I
104TH CONGRESS
1ST SESSION
H. R. 2800
To amend the Internal Revenue Code of 1986 to impose a 5-percent tax
on all wagering and to use the revenues from such tax to enhance
funding for public elementary and secondary education, and for other
purposes.
IN THE HOUSE OF REPRESENTATIVES
DECEMBER 18 (legislative day, DECEMBER 15), 1995
Mr. FIELDS of Louisiana introduced the following bill; which was referred to
the Committee on Ways and Means, and in addition to the Committee
on Economic and Educational Opportunities, for a period to be subse-
quently 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 impose
a 5-percent tax on all wagering and to use the revenues
from such tax to enhance funding for public elementary
and secondary education, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Education Trust Fund
Act’’.
TITLE I—TAX AND TRUST FUND
SEC. 101. ADDITIONAL 5 PERCENT TAX ON NET PROCEEDS
OF WAGERING.
(a) IN GENERAL.—Chapter 35 of the Internal Reve-
nue Code of 1986 (relating to taxes on wagering) is
amended by redesignating subchapter C as subchapter D
and by inserting after subchapter B the following new sub-
chapter:
‘‘Subchapter C—Tax on Net Proceeds From
Wagers
‘‘Sec. 4415. Imposition of tax.
‘‘Sec. 4416. Definitions and special rules.
‘‘SEC. 4415. IMPOSITION OF TAX.
‘‘(a) IN GENERAL.—There is hereby imposed on the
payment of wagering proceeds an excise tax equal to 5
percent of the net wagering proceeds paid during any cal-
endar quarter.
‘‘(b) NET WAGERING PROCEEDS.—For purposes of
subsection (a)—
‘‘(1) IN
GENERAL.—The term ‘net wagering
proceeds’ means the proceeds from a wager deter-
mined—
‘‘(A) by reducing the amount paid by the
amount of the wager, and
‘‘(B) without regard to any tax imposed by
this section.
‘‘(2) NONCASH PROCEEDS.—Proceeds which are
not money shall be taken into account at their fair
market value.
‘‘(c) LIABILITY FOR TAX.—The tax imposed by sub-
section (a) shall be paid by the person making payment
of the wagering proceeds.
‘‘(d) CREDIT FOR DEDICATED STATE TAXES.—
‘‘(1) IN GENERAL.—The tax imposed by this
section on the net wagering proceeds paid during
any calendar quarter shall be reduced (but not below
zero) by an amount equal to the dedicated State tax
imposed on such proceeds.
‘‘(2) DEDICATED STATE TAX.—For purposes of
paragraph (1), the term ‘dedicated State tax’ means
any excise tax imposed by a maintenance-of effort
State on net wagering proceeds to the extent that
the revenues from such tax are set-aside solely for
purposes described in title II of the Education Trust
Fund Act.
‘‘(3) MAINTENANCE-OF-EFFORT
STATE.—For
purposes of paragraph (2), the term ‘maintenance-
of-effort State’ means, with respect to any calendar
year, any State if—
‘‘(A) the average per pupil expenditure in
such State (as determined for purposes of part
‘‘(b) TERRITORIAL EXTENT.—The tax imposed by
this subchapter shall apply only to wagers—
‘‘(1) accepted in the United States, or
‘‘(2) placed by a person who is in the United
States—
‘‘(A) with a person who is a citizen or resi-
dent of the United States, or
‘‘(B) in a wagering pool or lottery con-
ducted by a person who is a citizen or resident
of the United States.’’
(b) CONFORMING AMENDMENTS.—
(1) Subsection (a) of section 4411 of such Code
is amended by inserting ‘‘or 4415’’ after ‘‘4401’’.
(2) Paragraph (1) of section 4421 of such Code
is amended by striking ‘‘The term’’ and inserting
‘‘Except as provided in section 4416, the term’’.
(3) The table of subchapters for chapter 35 of
such Code is amended by striking the last item and
inserting the following new items:
‘‘Subchapter C. Tax on net proceeds from wagers.
‘‘Subchapter D. Miscellaneous provisions.’’
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to calendar quarters begin-
ning more than 90 days after the date of the enact-
ment of this Act.
(2) TRANSITIONAL RULE.—Any person who, on
the first day of the first calendar quarter beginning
more than 90 days after the date of the enactment
of this Act, is engaged in an activity which makes
such person liable for payment of the tax imposed by
section 4415 of the Internal Revenue Code of 1986
shall be treated as commencing such activity on such
date for purposes of such section and section 4901
of such Code. The preceding sentence shall not apply
to any person who before such date paid the tax im-
posed by section 4411 of such Code for the year
which includes such date.
SEC. 102. NATIONAL EDUCATION TRUST FUND.
(a) IN GENERAL.—Subchapter A of chapter 98 of the
Internal Revenue Code of 1986 (relating to trust fund
code) is amended by adding at the end the following new
section:
‘‘SEC. 9512. NATIONAL EDUCATION TRUST FUND.
‘‘(a) CREATION OF TRUST FUND.—There is estab-
lished in the Treasury of the United States a trust fund
to be known as the ‘National Education Trust Fund’, con-
sisting of such amounts as may be appropriated or cred-
ited to such Trust Fund as provided in this section or sec-
tion 9602(b).
‘‘(b) TRANSFERS TO TRUST FUND.—
‘‘(1) IN GENERAL.—There are hereby appro-
priated to the National Education Trust Fund
amounts equivalent to the net revenues received in
the Treasury from the taxes imposed by section
4401 (relating to tax on wagers) to the extent at-
tributable to the basic percentage under such sec-
tion.
‘‘(2) NET REVENUES.—For purposes of para-
graph (1), the term ‘net revenues’ means the
amount estimated by the Secretary based on the ex-
cess of—
‘‘(A) the taxes referred to in paragraph (1)
which are received in the Treasury, over
‘‘(B) the decrease in the tax imposed by
chapter 1 resulting from such taxes.
‘‘(c) EXPENDITURES FROM TRUST FUND.—Amounts
in the National Education Trust Fund shall be available,
as provided in appropriation Acts, only for purposes of
making expenditures to carry out title II of the Education
Trust Fund Act.’’
(b) CLERICAL AMENDMENT.—The table of sections
for such subchapter A is amended by adding at the end
the following new item:
‘‘Sec. 9512. National Education Trust Fund.’’
TITLE II—EDUCATIONAL
ENHANCEMENT
SEC. 201. EDUCATION TRUST FUND PURPOSES.
Funds from the National Education Trust Fund may
be used by local educational agencies only for the purpose
of educating students, including improving classroom in-
structional materials, renovating or building school facili-
ties and buildings, and increasing teacher salaries.
SEC. 202. GRANTS TO LOCAL EDUCATIONAL AGENCIES.
(a) IN GENERAL.—The Secretary of Education is au-
thorized to provide grants from the National Education
Trust Fund established under section 9512 of the Internal
Revenue Code of 1986 to State educational agencies for
use by local educational agencies to improve education in
elementary and secondary schools as described in section
201.
(b) ELIGIBILITY
OF LOCAL EDUCATIONAL AGEN-
CIES.—A local educational agency in a State is eligible to
receive a grant under this section from the Education
Trust Fund established pursuant to section 9512 of the
Internal Revenue Code of 1986 for any fiscal year if the
number of children in the local educational agency counted
under subsection 1124(c) of the Elementary and Second-
ary Education Act of 1965, before application of the
weighting factor described in subsection (d) of this section,
is at least 10, and if the number of children counted for
grants under section 1124 of the Elementary and Second-
ary Education Act of 1965 is at least 18 percent of the
total population aged 5 to 17 years, inclusive, in the local
educational agency. Funds made available as a result of
applying this subsection shall be reallocated by the State
educational agency to other eligible local educational agen-
cies in the State in proportion to the distribution of other
funds under this section.
(c) GRANTS FOR LOCAL EDUCATIONAL AGENCIES,
THE DISTRICT OF COLUMBIA, AND PUERTO RICO.—
(1) IN GENERAL.—Of the funds made available
for the National Education Trust Fund as estab-
lished under section 9512 of the Internal Revenue
Code of 1986 in a fiscal year, seventy-four percent
shall be made available to carry out this section. The
amount of the grant that a local educational agency
in a State or that the District of Columbia is eligible
to receive under this section for any fiscal year shall
be the product of—
(A) the weighted child count determined
under subsection (d); and
(B) the amount in the second sentence of
subparagraph 1124(a)(1) of the Elementary
and Secondary Education Act of 1965.
(2) PUERTO RICO.—For each fiscal year, the
amount of the grant for which the Commonwealth of
Puerto Rico is eligible under this section shall be
equal to the number of children counted under sub-
section (d) for Puerto Rico, multiplied by the
amount determined in subparagraph 1124(a)(3) of
the Elementary and Secondary Education Act of
1965.
(d) WEIGHTED CHILD COUNT.—
(1) IN
GENERAL.—The weighted child count
used to determine a local educational agency’s allo-
cation under this section is the larger of the two
amounts determined under clause (i) or (ii), as fol-
lows:
(A) BY PERCENTAGE OF CHILDREN.—This
amount is determined by adding—
(i) the number of children determined
under section 1124(c) of the Elementary
and Secondary Education Act of 1965 for
that local educational agency constituting
up to 12.20 percent, inclusive, of the local
educational agency’s total population aged
5 to 17, inclusive, multiplied by 1.0;
(ii) the number of such children con-
stituting more than 12.20 percent, but not