I

107TH CONGRESS

1ST SESSION H. R. 2152

To provide for the issuance of bonds to construct and modernize Indian

schools and to provide a credit against Federal income tax for holders

of such bonds.

IN THE HOUSE OF REPRESENTATIVES

JUNE 13, 2001

Mr. CARSON of Oklahoma introduced the following bill; which was referred to

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

on Education and the Workforce and Resources, 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 provide for the issuance of bonds to construct and modernize Indian schools and to provide a credit against

Federal income tax for holders of such bonds.

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 ‘‘Indian School Con5 struction Act of 2001’’.

6 SEC. 2. INDIAN SCHOOL CONSTRUCTION.

7 (a) DEFINITIONS.—In this section:
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1 (1) BUREAU.—The term ‘‘Bureau’’ means the

2 Bureau of Indian Affairs of the Department of the

3 Interior.

4 (2) INDIAN.—The term ‘‘Indian’’ means any in5 dividual who is a member of a tribe.

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

7 the Secretary of the Interior.

8 (4) TRIBAL SCHOOL.—The term ‘‘tribal school’’

9 means an elementary school, secondary school, or

10 dormitory that is operated by a tribal organization

11 or the Bureau for the education of Indian children

12 and that receives financial assistance for its oper13 ation under an appropriation for the Bureau under

14 section 102, 103(a), or 208 of the Indian Self-Deter15 mination and Education Assistance Act (25 U.S.C.

16 450f, 450h(a), and 458d) or under the Tribally Con17 trolled Schools Act of 1988 (25 U.S.C. 2501 et seq.)

18 under a contract, a grant, or an agreement, or for

19 a Bureau-operated school.

20 (5) TRIBE.—The term ‘‘tribe’’ has the meaning

21 given the term ‘‘Indian tribal government’’ by sec22 tion 7701(a)(40) of the Internal Revenue Code of

23 1986, including the application of section 7871(d) of

24 such Code. Such term includes any consortium of

25 tribes approved by the Secretary.
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1 (b) ISSUANCE OF BONDS.—

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

3 a pilot program under which eligible tribes have the

4 authority to issue qualified tribal school moderniza5 tion bonds to provide funding for the construction,

6 rehabilitation, or repair of tribal schools, including

7 the advance planning and design thereof.

8 (2) ELIGIBILITY.—

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

10 any qualified tribal school modernization bond

11 under the program under paragraph (1), a tribe

12 shall—

13 (i) prepare and submit to the Sec14 retary a plan of construction that meets

15 the requirements of subparagraph (B);

16 (ii) provide for quarterly and final in17 spection of the project by the Bureau; and

18 (iii) pledge that the facilities financed

19 by such bond will be used primarily for ele20 mentary and secondary educational pur21 poses for not less than the period such

22 bond remains outstanding.

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

24 construction meets the requirements of this

25 subparagraph if such plan—
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1 (i) contains a description of the con2 struction to be undertaken with funding

3 provided under a qualified tribal school

4 modernization bond;

5 (ii) demonstrates that a comprehen6 sive survey has been undertaken con7 cerning the construction needs of the tribal

8 school involved;

9 (iii) contains assurances that funding

10 under the bond will be used only for the

11 activities described in the plan;

12 (iv) contains response to the evalua13 tion criteria contained in Instructions and

14 Application for Replacement School Con15 struction, Revision 6, dated February 6,

16 1999; and

17 (v) contains any other reasonable and

18 related information determined appropriate

19 by the Secretary.

20 (C) PRIORITY.—In determining whether a

21 tribe is eligible to participate in the program

22 under this subsection, the Secretary shall give

23 priority to tribes that, as demonstrated by the

24 relevant plans of construction, will fund

25 projects—
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1 (i) described in the Education Facili2 ties Replacement Construction Priorities

3 List as of FY 2000 of the Bureau of In4 dian Affairs (65 Fed. Reg. 4623–4624);

5 (ii) described in any subsequent prior6 ities list published in the Federal Register;

7 or

8 (iii) which meet the criteria for rank9 ing schools as described in Instructions

10 and Application for Replacement School

11 Construction, Revision 6, dated February

12 6, 1999.

13 (D) ADVANCE PLANNING AND DESIGN

14 FUNDING.—A tribe may propose in its plan of

15 construction to receive advance planning and

16 design funding from the tribal school mod17 ernization escrow account established under

18 paragraph (6)(B). Before advance planning and

19 design funds are allocated from the escrow ac20 count, the tribe shall agree to issue qualified

21 tribal school modernization bonds after the re22 ceipt of such funds and agree as a condition of

23 each bond issuance that the tribe will deposit

24 into such account or a fund managed by the

25 trustee as described in paragraph (4)(C) an
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1 amount equal to the amount of such funds re2 ceived from the escrow account.

3 (3) PERMISSIBLE ACTIVITIES.—In addition to

4 the use of funds permitted under paragraph (1), a

5 tribe may use amounts received through the issuance

6 of a qualified tribal school modernization bond to—

7 (A) enter into and make payments under

8 contracts with licensed and bonded architects,

9 engineers, and construction firms in order to

10 determine the needs of the tribal school and for

11 the design and engineering of the school;

12 (B) enter into and make payments under

13 contracts with financial advisors, underwriters,

14 attorneys, trustees, and other professionals who

15 would be able to provide assistance to the tribe

16 in issuing bonds; and

17 (C) carry out other activities determined

18 appropriate by the Secretary.

19 (4) BOND TRUSTEE.—

20 (A) IN GENERAL.—Notwithstanding any

21 other provision of law, any qualified tribal

22 school modernization bond issued by a tribe

23 under this subsection shall be subject to a trust

24 agreement between the tribe and a trustee.
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1 (B) TRUSTEE.—Any bank or trust com2 pany that meets requirements established by

3 the Secretary may be designated as a trustee

4 under subparagraph (A).

5 (C) CONTENT OF TRUST AGREEMENT.—A

6 trust agreement entered into by a tribe under

7 this paragraph shall specify that the trustee,

8 with respect to any bond issued under this sub9 section shall—

10 (i) act as a repository for the proceeds

11 of the bond;

12 (ii) make payments to bondholders;

13 (iii) receive, as a condition to the

14 issuance of such bond, a transfer of funds

15 from the tribal school modernization es16 crow account established under paragraph

17 (6)(B) or from other funds furnished by or

18 on behalf of the tribe in an amount, which

19 together with interest earnings from the

20 investment of such funds in obligations of

21 or fully guaranteed by the United States or

22 from other investments authorized by para23 graph (10), will produce moneys sufficient

24 to timely pay in full the entire principal
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1 amount of such bond on the stated matu2 rity date therefor;

3 (iv) invest the funds received pursuant

4 to clause (iii) as provided by such clause;

5 and

6 (v) hold and invest the funds in a seg7 regated fund or account under the agree8 ment, which fund or account shall be ap9 plied solely to the payment of the costs of

10 items described in paragraph (3).

11 (D) REQUIREMENTS FOR MAKING DIRECT

12 PAYMENTS.—

13 (i) IN GENERAL.—Notwithstanding

14 any other provision of law, the trustee

15 shall make any payment referred to in sub16 paragraph (C)(v) in accordance with re17 quirements that the tribe shall prescribe in

18 the trust agreement entered into under

19 subparagraph (C). Before making a pay20 ment to a contractor under subparagraph

21 (C)(v), the trustee shall require an inspec22 tion of the project by a local financial in23 stitution or an independent inspecting ar24 chitect or engineer, to ensure the comple25 tion of the project.
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1 (ii) CONTRACTS.—Each contract re2 ferred to in paragraph (3) shall specify, or

3 be renegotiated to specify, that payments

4 under the contract shall be made in ac5 cordance with this paragraph.

6 (5) PAYMENTS OF PRINCIPAL AND INTEREST.—

7 (A) PRINCIPAL.—No principal payments

8 on any qualified tribal school modernization

9 bond shall be required until the final, stated

10 maturity of such bond, which stated maturity

11 shall be within 15 years from the date of

12 issuance. Upon the expiration of such period,

13 the entire outstanding principal under the bond

14 shall become due and payable.

15 (B) INTEREST.—In lieu of interest on a

16 qualified tribal school modernization bond there

17 shall be awarded a tax credit under section

18 1400K of the Internal Revenue Code of 1986.

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, beginning in

4 fiscal year 2002, from amounts made

5 available for school replacement under the

6 construction account of the Bureau, the

7 Secretary is authorized to deposit not more

8 than $30,000,000 each fiscal year into a

9 tribal school modernization escrow account.

10 (ii) PAYMENTS.—The Secretary shall

11 use any amounts deposited in the escrow

12 account under clauses (i) and (iii) to make

13 payments to trustees appointed and acting

14 pursuant to paragraph (4) or to make pay15 ments described in paragraph (2)(D).

16 (iii) TRANSFERS OF EXCESS PRO17 CEEDS.—Excess proceeds held under any

18 trust agreement that are not needed for

19 any of the purposes described in clauses

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

21 transferred, from time to time, by the

22 trustee for deposit into the tribal school

23 modernization escrow account.

24 (7) LIMITATIONS.—
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1 (A) OBLIGATION TO REPAY.—Notwith2 standing any other provision of law, the prin3 cipal amount on any qualified tribal school

4 modernization bond issued under this sub5 section shall be repaid only to the extent of any

6 escrowed funds furnished under paragraph

7 (4)(C)(iii). No qualified tribal school moderniza8 tion bond issued by a tribe shall be an obliga9 tion of, nor shall payment of the principal

10 thereof be guaranteed by, the United States.

11 (B) LAND AND FACILITIES.—Any land or

12 facilities purchased or improved with amounts

13 derived from qualified tribal school moderniza14 tion bonds issued under this subsection shall

15 not be mortgaged or used as collateral for such

16 bonds.

17 (8) SALE OF BONDS.—Qualified tribal school

18 modernization bonds may be sold at a purchase price

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

20 amount thereof.

21 (9) TREATMENT OF TRUST AGREEMENT EARN22 INGS.—Any amounts earned through the investment

23 of funds under the control of a trustee under any

24 trust agreement described in paragraph (4) shall not

25 be subject to Federal income tax.
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1 (10) INVESTMENT OF SINKING FUNDS.—Any

2 sinking fund established for the purpose of the pay3 ment of principal on a qualified tribal school mod4 ernization bond shall be invested in obligations

5 issued by or guaranteed by the United States or in

6 such other assets as the Secretary of the Treasury

7 may by regulation allow.

8 (c) EXPANSION OF INCENTIVES FOR TRIBAL

9 SCHOOLS.—

10 (1) IN GENERAL.—Chapter 1 of the Internal

11 Revenue Code of 1986 is amended by adding at the

12 end the following new subchapter:

13 ‘‘Subchapter Y—Tribal School Modernization

14 Provisions

‘‘Sec. 1400K. Credit to holders of qualified tribal school modernization bonds.

15 ‘‘SEC. 1400K. CREDIT TO HOLDERS OF QUALIFIED TRIBAL

16 SCHOOL MODERNIZATION BONDS.

17 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of a tax18 payer who holds a qualified tribal school modernization

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

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

21 against the tax imposed by this chapter for such taxable

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

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

24 during such year on which the taxpayer holds such bond.
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1 ‘‘(b) AMOUNT OF CREDIT.—

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

3 determined under this subsection with respect to any

4 credit allowance date for a qualified tribal school

5 modernization bond is 25 percent of the annual

6 credit determined with respect to such bond.

7 ‘‘(2) ANNUAL CREDIT.—The annual credit de8 termined with respect to any qualified tribal school

9 modernization bond is the product of—

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

11 by

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

13 bond.

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

15 of paragraph (1), the applicable credit rate with re16 spect to an issue is the rate equal to an average

17 market yield (as of the date of sale of the issue) on

18 outstanding long-term corporate obligations (as de19 termined by the Secretary).

20 ‘‘(4) SPECIAL RULE FOR ISSUANCE AND RE21 DEMPTION.—In the case of a bond which is issued

22 during the 3-month period ending on a credit allow23 ance date, the amount of the credit determined

24 under this subsection with respect to such credit al25 lowance date shall be a ratable portion of the credit
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1 otherwise determined based on the portion of the 3-

2 month period during which the bond is outstanding.

3 A similar rule shall apply when the bond is re4 deemed.

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

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

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

8 the excess of—

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

10 (as defined in section 26(b)) plus the tax im11 posed by section 55, over

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

13 under part IV of subchapter A (other than sub14 part C thereof, relating to refundable credits).

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

16 credit allowable under subsection (a) exceeds the

17 limitation imposed by paragraph (1) for such taxable

18 year, such excess shall be carried to the succeeding

19 taxable year and added to the credit allowable under

20 subsection (a) for such taxable year.

21 ‘‘(d) QUALIFIED TRIBAL SCHOOL MODERNIZATION

22 BOND; OTHER DEFINITIONS.—For purposes of this

23 section—

24 ‘‘(1) QUALIFIED TRIBAL SCHOOL MODERNIZA25 TION BOND.—
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1 ‘‘(A) IN GENERAL.—The term ‘qualified

2 tribal school modernization bond’ means, sub3 ject to subparagraph (B), any bond issued as

4 part of an issue under section 2(b) of the In5 dian School Construction Act of 2001, as in ef6 fect on the date of the enactment of this sec7 tion, if—

8 ‘‘(i) 95 percent or more of the pro9 ceeds of such issue are to be used for the

10 construction, rehabilitation, or repair of a

11 school facility funded by the Bureau of In12 dian Affairs of the Department of the Inte13 rior or for the acquisition of land on which

14 such a facility is to be constructed with

15 part of the proceeds of such issue,

16 ‘‘(ii) the bond is issued by a tribe,

17 ‘‘(iii) the issuer designates such bond

18 for purposes of this section, and

19 ‘‘(iv) the term of each bond which is

20 part of such issue does not exceed 15

21 years.

22 ‘‘(B) NATIONAL LIMITATION ON AMOUNT

23 OF BONDS DESIGNATED.—

24 ‘‘(i) NATIONAL LIMITATION.—There is

25 a national qualified tribal school mod-
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1 ernization bond limitation for each cal2 endar year. Such limitation is—

3 ‘‘(I) $200,000,000 for 2002,

4 ‘‘(II) $200,000,000 for 2003,

5 and

6 ‘‘(III) zero after 2003.

7 ‘‘(ii) ALLOCATION OF LIMITATION.—

8 The national qualified tribal school mod9 ernization bond limitation shall be allo10 cated to tribes by the Secretary of the In11 terior subject to the provisions of section 2

12 of the Indian School Construction Act of

13 2001, as in effect on the date of the enact14 ment of this section.

15 ‘‘(iii) DESIGNATION SUBJECT TO LIMI16 TATION AMOUNT.—The maximum aggre17 gate face amount of bonds issued during

18 any calendar year which may be designated

19 under subsection (d)(1) with respect to any

20 tribe shall not exceed the limitation

21 amount allocated to such government

22 under clause (ii) for such calendar year.

23 ‘‘(iv) CARRYOVER OF UNUSED LIMITA24 TION.—If for any calendar year—
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1 ‘‘(I) the limitation amount under

2 this subparagraph, exceeds

3 ‘‘(II) the amount of qualified

4 tribal school modernization bonds

5 issued during such year,

6 the limitation amount under this subpara7 graph for the following calendar year shall

8 be increased by the amount of such excess.

9 The preceding sentence shall not apply if

10 such following calendar year is after 2010.

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

12 ‘credit allowance date’ means—

13 ‘‘(A) March 15,

14 ‘‘(B) June 15,

15 ‘‘(C) September 15, and

16 ‘‘(D) December 15.

17 Such term includes the last day on which the bond

18 is outstanding.

19 ‘‘(3) BOND.—The term ‘bond’ includes any ob20 ligation.

21 ‘‘(4) TRIBE.—The term ‘tribe’ has the meaning

22 given the term ‘Indian tribal government’ by section

23 7701(a)(40), including the application of section

24 7871(d). Such term includes any consortium of

25 tribes approved by the Secretary of the Interior.
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1 ‘‘(e) CREDIT INCLUDED IN GROSS INCOME.—Gross

2 income includes the amount of the credit allowed to the

3 taxpayer under this section (determined without regard to

4 subsection (c)) and the amount so included shall be treat5 ed as interest income.

6 ‘‘(f) BONDS HELD BY REGULATED INVESTMENT

7 COMPANIES.—If any qualified tribal school modernization

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

9 determined under subsection (a) shall be allowed to share10 holders of such company under procedures prescribed by

11 the Secretary.

12 ‘‘(g) CREDITS MAY BE STRIPPED.—Under regula13 tions prescribed by the Secretary—

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

15 (including at issuance) of the ownership of a quali16 fied tribal school modernization bond and the entitle17 ment to the credit under this section with respect to

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

19 under this section shall be allowed to the person who

20 on the credit allowance date holds the instrument ev21 idencing the entitlement to the credit and not to the

22 holder of the bond.

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

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

25 of section 1286 shall apply to the qualified tribal
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1 school modernization bond as if it were a stripped

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

3 were a stripped coupon.

4 ‘‘(h) TREATMENT FOR ESTIMATED TAX PUR5 POSES.—Solely for purposes of sections 6654 and 6655,

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

7 of holding a qualified tribal school modernization bonds

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

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

10 date.

11 ‘‘(i) CREDIT MAY BE TRANSFERRED.—Nothing in

12 any law or rule of law shall be construed to limit the trans13 ferability of the credit allowed by this section through sale

14 and repurchase agreements.

15 ‘‘(j) CREDIT TREATED AS ALLOWED UNDER PART

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

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

18 allowable under part IV of subchapter A of this chapter.

19 ‘‘(k) REPORTING.—Issuers of qualified tribal school

20 modernization bonds shall submit reports similar to the

21 reports required under section 149(e).’’.

22 (2) CLERICAL AMENDMENT.—The table of sub23 chapters for chapter 1 of the Internal Revenue Code

24 of 1986 is amended by adding at the end the fol25 lowing new item:

‘‘Subchapter Y. Tribal school modernization provisions.’’
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1 (d) SOVEREIGN IMMUNITY.—This section and the

2 amendments made by this section shall not be construed

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

4 Federal Government or any State or tribal government.

5 (e) EFFECTIVE DATE.—This section and the amend6 ments made by this section shall take effect on the date

7 of the enactment of this Act with respect to bonds issued

8 after December 31, 2001.

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