II 

109TH CONGRESS 

1ST SESSION S. 1538 

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 

JULY 28, 2005 

Mr. ROCKEFELLER introduced the following bill; which was read twice and 

referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to 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 2005’’. 

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. 1400M. Credit to holders of qualified public school modernization bonds. 

‘‘Sec. 1400N. Qualified school construction bonds. 

‘‘Sec. 1400O. Qualified zone academy bonds. 

‘‘Sec. 1400P. Qualified tribal school modernization bonds. 

3 ‘‘SEC. 1400M. 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 ‘‘(2) CARRYOVER OF UNUSED CREDIT.—If the 

8 credit allowable under subsection (a) exceeds the 

9 limitation imposed by paragraph (1) for such taxable 

10 year, such excess shall be carried to the succeeding 

11 taxable year and added to the credit allowable under 

12 subsection (a) for such taxable year. 

13 ‘‘(d) QUALIFIED PUBLIC SCHOOL MODERNIZATION

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

15 section— 

16 ‘‘(1) QUALIFIED PUBLIC SCHOOL MODERNIZA17 TION BOND.—The term ‘qualified public school mod18 ernization bond’ means— 

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

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

21 and 

22 ‘‘(C) a qualified tribal school moderniza23 tion bond. 

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

25 ‘credit allowance date’ means— 
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1 ‘‘(A) March 15, 

2 ‘‘(B) June 15, 

3 ‘‘(C) September 15, and 

4 ‘‘(D) December 15. 

5 Such term includes the last day on which the bond 

6 is outstanding. 

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

8 subchapter— 

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

10 ‘local educational agency’ has the meaning given to 

11 such term by section 9101 of the Elementary and 

12 Secondary Education Act of 1965. Such term in13 cludes the local educational agency that serves the 

14 District of Columbia but does not include any other 

15 State agency. 

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

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

19 District of Columbia and any possession of the 

20 United States. 

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

22 ‘public school facility’ shall not include— 

23 ‘‘(A) any stadium or other facility pri24 marily used for athletic contests or exhibitions 
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1 or other events for which admission is charged 

2 to the general public, or 

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

4 State or local government or any agency or in5 strumentality of a State or local government. 

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

7 income includes the amount of the credit allowed to the 

8 taxpayer under this section (determined without regard to 

9 subsection (c)) and the amount so included shall be treat10 ed as interest income. 

11 ‘‘(g) RECAPTURE OF PORTION OF CREDIT WHERE

12 CESSATION OF COMPLIANCE.— 

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

14 issued purported to be a qualified public school mod15 ernization bond ceases to be a qualified public school 

16 modernization bond, the issuer shall pay to the 

17 United States (at the time required by the Sec18 retary) an amount equal to the sum of— 

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

20 under this section with respect to such bond 

21 (determined without regard to subsection (c)) 

22 for taxable years ending during the calendar 

23 year in which such cessation occurs and the 2 

24 preceding calendar years, and 
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1 ‘‘(B) interest at the underpayment rate 

2 under section 6621 on the amount determined 

3 under subparagraph (A) for each calendar year 

4 for the period beginning on the first day of 

5 such calendar year. 

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

7 timely pay the amount required by paragraph (1) 

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

9 chapter on each holder of any such bond which is 

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

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

12 the aggregate decrease in the credits allowed under 

13 this section to such holder for taxable years begin14 ning in such 3 calendar years which would have re15 sulted solely from denying any credit under this sec16 tion with respect to such issue for such taxable 

17 years. 

18 ‘‘(3) SPECIAL RULES.— 

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

20 the taxable year shall be increased under para21 graph (2) only with respect to credits allowed 

22 by reason of this section which were used to re23 duce tax liability. In the case of credits not so 

24 used to reduce tax liability, the carryforwards 
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1 and carrybacks under section 39 shall be appro2 priately adjusted. 

3 ‘‘(B) NO CREDITS AGAINST TAX.—Any in4 crease in tax under paragraph (2) shall not be 

5 treated as a tax imposed by this chapter for 

6 purposes of determining— 

7 ‘‘(i) the amount of any credit allow8 able under this part, or 

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

10 by section 55. 

11 ‘‘(h) BONDS HELD BY REGULATED INVESTMENT

12 COMPANIES.—If any qualified public school modernization 

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

14 determined under subsection (a) shall be allowed to share15 holders of such company under procedures prescribed by 

16 the Secretary. 

17 ‘‘(i) CREDITS MAY BE STRIPPED.—Under regula18 tions prescribed by the Secretary— 

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

20 (including at issuance) of the ownership of a quali21 fied public school modernization bond and the enti22 tlement to the credit under this section with respect 

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

24 credit under this section shall be allowed to the per25 son who on the credit allowance date holds the in-
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1 strument evidencing the entitlement to the credit 

2 and not to the holder of the bond. 

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

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

5 of section 1286 shall apply to the qualified public 

6 school modernization bond as if it were a stripped 

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

8 were a stripped coupon. 

9 ‘‘(j) TREATMENT FOR ESTIMATED TAX PURPOSES.— 

10 Solely for purposes of sections 6654 and 6655, the credit 

11 allowed by this section to a taxpayer by reason of holding 

12 a qualified public school modernization bonds on a credit 

13 allowance date shall be treated as if it were a payment 

14 of estimated tax made by the taxpayer on such date. 

15 ‘‘(k) CREDIT MAY BE TRANSFERRED.—Nothing in 

16 any law or rule of law shall be construed to limit the trans17 ferability of the credit allowed by this section through sale 

18 and repurchase agreements. 

19 ‘‘(l) REPORTING.—Issuers of qualified public school 

20 modernization bonds shall submit reports similar to the 

21 reports required under section 149(e). 

22 ‘‘(m) TERMINATION.—This section shall not apply to 

23 any bond issued after September 30, 2007 (December 31, 

24 2012, in the case of any qualified tribal school moderniza25 tion bond). 
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1 ‘‘SEC. 1400N. 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 con-
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1 struction bond limitation for each calendar year. Such lim2 itation is— 

3 ‘‘(1) $11,000,000,000 for 2006, 

4 ‘‘(2) $11,000,000,000 for 2007, and 

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

6 after 2007. 

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. 

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

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

20 adjust the allocations under this subsection for 

21 any calendar year for each State to the extent 

22 necessary to ensure that the amount allocated 

23 to such State under this subsection for such 

24 year is not less than an amount equal to such 

25 State’s minimum percentage of the amount to 
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1 be allocated under paragraph (1) for the cal2 endar year. 

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

4 minimum percentage for any calendar year is 

5 the minimum percentage described in section 

6 1124(d) of the Elementary and Secondary Edu7 cation Act of 1965 for such State for the most 

8 recent fiscal year ending before such calendar 

9 year. 

10 ‘‘(3) ALLOCATIONS TO CERTAIN POSSES11 SIONS.—The amount to be allocated under para12 graph (1) to any possession of the United States 

13 other than Puerto Rico shall be the amount which 

14 would have been allocated if all allocations under 

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

16 populations of individuals below the poverty line (as 

17 defined by the Office of Management and Budget). 

18 In making other allocations, the amount to be allo19 cated under paragraph (1) shall be reduced by the 

20 aggregate amount allocated under this paragraph to 

21 possessions of the United States. 

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

23 any calendar year— 

24 ‘‘(1) the amount allocated under subsection (d) 

25 to any State, exceeds 
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1 ‘‘(2) the amount of bonds issued during such 

2 year which are designated under subsection (a) pur3 suant to such allocation, the limitation amount 

4 under such subsection for such State for the fol5 lowing calendar year shall be increased by the 

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

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

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

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

10 as failing to meet the requirement of subsection 

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

12 of the issue of which such bond is a part are in13 vested for a temporary period (but not more than 36 

14 months) until such proceeds are needed for the pur15 pose for which such issue was issued. 

16 ‘‘(2) BINDING COMMITMENT REQUIREMENT.— 

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

18 the date of issuance, there is a reasonable expecta19 tion that— 

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

21 the issue will be spent within the 6-month pe22 riod beginning on such date for the purpose for 

23 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. 1400O. 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, and 

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

9 of such issue does not exceed 15 years. 

10 Rules similar to the rules of section 1400N(f) shall 

11 apply for purposes of subparagraph (A). 

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 

25 purposes of subparagraph (A), the term ‘quali-
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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) $400,000,000 for 1998, 

22 ‘‘(B) $400,000,000 for 1999, 

23 ‘‘(C) $400,000,000 for 2000, 

24 ‘‘(D) $400,000,000 for 2001, 

25 ‘‘(E) $400,000,000 for 2002, 
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1 ‘‘(F) $400,000,000 for 2003, 

2 ‘‘(G) $400,000,000 for 2004, 

3 ‘‘(H) $400,000,000 for 2005, 

4 ‘‘(I) $1,400,000 for 2006, 

5 ‘‘(J) $1,400,000 for 2007, and 

6 ‘‘(K) except as provided in paragraph (3), 

7 zero after 2007. 

8 ‘‘(2) ALLOCATION OF LIMITATION.— 

9 ‘‘(A) ALLOCATION AMONG STATES.— 

10 ‘‘(i) 1998, 1999, 2000, 2001, 2002, 2003, 

11 2004, AND 2005 LIMITATIONS.—The na12 tional zone academy bond limitations for 

13 calendar years 1998, 1999, 2000, 2001, 

14 2002, 2003, 2004, and 2005 shall be allo15 cated by the Secretary among the States 

16 on the basis of their respective populations 

17 of individuals below the poverty line (as de18 fined by the Office of Management and 

19 Budget). 

20 ‘‘(ii) LIMITATION AFTER 2005.—The 

21 national zone academy bond limitation for 

22 any calendar year after 2005 shall be allo23 cated by the Secretary among the States in 

24 proportion to the respective amounts each 

25 such State received for basic grants under 
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1 section 1124 of the Elementary and Sec2 ondary Education Act of 1965 for the 

3 most recent fiscal year ending before such 

4 calendar year. 

5 ‘‘(B) ALLOCATION TO LOCAL EDU6 CATIONAL AGENCIES.—The limitation amount 

7 allocated to a State under subparagraph (A) 

8 shall be allocated by the State to qualified zone 

9 academies within such State. 

10 ‘‘(C) DESIGNATION SUBJECT TO LIMITA11 TION AMOUNT.—The maximum aggregate face 

12 amount of bonds issued during any calendar 

13 year which may be designated under subsection 

14 (a) with respect to any qualified zone academy 

15 shall not exceed the limitation amount allocated 

16 to such academy under subparagraph (B) for 

17 such calendar year. 

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

19 for any calendar year— 

20 ‘‘(A) the limitation amount under this sub21 section for any State, exceeds 

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

23 such year which are designated under sub24 section (a) (or the corresponding provisions of 

25 prior law) with respect to qualified zone acad-
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1 emies within such State, the limitation amount 

2 under this subsection for such State for the fol3 lowing calendar year shall be increased by the 

4 amount of such excess. 

5 ‘‘SEC. 1400P. 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 2005, 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 2006, 

10 ‘‘(ii) $200,000,000 for 2007, and 

11 ‘‘(iii) zero after 2007. 

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 2005, 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 2014. 

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 ‘‘(8) 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 1400M(f) and such amounts shall be treated as 

5 paid on the credit allowance date (as defined in 

6 section 1400M(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) The table of subchapters for chapter 1 of 

2 such Code is amended by adding at the end the fol3 lowing new item:

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

4 (3) The table of parts of subchapter U of chap5 ter 1 of such Code is amended by striking the last 

6 2 items and inserting the following new item:

‘‘PART IV. REGULATIONS.’’.

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

8 amendments made by this section shall not be construed 

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

10 Federal Government or any State or tribal government. 

11 (e) EFFECTIVE DATES.— 

12 (1) IN GENERAL.—Except as otherwise pro13 vided in this subsection, the amendments made by 

14 this section shall apply to obligations issued after 

15 December 31, 2005. 

16 (2) REPEAL OF RESTRICTION ON ZONE ACAD17 EMY BOND HOLDERS.—In the case of bonds to 

18 which section 1397E of the Internal Revenue Code 

19 of 1986 (as in effect before the date of the enact20 ment of this Act) applies, the limitation of such sec21 tion to eligible taxpayers (as defined in subsection 

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

23 of the enactment of this Act. 
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1 SEC. 3. INDIAN SCHOOL CONSTRUCTION. 

2 (a) DEFINITIONS.—In this section: 

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

4 Bureau of Indian Affairs of the Department. 

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

6 means the Department of the Interior. 

7 (3) ESCROW ACCOUNT.—The term ‘‘escrow ac8 count’’ means the tribal school modernization escrow 

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

10 (4) INDIAN.—The term ‘‘Indian’’ means any in11 dividual who is a member of an Indian tribe. 

12 (5) INDIAN TRIBE.— 

13 (A) IN GENERAL.—The term ‘‘Indian 

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

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

16 the Internal Revenue Code of 1986 (including 

17 the application of section 7871(d) of that 

18 Code). 

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

20 includes a consortium of Indian tribes approved 

21 by the Secretary. 

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

23 the Secretary of the Interior. 

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

25 means an elementary school, secondary school, or 

26 dormitory that— 
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1 (A) is operated by a tribal organization or 

2 the Bureau for the education of Indian chil3 dren; and 

4 (B) under a contract, a grant, or an agree5 ment, or for a Bureau-operated school, receives 

6 financial assistance to pay the costs of oper7 ation from funds made available under— 

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

9 Indian Self-Determination and Education 

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

11 458d); or 

12 (ii) the Tribally Controlled Schools 

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

14 (b) ISSUANCE OF BONDS.— 

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

16 a pilot program under which eligible Indian tribes 

17 may issue qualified tribal school modernization 

18 bonds to provide funding for the construction, reha19 bilitation, or repair of tribal schools (including the 

20 advance planning and design of tribal schools). 

21 (2) ELIGIBILITY.— 

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

23 any qualified tribal school modernization bond 

24 under the program under paragraph (1), an In25 dian tribe shall— 
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1 (i) prepare and submit to the Sec2 retary a plan of construction that meets 

3 the requirements of subparagraph (B); 

4 (ii) provide for quarterly and final in5 spection of the project by the Bureau; and 

6 (iii) pledge that the facilities financed 

7 by the bond will be used primarily for ele8 mentary and secondary educational pur9 poses for not less than the period during 

10 which the bond remains outstanding. 

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

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

13 meets the requirements of this subparagraph if 

14 the plan— 

15 (i) contains a description of the con16 struction to be carried out with funding 

17 provided under a qualified tribal school 

18 modernization bond; 

19 (ii) demonstrates that a comprehen20 sive survey has been completed to deter21 mine the construction needs of the tribal 

22 school involved; 

23 (iii) contains assurances that funding 

24 under the bond will be used only for the 

25 activities described in the plan; 
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1 (iv) contains a response to the evalua2 tion criteria contained in Instructions and 

3 Application for Replacement School Con4 struction, Revision 6, dated February 6, 

5 1999; and 

6 (v) contains any other reasonable and 

7 related information determined to be ap8 propriate by the Secretary. 

9 (C) PRIORITY.—In determining whether an 

10 Indian tribe is eligible to participate in the pro11 gram under this subsection, the Secretary shall 

12 give priority to an Indian tribe that, as dem13 onstrated by the relevant plans of construction, 

14 will fund projects— 

15 (i) described in the Education Facili16 ties Replacement Construction Priorities 

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

18 (65 Fed. Reg. 4623); 

19 (ii) described in any subsequent prior20 ities list published in the Federal Register; 

21 or 

22 (iii) that meet the criteria for ranking 

23 schools as described in Instructions and 

24 Application for Replacement School Con-
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1 struction, Revision 6, dated February 6, 

2 1999. 

3 (D) ADVANCE PLANNING AND DESIGN

4 FUNDING.— 

5 (i) IN GENERAL.—An Indian tribe 

6 may propose in the plan of construction of 

7 the Indian tribe to receive advance plan8 ning and design funding from the escrow 

9 account. 

10 (ii) CONDITIONS ON ALLOCATION OF

11 FUNDS.—As a condition to the allocation 

12 to an Indian tribe of advance planning and 

13 design funds from the escrow account 

14 under clause (i), the Indian tribe shall 

15 agree— 

16 (I) to issue qualified tribal school 

17 modernization bonds after the date of 

18 receipt of the funds; and 

19 (II) as a condition of each bond 

20 issuance, that the Indian tribe will de21 posit into the escrow account, or a 

22 fund managed by the trustee as de23 scribed in paragraph (4)(C), an 

24 amount equal to the amount of funds 

25 received from the escrow account. 
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1 (3) PERMISSIBLE ACTIVITIES.—In addition to 

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

3 Indian tribe may use amounts received through the 

4 issuance of a qualified tribal school modernization 

5 bond— 

6 (A) to enter into and make payments 

7 under contracts with licensed and bonded archi8 tects, engineers, and construction firms— 

9 (i) to determine the needs of the tribal 

10 school; and 

11 (ii) for the design and engineering of 

12 the tribal school; 

13 (B) enter into and make payments under 

14 contracts with financial advisers, underwriters, 

15 attorneys, trustees, and other professionals who 

16 would be able to provide assistance to the In17 dian tribe in issuing bonds; and 

18 (C) carry out other activities determined to 

19 be appropriate by the Secretary. 

20 (4) BOND TRUSTEE.— 

21 (A) IN GENERAL.—Notwithstanding any 

22 other provision of law, any qualified tribal 

23 school modernization bond issued by an Indian 

24 tribe under this subsection shall be subject to a 
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1 trust agreement between the Indian tribe and a 

2 trustee. 

3 (B) TRUSTEE.—Any bank or trust com4 pany that meets requirements established by 

5 the Secretary may be designated as a trustee 

6 under subparagraph (A). 

7 (C) CONTENT OF TRUST AGREEMENT.—A 

8 trust agreement entered into by an Indian tribe 

9 under this paragraph shall specify that the 

10 trustee, with respect to any bond issued under 

11 this subsection, shall— 

12 (i) act as a repository for the proceeds 

13 of the bond; 

14 (ii) make payments to bondholders; 

15 (iii) receive, as a condition to the 

16 issuance of the bond, a transfer of funds 

17 from the escrow account, or from other 

18 funds furnished by or on behalf of the In19 dian tribe, in an amount that (including 

20 interest earnings from the investment of 

21 the funds in obligations of, or fully guaran22 teed by, the United States, or from other 

23 investments authorized by paragraph (10)) 

24 will produce funds sufficient to timely pay 

25 in full the entire principal amount of the 
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1 bond on the stated maturity date of the 

2 bond; 

3 (iv) invest the funds transferred under 

4 clause (iii) in an investment described in 

5 that clause; and 

6 (v)(I) hold and invest the funds trans7 ferred under clause (iii) in a segregated 

8 fund or account under the agreement; and 

9 (II) use the fund or account solely for 

10 payment of the costs of items described in 

11 paragraph (3). 

12 (D) REQUIREMENTS FOR MAKING DIRECT

13 PAYMENTS.— 

14 (i) PAYMENTS.— 

15 (I) IN GENERAL.—Notwith16 standing any other provision of law, 

17 the trustee shall make any payment 

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

19 accordance with such requirements as 

20 the Indian tribe shall prescribe in the 

21 trust agreement entered into under 

22 subparagraph (C). 

23 (II) INSPECTION.—Before mak24 ing a payment for a project to a con25 tractor under subparagraph (C)(v), to 
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1 ensure completion of the project, the 

2 trustee shall require an inspection of 

3 the project by— 

4 (aa) a local financial institu5 tion; or 

6 (bb) an independent inspect7 ing architect or engineer. 

8 (ii) CONTRACTS.—Each contract re9 ferred to in paragraph (3) shall specify, or 

10 be renegotiated to specify, that payments 

11 under the contract shall be made in ac12 cordance with this paragraph. 

13 (5) PAYMENTS OF PRINCIPAL AND INTEREST.— 

14 (A) PRINCIPAL.— 

15 (i) IN GENERAL.—No principal pay16 ment on any qualified tribal school mod17 ernization bond shall be required under 

18 this subsection until the final, stated date 

19 on which the bond reaches maturity. 

20 (ii) MATURITY; OUTSTANDING PRIN21 CIPAL.—With respect to a qualified tribal 

22 school modernization bond issued under 

23 this subsection— 
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1 (I) the bond shall reach maturity 

2 not later than 15 years after the date 

3 of issuance of the bond; and 

4 (II) on the date on which the 

5 bond reaches maturity, the entire out6 standing principal under the bond 

7 shall become due and payable. 

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

9 tax credit under section 1400M of the Internal 

10 Revenue Code of 1986 in lieu of interest on a 

11 qualified tribal school modernization bond 

12 issued under this subsection. 

13 (6) BOND GUARANTEES.— 

14 (A) IN GENERAL.—Payment of the prin15 cipal portion of a qualified tribal school mod16 ernization bond issued under this subsection 

17 shall be guaranteed solely by amounts deposited 

18 with each respective bond trustee as described 

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

20 (B) ESTABLISHMENT OF ACCOUNT.— 

21 (i) IN GENERAL.—Notwithstanding 

22 any other provision of law, the Secretary 

23 may— 

24 (I) establish a tribal school mod25 ernization escrow account; and 
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1 (II) beginning in fiscal year 

2 2006, from amounts made available 

3 for school replacement under the con4 struction account of the Bureau, de5 posit not more than $30,000,000 for 

6 each fiscal year into the escrow ac7 count. 

8 (ii) TRANSFERS OF EXCESS PRO9 CEEDS.—Excess proceeds held under any 

10 trust agreement that are not needed for 

11 any of the purposes described in clauses 

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

13 transferred, from time to time, by the 

14 trustee for deposit into the escrow account. 

15 (iii) PAYMENTS.—The Secretary shall 

16 use any amounts deposited in the escrow 

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

18 (I) to make payments to trustees 

19 appointed and acting in accordance 

20 with paragraph (4); or 

21 (II) to make payments described 

22 in paragraph (2)(D). 

23 (7) LIMITATIONS.— 

24 (A) OBLIGATION TO REPAY.— 
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1 (i) IN GENERAL.—Notwithstanding 

2 any other provision of law, the principal 

3 amount on any qualified tribal school mod4 ernization bond issued under this sub5 section shall be repaid only to the extent of 

6 any escrowed funds provided under para7 graph (4)(C)(iii). 

8 (ii) NO GUARANTEE.—No qualified 

9 tribal school modernization bond issued by 

10 an Indian tribe under this subsection shall 

11 be an obligation of, and no payment of the 

12 principal of such a bond shall be guaran13 teed by— 

14 (I) the United States; 

15 (II) the Indian tribe; or 

16 (III) the tribal school for which 

17 the bond was issued. 

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

19 facility purchased or improved with amounts 

20 derived from a qualified tribal school mod21 ernization bond issued under this subsection 

22 shall be mortgaged or used as collateral for the 

23 bond. 

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

25 modernization bond may be sold at a purchase price 
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1 equal to, in excess of, or at a discount from, the par 

2 amount of the bond. 

3 (9) TREATMENT OF TRUST AGREEMENT EARN4 INGS.—No amount earned through the investment of 

5 funds under the control of a trustee under any trust 

6 agreement described in paragraph (4) shall be sub7 ject to Federal income taxation. 

8 (10) INVESTMENT OF SINKING FUNDS.—A 

9 sinking fund established for the purpose of the pay10 ment of principal on a qualified tribal school mod11 ernization bond issued under this subsection shall be 

12 invested in— 

13 (A) obligations issued by or guaranteed by 

14 the United States; or 

15 (B) such other assets as the Secretary of 

16 the Treasury may by regulation allow. 

17 SEC. 4. APPLICATION OF CERTAIN LABOR STANDARDS ON 

18 CONSTRUCTION PROJECTS FINANCED 

19 UNDER PUBLIC SCHOOL MODERNIZATION 

20 PROGRAM. 

21 Section 439 of the General Education Provisions Act 

22 (20 U.S.C. 1232b) is amended— 

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

24 mechanics’’, and 
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1 (2) by adding at the end the following new sub2 section: 

3 ‘‘(b)(1) For purposes of this section, the term ‘appli4 cable program’ also includes the qualified zone academy 

5 bond provisions enacted by section 226 of the Taxpayer 

6 Relief Act of 1997 and the program established by section 

7 2 of the America’s Better Classroom Act of 2005. 

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

9 program described in paragraph (1) shall— 

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

11 to contractors with substantial numbers of employ12 ees residing in the local education area to be served 

13 by the school being constructed; and 

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

15 such school a requirement that the contractor give 

16 priority in hiring new workers to individuals residing 

17 in such local education area. 

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

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

20 construed to deny any tax credit allowed under such pro21 gram. If amounts are required to be withheld from con22 tractors to pay wages to which workers are entitled, such 

23 amounts shall be treated as expended for construction pur24 poses in determining whether the requirements of such 

25 program are met.’’. 
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1 SEC. 5. EMPLOYMENT AND TRAINING ACTIVITIES RELAT2 ING TO CONSTRUCTION OR RECONSTRUC3 TION OF PUBLIC SCHOOL FACILITIES. 

4 (a) IN GENERAL.—Section 134 of the Workforce In5 vestment Act of 1998 (29 U.S.C. 2864) is amended by 

6 adding at the end the following new subsection: 

7 ‘‘(f) LOCAL EMPLOYMENT AND TRAINING ACTIVI8 TIES RELATING TO CONSTRUCTION OR RECONSTRUCTION

9 OF PUBLIC SCHOOL FACILITIES.— 

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

11 services related to construction or reconstruction of 

12 public school facilities receiving funding assistance 

13 under an applicable program, each State shall estab14 lish a specialized program of training meeting the 

15 following requirements: 

16 ‘‘(A) The specialized program provides 

17 training for jobs in the construction industry. 

18 ‘‘(B) The program provides trained work19 ers for projects for the construction or recon20 struction of public school facilities receiving 

21 funding assistance under an applicable pro22 gram. 

23 ‘‘(C) The program ensures that skilled 

24 workers (residing in the area to be served by 

25 the school facilities) will be available for the 

26 construction or reconstruction work. 
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1 ‘‘(2) COORDINATION.—The specialized program 

2 established under paragraph (1) shall be integrated 

3 with other activities under this Act, with the activi4 ties carried out under the National Apprenticeship 

5 Act of 1937 by the State Apprenticeship Council or 

6 through the Bureau of Apprenticeship and Training 

7 in the Department of Labor, as appropriate, and 

8 with activities carried out under the Carl D. Perkins 

9 Vocational and Technical Education Act of 1998. 

10 Nothing in this subsection shall be construed to re11 quire services duplicative of those referred to in the 

12 preceding sentence. 

13 ‘‘(3) APPLICABLE PROGRAM.—In this sub14 section, the term ‘applicable program’ has the mean15 ing given the term in section 439(b) of the General 

16 Education Provisions Act (relating to labor stand17 ards).’’. 

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

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

20 2822(b)(17)(A)) is amended— 

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

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

23 and 

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

25 new clause: 
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1 ‘‘(iv) how the State will establish and 

2 carry out a specialized program of training 

3 under section 134(f); and’’.

Æ