I

106TH CONGRESS

1ST SESSION H. R. 1760

To amend the Internal Revenue Code of 1986 to expand the incentives

for the construction, repair, rehabilitation, and renovation of public schools.

IN THE HOUSE OF REPRESENTATIVES

MAY 11, 1999

Mrs. JOHNSON of Connecticut introduced the following bill; which was referred

to the Committee on Ways and Means, and in addition to the Committee

on Education and the Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions

as fall within the jurisdiction of the committee concerned

A BILL

To amend the Internal Revenue Code of 1986 to expand

the incentives for the construction, repair, rehabilitation,

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 Classrooms Act of 1999’’.

6 SEC. 2. FINDINGS.

7 The Congress hereby finds:
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1 (1) Public school buildings in urban, suburban,

2 and rural school districts across the United States

3 need extensive repair, rehabilitation, and renovation.

4 (2) New buildings will be needed in many

5 school districts as a result of a surge in student en6 rollments.

7 (3) The General Accounting Office has found

8 that more than 14 million children attend schools in

9 need of extensive repair or replacement, 7 million

10 children attend schools with safety code violations,

11 and 12 million children attend schools with leaky

12 roofs.

13 (4) Many public schools do not have the appro14 priate infrastructure to be able to use computers

15 and other technology needed to adequately prepare

16 students to meet the challenges of the 21st Century.

17 (5) The Federal Government can support public

18 school repair, modernization, and construction with19 out interfering with local control.

20 SEC. 3. CREDIT TO HOLDERS OF QUALIFIED PUBLIC

21 SCHOOL CONSTRUCTION BONDS.

22 (a) IN GENERAL.—Subpart B of part IV of sub23 chapter A of chapter 1 of the Internal Revenue Code of

24 1986 is amended by adding at the end the following new

25 section:
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1 ‘‘SEC. 30B. CREDIT TO HOLDERS OF QUALIFIED PUBLIC

2 SCHOOL CONSTRUCTION BONDS.

3 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of a tax4 payer who holds a qualified school construction bond on

5 a credit allowance date of such bond which occurs during

6 the taxable year, there shall be allowed as a credit against

7 the tax imposed by this chapter for such taxable year an

8 amount equal to the sum of the credits determined under

9 subsection (b) with respect to credit allowance dates dur10 ing such year on which the taxpayer holds such bond.

11 ‘‘(b) AMOUNT OF CREDIT.—

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

13 determined under this subsection with respect to any

14 credit allowance date for a qualified school construc15 tion bond is 25 percent of the annual credit deter16 mined with respect to such bond.

17 ‘‘(2) ANNUAL CREDIT.—The annual credit de18 termined with respect to any qualified school con19 struction bond is the product of—

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

21 by

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

23 bond.

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

25 of paragraph (1), the applicable credit rate with re26 spect to an issue is the rate equal to an average
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1 market yield (as of the day before the date of

2 issuance of the issue) on outstanding long-term cor3 porate debt obligations (determined under regula4 tions prescribed by the Secretary).

5 ‘‘(4) SPECIAL RULE FOR ISSUANCE AND RE6 DEMPTION.—In the case of a bond which is issued

7 during the 3-month period ending on a credit allow8 ance date, the amount of the credit determined

9 under this subsection with respect to such credit al10 lowance date shall be a ratable portion of the credit

11 otherwise determined based on the portion of the 3-

12 month period during which the bond is outstanding.

13 A similar rule shall apply when the bond is re14 deemed.

15 ‘‘(c) QUALIFIED SCHOOL CONSTRUCTION BOND.—

16 For purposes of this section—

17 ‘‘(1) IN GENERAL.—The term ‘qualified school

18 construction bond’ means any bond issued as part of

19 an issue if—

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

21 such issue are to be used for the construction,

22 rehabilitation, or repair of a public school facil23 ity or for the acquisition of land on which such

24 a facility is to be constructed with part of the

25 proceeds of such issue,
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1 ‘‘(B) the bond is issued by a State or local

2 government within the jurisdiction of which

3 such school is located,

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

5 purposes of this section, and

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

7 of such issue does not exceed 15 years.

8 ‘‘(2) LIMITATION ON AMOUNT OF BONDS DES9 IGNATED.—The maximum aggregate face amount of

10 bonds issued during any calendar year which may be

11 designated under paragraph (1) by any issuer shall

12 not exceed the limitation amount allocated under

13 paragraph (3) for such calendar year to such issuer.

14 ‘‘(3) NATIONAL LIMITATION ON AMOUNT OF

15 BONDS DESIGNATED.—There is a national qualified

16 school construction bond limitation for each calendar

17 year. Such limitation is—

18 ‘‘(A) $12,500,000,000 for 2000,

19 ‘‘(B) $12,500,000,000 for 2001, and

20 ‘‘(C) except as provided in paragraph (5),

21 zero after 2001.

22 ‘‘(4) ALLOCATION OF LIMITATION AMONG

23 STATES.—

24 ‘‘(A) IN GENERAL.—The limitation appli25 cable under paragraph (3) for any calendar
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1 year shall be allocated among the States by the

2 Secretary. The amount allocated to a State for

3 a calendar year shall be equal to the sum of—

4 ‘‘(i) the amount allocated to the State

5 for such year under subparagraph (B), and

6 ‘‘(ii) the amount allocated to the State

7 for such year under subparagraph (C).

8 The limitation amount allocated to a State

9 under the preceding sentence shall be allocated

10 by the State education agency to issuers within

11 such State and such allocations may be made

12 only if there is an approved State application.

13 ‘‘(B) ALLOCATION ON BASIS OF BASIC

14 GRANTS UNDER TITLE I OF THE ELEMENTARY

15 AND SECONDARY EDUCATION ACT OF 1965.—

16 One-half of the limitation applicable under

17 paragraph (3) for any calendar year shall be al18 located among the States in proportion to the

19 respective amounts each such State received for

20 basic grants under subpart 2 of part A of title

21 I of the Elementary and Secondary Education

22 Act of 1965 (20 U.S.C. 6331 et seq.) for the

23 most recent fiscal year ending before such cal24 endar year.
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1 ‘‘(C) ALLOCATION ON BASIS OF TOTAL EL2 EMENTARY AND SECONDARY SCHOOL AGE POP3 ULATION.—One-half of the limitation applicable

4 under paragraph (3) for any calendar year shall

5 be allocated among the States in proportion to

6 the respective numbers of children in each State

7 who have attained age 5 but not age 18 for the

8 most recent fiscal year ending before such cal9 endar year.

10 ‘‘(D) MINIMUM ALLOCATIONS TO

11 STATES.—

12 ‘‘(i) IN GENERAL.—The Secretary

13 shall adjust the allocations under this

14 paragraph for any calendar year for each

15 State to the extent necessary to ensure

16 that the amount allocated to such State

17 under this paragraph for such year is not

18 less than an amount equal to such State’s

19 minimum percentage of one-half of the

20 amount to be allocated under subpara21 graph (A) for the calendar year.

22 ‘‘(ii) MINIMUM PERCENTAGE.—A

23 State’s minimum percentage for any cal24 endar year is the minimum percentage de25 scribed in section 1124(d) of the Elemen-
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1 tary and Secondary Education Act of 1965

2 (20 U.S.C. 6334(d)) for such State for the

3 most recent fiscal year ending before such

4 calendar year.

5 ‘‘(E) ALLOCATIONS TO CERTAIN POSSES6 SIONS.—The amount to be allocated under sub7 paragraph (A) to any possession of the United

8 States other than Puerto Rico shall be the

9 amount which would have been allocated if all

10 allocations under subparagraph (A) were made

11 on the basis of respective populations of individ12 uals below the poverty line (as defined by the

13 Office of Management and Budget). In making

14 other allocations, the amount to be allocated

15 under subparagraph (A) shall be reduced by the

16 aggregate amount allocated under this subpara17 graph to possessions of the United States.

18 ‘‘(F) APPROVED STATE APPLICATION.—

19 For purposes of subparagraph (A), the term

20 ‘approved State application’ means an applica21 tion which is approved by the Secretary of Edu22 cation and which includes—

23 ‘‘(i) the results of a recent publicly24 available survey (undertaken by the State

25 with the involvement of local education of-
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1 ficials, members of the public, and experts

2 in school construction and management) of

3 such State’s needs for public school facili4 ties, including descriptions of—

5 ‘‘(I) health and safety problems

6 at such facilities,

7 ‘‘(II) the capacity of public

8 schools in the State to house projected

9 enrollments, and

10 ‘‘(III) the extent to which the

11 public schools in the State offer the

12 physical infrastructure needed to pro13 vide a high-quality education to all

14 students, and

15 ‘‘(ii) a description of how the State

16 will allocate to local educational agencies,

17 or otherwise use, its allocation under this

18 subsection to address the needs identified

19 under subparagraph (A), including a de20 scription of how it will—

21 ‘‘(I) give high priority to local22 ities with the greatest needs, as dem23 onstrated by inadequate school facili24 ties coupled with a low level of re25 sources to meet those needs,
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1 ‘‘(II) use its allocation under this

2 subsection to assist localities that lack

3 the fiscal capacity to issue bonds on

4 their own,

5 ‘‘(III) ensure that its allocation

6 under this subsection is used only to

7 supplement, and not supplant, the

8 amount of school construction, reha9 bilitation, and repair in the State that

10 would have occurred in the absence of

11 such allocation, and

12 ‘‘(IV) ensure that the needs of

13 both rural and urban areas are recog14 nized.

15 Any allocation under subparagraph (A) by a

16 State education agency shall be binding if such

17 agency reasonably determined that the alloca18 tion was in accordance with the plan approved

19 under this subparagraph.

20 ‘‘(5) CARRYOVER OF UNUSED LIMITATION.—If

21 for any calendar year—

22 ‘‘(A) the amount allocated under para23 graph (4) to any State, exceeds
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1 ‘‘(B) the amount of bonds issued during

2 such year which are designated under para3 graph (1) pursuant to such allocation,

4 the limitation amount under paragraph (4) for such

5 State for the following calendar year shall be in6 creased by the amount of such excess.

7 ‘‘(d) LIMITATION BASED ON AMOUNT OF TAX.—

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

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

10 the excess of—

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

12 (as defined in section 26(b)) plus the tax im13 posed by section 55, over

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

15 under part IV of subchapter A (other than sub16 part C thereof, relating to refundable credits).

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

18 credit allowable under subsection (a) exceeds the

19 limitation imposed by paragraph (1) for such taxable

20 year, such excess shall be carried to the succeeding

21 taxable year and added to the credit allowable under

22 subsection (a) for such taxable year.

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

24 section—
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1 ‘‘(1) 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 ‘‘(2) LOCAL EDUCATIONAL AGENCY.—The term

10 ‘local educational agency’ has the meaning given to

11 such term by section 14101 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 ‘‘(3) BOND.—The term ‘bond’ includes any ob17 ligation.

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

19 District of Columbia and any possession of the

20 United States.

21 ‘‘(5) 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 (d)) and the amount so included shall be treat10 ed as interest income.

11 ‘‘(g) BONDS HELD BY REGULATED INVESTMENT

12 COMPANIES.—If any qualified school construction bond is

13 held by a regulated investment company, the credit deter14 mined under subsection (a) shall be allowed to share15 holders of such company under procedures prescribed by

16 the Secretary.

17 ‘‘(h) 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 school construction bond and the entitlement to

22 the credit under this section with respect to such

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

24 under this section shall be allowed to the person who

25 on the credit allowance date holds the instrument ev-
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1 idencing the entitlement to the credit and not to the

2 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 school

6 construction bond as if it were a stripped bond and

7 to the credit under this section as if it were a

8 stripped coupon.

9 ‘‘(i) 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 school construction bond on a credit allowance

13 date shall be treated as if it were a payment of estimated

14 tax made by the taxpayer on such date.

15 ‘‘(j) 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 ‘‘(k) REPORTING.—Issuers of qualified school con20 struction bonds shall submit reports similar to the reports

21 required under section 149(e).

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

23 any bond issued after December 31, 2004.’’

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

25 such Code (relating to returns regarding payments of in-
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1 terest) is amended by adding at the end the following new

2 paragraph:

3 ‘‘(8) REPORTING OF CREDIT ON QUALIFIED

4 SCHOOL CONSTRUCTION BONDS.—

5 ‘‘(A) IN GENERAL.—For purposes of sub6 section (a), the term ‘interest’ includes amounts

7 includible in gross income under section 30B(f)

8 and such amounts shall be treated as paid on

9 the credit allowance date (as defined in section

10 30B(e)(1)).

11 ‘‘(B) REPORTING TO CORPORATIONS,

12 ETC.—Except as otherwise provided in regula13 tions, in the case of any interest described in

14 subparagraph (A) of this paragraph, subsection

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

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

17 and (L)(i).

18 ‘‘(C) REGULATORY AUTHORITY.—The Sec19 retary may prescribe such regulations as are

20 necessary or appropriate to carry out the pur21 poses of this paragraph, including regulations

22 which require more frequent or more detailed

23 reporting.’’

24 (c) CONFORMING AMENDMENTS.—
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1 (1) Subchapter U of chapter 1 of such Code is

2 amended by striking part IV, by redesignating part

3 V as part IV, and by redesignating section 1397F

4 as section 1397E.

5 (2) The table of parts of subchapter U of chap6 ter 1 of such Code is amended by striking the last

7 2 items and inserting the following item:

‘‘Part IV. Regulations.’’

8 (3) The table of sections for subpart B of part

9 IV of subchapter A of chapter 1 of such Code is

10 amended by adding at the end the following new

11 item:

‘‘Sec. 30B. Credit to holders of qualified public school construction bonds.’’

12 (d) EFFECTIVE DATE.—The amendments made by

13 this section shall apply to obligations issued after Decem14 ber 31, 1999.

15 SEC. 4. APPLICATION OF CERTAIN LABOR STANDARDS ON

16 CONSTRUCTION PROJECTS FINANCED

17 UNDER PUBLIC SCHOOL CONSTRUCTION

18 PROGRAM.

19 Section 439 of the General Education Provisions Act

20 (relating to labor standards) is amended—

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

22 mechanics’’, and

23 (2) by adding at the end the following:
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1 ‘‘(b)(1) For purposes of this section, the term ‘appli2 cable program’ also includes the qualified zone academy

3 bond provisions enacted by section 226 of the Taxpayer

4 Relief Act of 1997 and the program established by section

5 3 of the America’s Better Classrooms Act of 1999.

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

7 program described in paragraph (1) shall—

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

9 to contractors with substantial numbers of employ10 ees residing in the local education area to be served

11 by the school being constructed; and

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

13 such school a requirement that the contractor give

14 priority in hiring new workers to individuals residing

15 in such local education area.

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

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

18 construed to deny any tax credit allowed under such pro19 gram. If amounts are required to be withheld from con20 tractors to pay wages to which workers are entitled, such

21 amounts shall be treated as expended for construction pur22 poses in determining whether the requirements of such

23 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:

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 is designed to provide

19 trained workers for projects for the construction

20 or reconstruction of public school facilities re21 ceiving funding assistance under an applicable

22 program.

23 ‘‘(C) The program is designed to ensure

24 that skilled workers (residing in the area to be

25 served by the school facilities) will be available

26 for the 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:
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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