II

106TH CONGRESS

1ST SESSION S. 551

To amend the Internal Revenue Code of 1986 to encourage school construction and rehabilitation through the creation of a new class of bond,

and for other purposes.

IN THE SENATE OF THE UNITED STATES

MARCH 4, 1999

Mrs. FEINSTEIN 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 encourage

school construction and rehabilitation through the creation of a new class of bond, and for other purposes.

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 ‘‘Expand and Rebuild

5 America’s Schools Act of 1999’’.

6 SEC. 2. FINDINGS.

7 The Congress finds the following:

8 (1) Many States and school districts will need

9 to build new schools to accommodate increasing stu-
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1 dent enrollments; the Department of Education has

2 predicted that the Nation will need 6,000 more

3 schools by the year 2006.

4 (2) In response to reduced class mandates en5 forced by State governments and increased enroll6 ment, many school districts have been forced to uti7 lize temporary classrooms and other structures to

8 accommodate increased school populations, along

9 with resorting to year-round schedules for students.

10 (3) Research has proven a direct correlation be11 tween the condition of school facilities and student

12 achievement. Recently, researchers found that the

13 test scores of students assigned to schools in poor

14 condition can be expected to fall 10.9 percentage

15 points behind the test scores of students in buildings

16 in excellent condition. Similar studies have dem17 onstrated up to a 20 percent improvement in test

18 scores when students were moved from a school with

19 poor facilities to one with new facilities.

20 (4) While school construction and maintenance

21 are primarily a State and local concern, States and

22 communities have not, on their own, met the in23 creasing burden of providing acceptable school facili24 ties, and the poorest communities have had the

25 greatest difficulty meeting this need.
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1 (5) Many local educational agencies have dif2 ficulties securing financing for school facility con3 struction and renovation, especially in States that

require a 2 4 ⁄3 majority of voter approval for the pas5 sage of local bond initiatives.

6 (6) The Federal Government, by providing in7 terest subsidies and similar types of support, can

8 lower the costs of State and local school infrastruc9 ture investment, creating an incentive for businesses

10 to support local school infrastructure improvement

11 efforts.

12 (7) The United States competitive position

13 within the world economy is vulnerable if America’s

14 future workforce continues to be educated in schools

15 not equipped for the 21st century. America must do

16 everything in its power to properly educate its people

17 to compete in the global marketplace.

18 SEC. 3. PURPOSE.

19 The purpose of this Act is to help local educational

20 agencies bring all public school facilities up to an accept21 able standard and build the additional classrooms needed

22 to educate the growing number of students who will enroll

23 in the next decade.
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1 SEC. 4. CREDIT TO HOLDERS OF SCHOOL CONSTRUCTION

2 BONDS.

3 (a) IN GENERAL.—Subpart D of part IV of sub4 chapter A of chapter 1 of the Internal Revenue Code of

5 1986 (relating to business-related credits) is amended by

6 adding at the end the following:

7 ‘‘SEC. 45D. CREDIT TO HOLDERS OF SCHOOL CONSTRUC8 TION BONDS.

9 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of a tax10 payer who holds a school construction bond on the credit

11 allowance date of such bond which occurs during the tax12 able year, there shall be allowed as a credit against the

13 tax imposed by this chapter for such taxable year the

14 amount determined under subsection (b).

15 ‘‘(b) AMOUNT OF CREDIT.—The amount of the credit

16 determined under this subsection with respect to any

17 school construction bond is the amount equal to the prod18 uct of—

19 ‘‘(1) the credit rate determined by the Sec20 retary under section 1397E(b)(2) for the month in

21 which such bond was issued, multiplied by

22 ‘‘(2) the face amount of the bond held by the

23 taxpayer on the credit allowance date.

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

25 credit allowed under subsection (a) for any taxable year

26 shall not exceed the excess of—
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1 ‘‘(1) the sum of the regular tax liability (as de2 fined in section 26(b)) plus the tax imposed by sec3 tion 55, over

4 ‘‘(2) the sum of the credits allowable under this

5 part (other than under this section and subpart C

6 thereof, relating to refundable credits) and section

7 1397E.

8 ‘‘(d) SCHOOL CONSTRUCTION BOND.—For purposes

9 of this section—

10 ‘‘(1) IN GENERAL.—The term ‘school construc11 tion bond’ means any bond issued as part of an

12 issue if—

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

14 such issue are to be used for a qualified pur15 pose with respect to a qualified school estab16 lished by an eligible local education agency,

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

18 government within the jurisdiction of which

19 such school is located,

20 ‘‘(C) the issuer—

21 ‘‘(i) designates such bond for purposes

22 of this section, and

23 ‘‘(ii) certifies that it has the written

24 approval of the eligible local education

25 agency for such bond issuance, and
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1 ‘‘(D) the term of each bond which is part

2 of such issue does not exceed the maximum

3 term permitted under section 1397E(d)(3).

4 ‘‘(3) QUALIFIED SCHOOL.—

5 ‘‘(A) IN GENERAL.—The term ‘qualified

6 school’ means any public school which is estab7 lished by and operated under the supervision of

8 an eligible local education agency to provide

9 education or training below the postsecondary

10 level if—

11 ‘‘(i) such public school is designed to

12 enhance the academic curriculum, increase

13 graduation and employment rates, and bet14 ter prepare students for postsecondary

15 education and the workforce,

16 ‘‘(ii) students in such public school

17 will be subject to the academic achievement

18 standards and assessments established by

19 the State,

20 ‘‘(iii) a program to alleviate over21 crowding and to improve students’ edu22 cation has been constructed,

23 ‘‘(iv) the average student-teacher ratio

24 for the school district in which such school
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1 is located as of the date of the issuance of

2 the bonds is at least 28 to 1, and

3 ‘‘(v) at least 1 of the following re4 quirements is met:

5 ‘‘(I) The proceeds from the

6 issuance of the bonds will be used for

7 new school construction, the rehabili8 tation of school facilities which are

9 more than 30 years old as of the date

10 of such issuance, or the provision of

11 advanced or improved communications

12 infrastructure.

13 ‘‘(II) There is a reasonable ex14 pectation (as of the date of issuance

15 of the bonds) that the student growth

16 rate over the next 5 years for the

17 school district in which such public

18 school is to be located will be at least

19 10 percent.

20 ‘‘(III) Construction or rehabilita21 tion activities are needed as the result

22 of natural disasters or to mitigate the

23 cost of potential disasters.

24 ‘‘(B) ELIGIBLE LOCAL EDUCATION AGEN25 CY.—The term ‘eligible local education agency’
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1 means any local educational agency as defined

2 in section 14101 of the Elementary and Sec3 ondary Education Act of 1965.

4 ‘‘(4) QUALIFIED PURPOSE.—

5 ‘‘(A) IN GENERAL.—The term ‘qualified

6 purpose’ means, with respect to any qualified

7 school, constructing or rehabilitating a school

8 facility.

9 ‘‘(B) SCHOOL FACILITY.—The term ‘school

10 facility’ means a public structure suitable for

11 use as a classroom, laboratory, library, media

12 center, or related facility the primary purpose

13 of which is the instruction of public elementary

14 or secondary students. Such term does not in15 clude an athletic stadium, or any other struc16 ture or facility intended primarily for athletic

17 exhibitions, contests, games, or events for which

18 admission is charged to the general public.

19 ‘‘(e) LIMITATION ON AMOUNT OF BONDS DES20 IGNATED.—

21 ‘‘(1) NATIONAL LIMITATION.—There is a na22 tional school construction bond limitation for each

23 calendar year. Such limitation is $1,400,000,000 for

24 1999 and 2000, and, except for carryovers as pro-
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1 vided under the rules applicable under paragraph

2 (2), zero thereafter.

3 ‘‘(2) ALLOCATION OF LIMITATION.—

4 ‘‘(A) STATE ALLOCATION.—The national

5 school construction bond limitation for a cal6 endar year shall be allocated by the Secretary

7 among the States on the combined basis of the

8 following factors:

9 ‘‘(i) The respective populations of in10 dividuals below the poverty line (as defined

11 by the Office of Management and Budget).

12 ‘‘(ii) The respective projected growth

13 rates in the number of students over the

14 next 5 years and 10 years (as determined

15 by the Secretary of Education).

16 ‘‘(B) SCHOOL ALLOCATION.—The limita17 tion amount allocated to a State under the sub18 paragraph (A) shall be allocated by the Sec19 retary of Education to qualified schools within

20 such State.

21 ‘‘(3) DESIGNATION SUBJECT TO LIMITATION

22 AMOUNT.—The maximum aggregate face amount of

23 bonds issued during any calendar year which may be

24 designated under subsection (d)(1) with respect to

25 any qualified school shall not exceed the limitation
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1 amount allocated to such school under paragraph

2 (2)(B) for such calendar year.

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

4 for any calendar year—

5 ‘‘(A) the limitation amount for any State,

6 exceeds

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

8 such year which are designated under sub9 section (d)(1) with respect to qualified schools

10 within such State,

11 the limitation amount for such State for the follow12 ing calendar year shall be increased by the amount

13 of such excess.

14 ‘‘(f) OTHER DEFINITIONS.—The definitions in sub15 sections (d)(6) and (f) of section 1397E shall apply for

16 purposes of this section.

17 ‘‘(g) CREDIT INCLUDED IN GROSS INCOME.—Gross

18 income includes the amount of the credit allowed to the

19 taxpayer under this section (determined without regard to

20 subsection (c).

21 ‘‘(h) CREDIT TREATED AS ALLOWED UNDER PART

22 IV OF SUBCHAPTER A.—For purposes of subtitle F, the

23 credit allowed by this section shall be treated as a credit

24 allowable under part IV of subchapter A of this chapter.’’
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1 (b) CONFORMING AMENDMENT.—The table of sec2 tions for subpart D of part IV of subchapter A of chapter

3 1 of the Internal Revenue Code of 1986 is amended by

4 adding at the end the following:

‘‘Sec. 45D. Credit to holders of school construction bonds.’’

5 (c) EFFECTIVE DATE.—The amendments made by

6 this section shall apply to obligations issued after Decem7 ber 31, 1999.

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