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[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 410 Introduced in House (IH)]

108th CONGRESS
  1st Session
                                H. R. 410

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

                            January 28, 2003

    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.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Indian School Construction Act of 
2003''.

SEC. 2. INDIAN SCHOOL CONSTRUCTION.

    (a) Definitions.--In this section:
            (1) Bureau.--The term ``Bureau'' means the Bureau of Indian 
        Affairs of the Department of the Interior.
            (2) Indian.--The term ``Indian'' means any individual who 
        is a member of a tribe.
            (3) Secretary.--The term ``Secretary'' means the Secretary 
        of the Interior.
            (4) Tribal school.--The term ``tribal school'' means an 
        elementary school, secondary school, or dormitory that is 
        operated by a tribal organization or the Bureau for the 
        education of Indian children and that receives financial 
        assistance for its operation under an appropriation for the 
        Bureau under section 102, 103(a), or 208 of the Indian Self-
        Determination and Education Assistance Act (25 U.S.C. 450f, 
        450h(a), and 458d) or under the Tribally Controlled Schools Act 
        of 1988 (25 U.S.C. 2501 et seq.) under a contract, a grant, or 
        an agreement, or for a Bureau-operated school.
            (5) Tribe.--The term ``tribe'' has the meaning given the 
        term ``Indian tribal government'' by section 7701(a)(40) of the 
        Internal Revenue Code of 1986, including the application of 
        section 7871(d) of such Code. Such term includes any consortium 
        of tribes approved by the Secretary.
    (b) Issuance of Bonds.--
            (1) In general.--The Secretary shall establish a pilot 
        program under which eligible tribes have the authority to issue 
        qualified tribal school modernization bonds to provide funding 
        for the construction, rehabilitation, or repair of tribal 
        schools, including the advance planning and design thereof.
            (2) Eligibility.--
                    (A) In general.--To be eligible to issue any 
                qualified tribal school modernization bond under the 
                program under paragraph (1), a tribe shall--
                            (i) prepare and submit to the Secretary a 
                        plan of construction that meets the 
                        requirements of subparagraph (B);
                            (ii) provide for quarterly and final 
                        inspection of the project by the Bureau; and
                            (iii) pledge that the facilities financed 
                        by such bond will be used primarily for 
                        elementary and secondary educational purposes 
                        for not less than the period such bond remains 
                        outstanding.
                    (B) Plan of construction.--A plan of construction 
                meets the requirements of this subparagraph if such 
                plan--
                            (i) contains a description of the 
                        construction to be undertaken with funding 
                        provided under a qualified tribal school 
                        modernization bond;
                            (ii) demonstrates that a comprehensive 
                        survey has been undertaken concerning the 
                        construction needs of the tribal school 
                        involved;
                            (iii) contains assurances that funding 
                        under the bond will be used only for the 
                        activities described in the plan;
                            (iv) contains response to the evaluation 
                        criteria contained in Instructions and 
                        Application for Replacement School 
                        Construction, Revision 6, dated February 6, 
                        1999; and
                            (v) contains any other reasonable and 
                        related information determined appropriate by 
                        the Secretary.
                    (C) Priority.--In determining whether a tribe is 
                eligible to participate in the program under this 
                subsection, the Secretary shall give priority to tribes 
                that, as demonstrated by the relevant plans of 
                construction, will fund projects--
                            (i) described in the Education Facilities 
                        Replacement Construction Priorities List as of 
                        FY 2000 of the Bureau of Indian Affairs (65 
                        Fed. Reg. 4623-4624);
                            (ii) described in any subsequent priorities 
                        list published in the Federal Register; or
                            (iii) which meet the criteria for ranking 
                        schools as described in Instructions and 
                        Application for Replacement School 
                        Construction, Revision 6, dated February 6, 
                        1999.
                    (D) Advance planning and design funding.--A tribe 
                may propose in its plan of construction to receive 
                advance planning and design funding from the tribal 
                school modernization escrow account established under 
                paragraph (6)(B). Before advance planning and design 
                funds are allocated from the escrow account, the tribe 
                shall agree to issue qualified tribal school 
                modernization bonds after the receipt of such funds and 
                agree as a condition of  each bond issuance that the 
tribe will deposit into such account or a fund managed by the trustee 
as described in paragraph (4)(C) an amount equal to the amount of such 
funds received from the escrow account.
            (3) Permissible activities.--In addition to the use of 
        funds permitted under paragraph (1), a tribe may use amounts 
        received through the issuance of a qualified tribal school 
        modernization bond to--
                    (A) enter into and make payments under contracts 
                with licensed and bonded architects, engineers, and 
                construction firms in order to determine the needs of 
                the tribal school and for the design and engineering of 
                the school;
                    (B) enter into and make payments under contracts 
                with financial advisors, underwriters, attorneys, 
                trustees, and other professionals who would be able to 
                provide assistance to the tribe in issuing bonds; and
                    (C) carry out other activities determined 
                appropriate by the Secretary.
            (4) Bond trustee.--
                    (A) In general.--Notwithstanding any other 
                provision of law, any qualified tribal school 
                modernization bond issued by a tribe under this 
                subsection shall be subject to a trust agreement 
                between the tribe and a trustee.
                    (B) Trustee.--Any bank or trust company that meets 
                requirements established by the Secretary may be 
                designated as a trustee under subparagraph (A).
                    (C) Content of trust agreement.--A trust agreement 
                entered into by a tribe under this paragraph shall 
                specify that the trustee, with respect to any bond 
                issued under this subsection shall--
                            (i) act as a repository for the proceeds of 
                        the bond;
                            (ii) make payments to bondholders;
                            (iii) receive, as a condition to the 
                        issuance of such bond, a transfer of funds from 
                        the tribal school modernization escrow account 
                        established under paragraph (6)(B) or from 
                        other funds furnished by or on behalf of the 
                        tribe in an amount, which together with 
                        interest earnings from the investment of such 
                        funds in obligations of or fully guaranteed by 
                        the United States or from other investments 
                        authorized by paragraph (10), will produce 
                        moneys sufficient to timely pay in full the 
                        entire principal amount of such bond on the 
                        stated maturity date therefor;
                            (iv) invest the funds received pursuant to 
                        clause (iii) as provided by such clause; and
                            (v) hold and invest the funds in a 
                        segregated fund or account under the agreement, 
                        which fund or account shall be applied solely 
                        to the payment of the costs of items described 
                        in paragraph (3).
                    (D) Requirements for making direct payments.--
                            (i) In general.--Notwithstanding any other 
                        provision of law, the trustee shall make any 
                        payment referred to in subparagraph (C)(v) in 
                        accordance with requirements that the tribe 
                        shall prescribe in the trust agreement entered 
                        into under subparagraph (C). Before making a 
                        payment to a contractor under subparagraph 
                        (C)(v), the trustee shall require an inspection 
                        of the project by a local financial institution 
                        or an independent inspecting architect or 
                        engineer, to ensure the completion of the 
                        project.
                            (ii) Contracts.--Each contract referred to 
                        in paragraph (3) shall specify, or be 
                        renegotiated to specify, that payments under 
                        the contract shall be made in accordance with 
                        this paragraph.
            (5) Payments of principal and interest.--
                    (A) Principal.--No principal payments on any 
                qualified tribal school modernization bond shall be 
                required until the final, stated maturity of such bond, 
                which stated maturity shall be within 15 years from the 
                date of issuance. Upon the expiration of such period, 
                the entire outstanding principal under the bond shall 
                become due and payable.
                    (B) Interest.--In lieu of interest on a qualified 
                tribal school modernization bond there shall be awarded 
                a tax credit under section 1400M of the Internal 
                Revenue Code of 1986.
            (6) Bond guarantees.--
                    (A) In general.--Payment of the principal portion 
                of a qualified tribal school modernization bond issued 
                under this subsection shall be guaranteed solely by 
                amounts deposited with each respective bond trustee as 
                described in paragraph (4)(C)(iii).
                    (B) Establishment of account.--
                            (i) In general.--Notwithstanding any other 
                        provision of law, beginning in fiscal year 
                        2004, from amounts made available for school 
                        replacement under the construction account of 
                        the Bureau, the Secretary is authorized to 
                        deposit not more than $30,000,000 each fiscal 
                        year into a tribal school modernization escrow 
                        account.
                            (ii) Payments.--The Secretary shall use any 
                        amounts deposited in the escrow account under 
                        clauses (i) and (iii) to make payments to 
                        trustees appointed and acting pursuant to 
                        paragraph (4) or to make payments described in 
                        paragraph (2)(D).
                            (iii) Transfers of excess proceeds.--Excess 
                        proceeds held under any trust agreement that 
                        are not needed for any of the purposes 
                        described in clauses (iii) and (v) of paragraph 
                        (4)(C) shall be transferred, from time to time, 
                        by the trustee for deposit into the tribal 
                        school modernization escrow account.
            (7) Limitations.--
                    (A) Obligation to repay.--Notwithstanding any other 
                provision of law, the principal amount on any qualified 
                tribal school modernization bond issued under this 
                subsection shall be repaid only to the extent of any 
                escrowed funds furnished under paragraph (4)(C)(iii). 
                No qualified tribal school modernization bond issued by 
                a tribe shall be an obligation of, nor shall payment of 
                the principal thereof be guaranteed by, the United 
                States.
                    (B) Land and facilities.--Any land or facilities 
                purchased or improved with amounts derived from 
                qualified tribal school modernization bonds issued 
                under this subsection shall not be mortgaged or used as 
                collateral for such bonds.
            (8) Sale of bonds.--Qualified tribal school modernization 
        bonds may be sold at a purchase price equal to, in excess of, 
        or at a discount from the par amount thereof.
            (9) Treatment of trust agreement earnings.--Any amounts 
        earned through the investment of funds under the control of a 
        trustee under any trust agreement described in paragraph (4) 
        shall not be subject to Federal income tax.
            (10) Investment of sinking funds.--Any sinking fund 
        established for the purpose of the payment of principal on a 
        qualified tribal school modernization bond shall be invested in 
        obligations issued by or guaranteed by the United States or in 
        such other assets as the Secretary of the Treasury may by 
        regulation allow.
    (c) Expansion of Incentives for Tribal Schools.--
            (1) In general.--Chapter 1 of the Internal Revenue Code of 
        1986 is amended by adding at the end the following new 
        subchapter:

         ``Subchapter Z--Tribal School Modernization Provisions

``Sec. 1400M. Credit to holders of qualified tribal school 
                            modernization bonds.

``SEC. 1400M. CREDIT TO HOLDERS OF QUALIFIED TRIBAL SCHOOL 
              MODERNIZATION BONDS.

    ``(a) Allowance of Credit.--In the case of a taxpayer who holds a 
qualified tribal school modernization bond on a credit allowance date 
of such bond which occurs during the taxable year, there shall be 
allowed as a credit against the tax imposed by this chapter for such 
taxable year an amount equal to the sum of the credits determined under 
subsection (b) with respect to credit allowance dates during such year 
on which the taxpayer holds such bond.
    ``(b) Amount of Credit.--
            ``(1) In general.--The amount of the credit determined 
        under this subsection with respect to any credit allowance date 
        for a qualified tribal school modernization bond is 25 percent 
        of the annual credit determined with respect to such bond.
            ``(2) Annual credit.--The annual credit determined with 
        respect to any qualified tribal school modernization bond is 
        the product of--
                    ``(A) the applicable credit rate, multiplied by
                    ``(B) the outstanding face amount of the bond.
            ``(3) Applicable credit rate.--For purposes of paragraph 
        (1), the applicable credit rate with respect to an issue is the 
        rate equal to an average market yield (as of the date of sale 
        of the issue) on outstanding long-term corporate obligations 
        (as determined by the Secretary).
            ``(4) Special rule for issuance and redemption.--In the 
        case of a bond which is issued during the 3-month period ending 
        on a credit allowance date, the amount of the credit determined 
        under this subsection with respect to such credit allowance 
        date shall be a ratable portion of the credit otherwise 
        determined based on the portion of the 3-month period during 
        which the bond is outstanding. A similar rule shall apply when 
        the bond is redeemed.
    ``(c) Limitation Based on Amount of Tax.--
            ``(1) In general.--The credit allowed under subsection (a) 
        for any taxable year shall not exceed the excess of--
                    ``(A) the sum of the regular tax liability (as 
                defined in section 26(b)) plus the tax imposed by 
                section 55, over
                    ``(B) the sum of the credits allowable under part 
                IV of subchapter A (other than subpart C thereof, 
                relating to refundable credits).
            ``(2) Carryover of unused credit.--If the credit allowable 
        under subsection (a) exceeds the limitation imposed by 
        paragraph (1) for such taxable year, such excess shall be 
        carried to the succeeding taxable year and added to the credit 
        allowable under subsection (a) for such taxable year.
    ``(d) Qualified Tribal School Modernization Bond; Other 
Definitions.--For purposes of this section--
            ``(1) Qualified tribal school modernization bond.--
                    ``(A) In general.--The term `qualified tribal 
                school modernization bond' means, subject to 
                subparagraph (B), any bond issued as part of an issue 
                under section 2(b) of the Indian School Construction 
                Act of 2003, as in effect on the date of the enactment 
                of this section, if--
                            ``(i) 95 percent or more of the proceeds of 
                        such issue are to be used for the construction, 
                        rehabilitation, or repair of a school facility 
                        funded by the Bureau of Indian Affairs of the 
                        Department of the Interior or for the 
                        acquisition of land on which such a facility is 
                        to be constructed with part of the proceeds of 
                        such issue,
                            ``(ii) the bond is issued by a tribe,
                            ``(iii) the issuer designates such bond for 
                        purposes of this section, and
                            ``(iv) the term of each bond which is part 
                        of such issue does not exceed 15 years.
                    ``(B) National limitation on amount of bonds 
                designated.--
                            ``(i) National limitation.--There is a 
                        national qualified tribal school modernization 
                        bond limitation for each calendar year. Such 
                        limitation is--
                                    ``(I) $200,000,000 for 2004,
                                    ``(II) $200,000,000 for 2005, and
                                    ``(III) zero after 2006.
                            ``(ii) Allocation of limitation.--The 
                        national qualified tribal school modernization 
                        bond limitation shall be allocated to tribes by 
                        the Secretary of the Interior subject to the 
                        provisions of section 2 of the Indian School 
                        Construction Act of 2003, as in effect on the 
                        date of the enactment of this section.
                            ``(iii) Designation subject to limitation 
                        amount.--The maximum aggregate face amount of 
                        bonds issued during any calendar year which may 
                        be designated under subsection (d)(1) with 
                        respect to any tribe shall not exceed the 
                        limitation amount allocated to such government 
                        under clause (ii) for such calendar year.
                            ``(iv) Carryover of unused limitation.--If 
                        for any calendar year--
                                    ``(I) the limitation amount under 
                                this subparagraph, exceeds
                                    ``(II) the amount of qualified 
                                tribal school modernization bonds 
                                issued during such year,
                        the limitation amount under this subparagraph 
                        for the following calendar year shall be 
                        increased by the amount of such excess. The 
                        preceding sentence shall not apply if such 
                        following calendar year is after 2010.
            ``(2) Credit allowance date.--The term `credit allowance 
        date' means--
                    ``(A) March 15,
                    ``(B) June 15,
                    ``(C) September 15, and
                    ``(D) December 15.
        Such term includes the last day on which the bond is 
        outstanding.
            ``(3) Bond.--The term `bond' includes any obligation.
            ``(4) Tribe.--The term `tribe' has the meaning given the 
        term `Indian tribal government' by section 7701(a)(40), 
        including the application of section 7871(d). Such term 
        includes any consortium of tribes approved by the Secretary of 
        the Interior.
    ``(e) Credit Included in Gross Income.--Gross income includes the 
amount of the credit allowed to the taxpayer under this section 
(determined without regard to subsection (c)) and the amount so 
included shall be treated as interest income.
    ``(f) Bonds Held by Regulated Investment Companies.--If any 
qualified tribal school modernization bond is held by a regulated 
investment company, the credit determined under subsection (a) shall be 
allowed to shareholders of such company under procedures prescribed by 
the Secretary.
    ``(g) Credits May Be Stripped.--Under regulations prescribed by the 
Secretary--
            ``(1) In general.--There may be a separation (including at 
        issuance) of the ownership of a qualified tribal school 
        modernization bond and the entitlement to the credit under this 
        section with respect to such bond. In case of any such 
        separation, the credit under this section shall be allowed to 
        the person who on the credit allowance date holds the 
        instrument evidencing the entitlement to the credit and not to 
        the holder of the bond.
            ``(2) Certain rules to apply.--In the case of a separation 
        described in paragraph (1), the rules of section 1286 shall 
        apply to the qualified tribal school modernization bond as if 
        it were a stripped bond and to the credit under this section as 
        if it were a stripped coupon.
    ``(h) Treatment for Estimated Tax Purposes.--Solely for purposes of 
sections 6654 and 6655, the credit allowed by this section to a 
taxpayer by reason of holding a qualified tribal school modernization 
bonds on a credit allowance date shall be treated as if it were a 
payment of estimated tax made by the taxpayer on such date.
    ``(i) Credit May Be Transferred.--Nothing in any law or rule of law 
shall be construed to limit the transferability of the credit allowed 
by this section through sale and repurchase agreements.
    ``(j) Credit Treated as Allowed Under Part IV of Subchapter A.--For 
purposes of subtitle F, the credit allowed by this section shall be 
treated as a credit allowable under part IV of subchapter A of this 
chapter.
    ``(k) Reporting.--Issuers of qualified tribal school modernization 
bonds shall submit reports similar to the reports required under 
section 149(e).''.
            (2) Clerical amendment.--The table of subchapters for 
        chapter 1 of the Internal Revenue Code of 1986 is amended by 
        adding at the end the following new item:

                              ``Subchapter Z. Tribal school 
                                        modernization provisions.''
    (d) Sovereign Immunity.--This section and the amendments made by 
this section shall not be construed to impact, limit, or affect the 
sovereign immunity of the Federal Government or any State or tribal 
government.
    (e) Effective Date.--This section and the amendments made by this 
section shall take effect on the date of the enactment of this Act with 
respect to bonds issued after December 31, 2003.
                                 <all>
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