more than $30,000,000 for 

12 each fiscal year into the escrow ac13 count. 

14 (ii) TRANSFERS OF EXCESS PRO15 CEEDS.—Excess proceeds held under any 

16 trust agreement that are not needed for 

17 any of the purposes described in clauses 

18 (iii) and (v) of paragraph (4)(C) shall be 

19 transferred, from time to time, by the 

20 trustee for deposit into the escrow account. 

21 (iii) PAYMENTS.—The Secretary shall 

22 use any amounts deposited in the escrow 

23 account under clauses (i) and (ii)— 

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1 (I) to make payments to trustees 

2 appointed and acting in accordance 

3 with paragraph (4); or 

4 (II) to make payments described 

5 in paragraph (2)(D). 

6 (7) LIMITATIONS.— 

7 (A) OBLIGATION TO REPAY.— 

8 (i) IN GENERAL.—Notwithstanding 

9 any other provision of law, the principal 

10 amount on any qualified tribal school mod11 ernization bond issued under this sub12 section shall be repaid only to the extent of 

13 any escrowed funds provided under para14 graph (4)(C)(iii). 

15 (ii) NO GUARANTEE.—No qualified 

16 tribal school modernization bond issued by 

17 an Indian tribe under this subsection shall 

18 be an obligation of, and no payment of the 

19 principal of such a bond shall be guaran20 teed by— 

21 (I) the United States; 

22 (II) the Indian tribe; or 

23 (III) the tribal school for which 

24 the bond was issued. 

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1 (B) LAND AND FACILITIES.—No land or 

2 facility purchased or improved with amounts 

3 derived from a qualified tribal school mod4 ernization bond issued under this subsection 

5 shall be mortgaged or used as collateral for the 

6 bond. 

7 (8) SALE OF BONDS.—A qualified tribal school 

8 modernization bond may be sold at a purchase price 

9 equal to, in excess of, or at a discount from, the par 

10 amount of the bond. 

11 (9) TREATMENT OF TRUST AGREEMENT EARN12 INGS.—No amount earned through the investment of 

13 funds under the control of a trustee under any trust 

14 agreement described in paragraph (4) shall be sub15 ject to Federal income taxation. 

16 (10) INVESTMENT OF SINKING FUNDS.—A 

17 sinking fund established for the purpose of the pay18 ment of principal on a qualified tribal school mod19 ernization bond issued under this subsection shall be 

20 invested in— 

21 (A) obligations issued by or guaranteed by 

22 the United States; or 

23 (B) such other assets as the Secretary of 

24 the Treasury may by regulation allow. 

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1 SEC. 4. APPLICATION OF CERTAIN LABOR STANDARDS ON 

2 CONSTRUCTION PROJECTS FINANCED 

3 UNDER PUBLIC SCHOOL MODERNIZATION 

4 PROGRAM. 

5 Section 439 of the General Education Provisions Act 

6 (20 U.S.C. 1232b) is amended— 

7 (1) by inserting ‘‘(a)’’ before ‘‘All laborers and 

8 mechanics’’, and 

9 (2) by adding at the end the following new sub10 section: 

11 ‘‘(b)(1) For purposes of this section, the term ‘appli12 cable program’ also includes the qualified zone academy 

13 bond provisions enacted by section 226 of the Taxpayer 

14 Relief Act of 1997 and the program established by section 

15 2 of the America’s Better Classroom Act of 2007. 

16 ‘‘(2) A State or local government participating in a 

17 program described in paragraph (1) shall— 

18 ‘‘(A) in the awarding of contracts, give priority 

19 to contractors with substantial numbers of employ20 ees residing in the local education area to be served 

21 by the school being constructed; and 

22 ‘‘(B) include in the construction contract for 

23 such school a requirement that the contractor give 

24 priority in hiring new workers to individuals residing 

25 in such local education area. 

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1 ‘‘(3) In the case of a program described in paragraph 

2 (1), nothing in this subsection or subsection (a) shall be 

3 construed to deny any tax credit allowed under such pro4 gram. If amounts are required to be withheld from con5 tractors to pay wages to which workers are entitled, such 

6 amounts shall be treated as expended for construction pur7 poses in determining whether the requirements of such 

8 program are met.’’. 

9 SEC. 5. EMPLOYMENT AND TRAINING ACTIVITIES RELAT10 ING TO CONSTRUCTION OR RECONSTRUC11 TION OF PUBLIC SCHOOL FACILITIES. 

12 (a) IN GENERAL.—Section 134 of the Workforce In13 vestment Act of 1998 (29 U.S.C. 2864) is amended by 

14 adding at the end the following new subsection: 

15 ‘‘(f) LOCAL EMPLOYMENT AND TRAINING ACTIVI16 TIES RELATING TO CONSTRUCTION OR RECONSTRUCTION

17 OF PUBLIC SCHOOL FACILITIES.— 

18 ‘‘(1) IN GENERAL.—In order to provide training 

19 services related to construction or reconstruction of 

20 public school facilities receiving funding assistance 

21 under an applicable program, each State shall estab22 lish a specialized program of training meeting the 

23 following requirements: 

24 ‘‘(A) The specialized program provides 

25 training for jobs in the construction industry. 

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1 ‘‘(B) The program provides trained work2 ers for projects for the construction or recon3 struction of public school facilities receiving 

4 funding assistance under an applicable pro5 gram. 

6 ‘‘(C) The program ensures that skilled 

7 workers (residing in the area to be served by 

8 the school facilities) will be available for the 

9 construction or reconstruction work. 

10 ‘‘(2) COORDINATION.—The specialized program 

11 established under paragraph (1) shall be integrated 

12 with other activities under this Act, with the activi13 ties carried out under the National Apprenticeship 

14 Act of 1937 by the State Apprenticeship Council or 

15 through the Bureau of Apprenticeship and Training 

16 in the Department of Labor, as appropriate, and 

17 with activities carried out under the Carl D. Perkins 

18 Career and Technical Education Act of 2006. Noth19 ing in this subsection shall be construed to require 

20 services duplicative of those referred to in the pre21 ceding sentence. 

22 ‘‘(3) APPLICABLE PROGRAM.—In this sub23 section, the term ‘applicable program’ has the mean24 ing given the term in section 439(b) of the General 

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1 Education Provisions Act (relating to labor stand2 ards).’’. 

3 (b) STATE PLAN.—Section 112(b)(17)(A) of the 

4 Workforce Investment Act of 1998 (29 U.S.C. 

5 2822(b)(17)(A)) is amended— 

6 (1) in clause (iii), by striking ‘‘and’’ at the end; 

7 (2) by redesignating clause (iv) as clause (v); 

8 and 

9 (3) by inserting after clause (iii) the following 

10 new clause: 

11 ‘‘(iv) how the State will establish and 

12 carry out a specialized program of training 

13 under section 134(f); and’’. 

Æ 

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