‘‘(1) LOCAL EDUCATIONAL AGENCY.—The term
‘local educational agency’ has the meaning given to
such term by section 14101 of the Elementary and
Secondary Education Act of 1965. Such term in-
cludes the local educational agency that serves the
District of Columbia but does not include any other
State agency.
‘‘(2) BOND.—The term ‘bond’ includes any ob-
ligation.
‘‘(3) STATE.—The term ‘State’ includes the
District of Columbia and any possession of the
United States.
‘‘(4) PUBLIC
SCHOOL
FACILITY.—The term
‘public school facility’ shall not include—
‘‘(A) any stadium or other facility pri-
marily used for athletic contests or exhibitions
or other events for which admission is charged
to the general public, or
‘‘(B) any facility which is not owned by a
State or local government or any agency or in-
strumentality of a State or local government.
‘‘(f) 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 treat-
ed as interest income.
‘‘(g) BONDS HELD
BY REGULATED INVESTMENT
COMPANIES.—If any qualified public school modernization
bond is held by a regulated investment company, the credit
determined under subsection (a) shall be allowed to share-
holders of such company under procedures prescribed by
the Secretary.
‘‘(h) CREDITS MAY BE STRIPPED.—Under regula-
tions prescribed by the Secretary—
‘‘(1) IN GENERAL.—There may be a separation
(including at issuance) of the ownership of a quali-
fied public school modernization bond and the enti-
tlement 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 per-
son who on the credit allowance date holds the in-
strument 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 public
school modernization bond as if it were a stripped
bond and to the credit under this section as if it
were a stripped coupon.
‘‘(i) 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 public 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.
‘‘(j) CREDIT MAY BE TRANSFERRED.—Nothing in
any law or rule of law shall be construed to limit the trans-
ferability of the credit allowed by this section through sale
and repurchase agreements.
‘‘(k) REPORTING.—Issuers of qualified public school
modernization bonds shall submit reports similar to the
reports required under section 149(e).
‘‘(l) TERMINATION.—This section shall not apply to
any bond issued after September 30, 2004.
‘‘PART II—QUALIFIED SCHOOL CONSTRUCTION
BONDS
‘‘Sec. 1400G. Qualified school construction bonds.
‘‘SEC. 1400G. QUALIFIED SCHOOL CONSTRUCTION BONDS.
‘‘(a) QUALIFIED SCHOOL CONSTRUCTION BOND.—
For purposes of this subchapter, the term ‘qualified school
construction bond’ means any bond issued as part of an
issue if—
‘‘(1) 95 percent or more of the proceeds of such
issue are to be used for the construction, rehabilita-
tion, or repair of a public school facility or for the
acquisition of land on which such a facility is to be
constructed with part of the proceeds of such issue,
‘‘(2) the bond is issued by a State or local gov-
ernment within the jurisdiction of which such school
is located,
‘‘(3) the issuer designates such bond for pur-
poses of this section, and
‘‘(4) the term of each bond which is part of
such issue does not exceed 15 years.
‘‘(b) LIMITATION
ON AMOUNT
OF BONDS DES-
IGNATED.—The maximum aggregate face amount of
bonds issued during any calendar year which may be des-
ignated under subsection (a) by any issuer shall not exceed
the sum of—
‘‘(1) the limitation amount allocated under sub-
section (d) for such calendar year to such issuer,
and
‘‘(2) if such issuer is a large local educational
agency (as defined in subsection (e)(4)) or is issuing
on behalf of such an agency, the limitation amount
allocated under subsection (e) for such calendar year
to such agency.
‘‘(c) NATIONAL LIMITATION ON AMOUNT OF BONDS
DESIGNATED.—There is a national qualified school con-
struction bond limitation for each calendar year. Such lim-
itation is—
‘‘(1) $11,000,000,000 for 2000,
‘‘(2) $11,000,000,000 for 2001, and
‘‘(3) except as provided in subsection (f), zero
after 2001.
‘‘(d) HALF
OF LIMITATION ALLOCATED AMONG
STATES.—
‘‘(1) IN GENERAL.—One-half of the limitation
applicable under subsection (c) for any calendar year
shall be allocated among the States under paragraph
(2) by the Secretary. The limitation amount allo-
cated to a State under the preceding sentence shall
be allocated by the State to issuers within such
State and such allocations may be made only if there
is an approved State application.
‘‘(2) ALLOCATION FORMULA.—The amount to
be allocated under paragraph (1) for any calendar
year shall be allocated among the States in propor-
tion to the respective amounts each such State re-
ceived for Basic Grants under subpart 2 of part A
of title I of the Elementary and Secondary Edu-
cation Act of 1965 (20 U.S.C. 6331 et seq.) for the
most recent fiscal year ending before such calendar
year. For purposes of the preceding sentence, Basic
Grants attributable to large local educational agen-
cies (as defined in subsection (e)) shall be dis-
regarded.
‘‘(3) MINIMUM ALLOCATIONS TO STATES.—
‘‘(A) IN
GENERAL.—The Secretary shall
adjust the allocations under this subsection for
any calendar year for each State to the extent
necessary to ensure that the sum of—
‘‘(i) the amount allocated to such
State under this subsection for such year,
and
‘‘(ii) the aggregate amounts allocated
under subsection (e) to large local edu-
cational agencies in such State for such
year,
is not less than an amount equal to such
State’s minimum percentage of the amount to
be allocated under paragraph (1) for the cal-
endar year.
‘‘(B) MINIMUM
PERCENTAGE.—A State’s
minimum percentage for any calendar year is
the minimum percentage described in section
1124(d) of the Elementary and Secondary Edu-
cation Act of 1965 (20 U.S.C. 6334(d)) for
‘‘(6) APPROVED
STATE
APPLICATION.—For
purposes of paragraph (1), the term ‘approved State
application’ means an application which is approved
by the Secretary of Education and which includes—
‘‘(A) the results of a recent publicly-avail-
able survey (undertaken by the State with the
involvement of local education officials, mem-
bers of the public, and experts in school con-
struction and management) of such State’s
needs for public school facilities, including de-
scriptions of—
‘‘(i) health and safety problems at
such facilities,
‘‘(ii) the capacity of public schools in
the State to house projected enrollments,
and
‘‘(iii) the extent to which the public
schools in the State offer the physical in-
frastructure needed to provide a high-qual-
ity education to all students, and
‘‘(B) a description of how the State will al-
locate to local educational agencies, or other-
wise use, its allocation under this subsection to
address the needs identified under subpara-
graph (A), including a description of how it
will—
‘‘(i) give highest priority to localities
with the greatest needs, as demonstrated
by inadequate school facilities coupled with
a low level of resources to meet those
needs,
‘‘(ii) use its allocation under this sub-
section to assist localities that lack the fis-
cal capacity to issue bonds on their own,
and
‘‘(iii) ensure that its allocation under
this subsection is used only to supplement,
and not supplant, the amount of school
construction, rehabilitation, and repair in
the State that would have occurred in the
absence of such allocation.
Any allocation under paragraph (1) by a State shall
be binding if such State reasonably determined that
the allocation was in accordance with the plan ap-
proved under this paragraph.
‘‘(e) HALF
OF LIMITATION ALLOCATED AMONG
LARGEST SCHOOL DISTRICTS.—
‘‘(1) IN GENERAL.—One-half of the limitation
applicable under subsection (c) for any calendar year
shall be allocated under paragraph (2) by the Sec-
retary among local educational agencies which are
large local educational agencies for such year. No
qualified school construction bond may be issued by
reason of an allocation to a large local educational
agency under the preceding sentence unless such
agency has an approved local application.
‘‘(2) ALLOCATION FORMULA.—The amount to
be allocated under paragraph (1) for any calendar
year shall be allocated among large local educational
agencies in proportion to the respective amounts
each such agency received for Basic Grants under
subpart 2 of part A of title I of the Elementary and
Secondary Education Act of 1965 (20 U.S.C. 6331
et seq.) for the most recent fiscal year ending before
such calendar year.
‘‘(3) ALLOCATION OF UNUSED LIMITATION TO
STATE.—The amount allocated under this subsection
to a large local educational agency for any calendar
year may be reallocated by such agency to the State
in which such agency is located for such calendar
year. Any amount reallocated to a State under the
preceding sentence may be allocated as provided in
subsection (d)(1).
‘‘(4) LARGE LOCAL EDUCATIONAL AGENCY.—
For purposes of this section, the term ‘large local
educational agency’ means, with respect to a cal-
endar year, any local educational agency if such
agency is—
‘‘(A) among the 100 local educational
agencies with the largest numbers of children
aged 5 through 17 from families living below
the poverty level, as determined by the Sec-
retary using the most recent data available
from the Department of Commerce that are
satisfactory to the Secretary, or
‘‘(B) 1 of not more than 25 local edu-
cational agencies (other than those described in
subparagraph (A)) that the Secretary of Edu-
cation determines (based on the most recent
data available satisfactory to the Secretary) are
in particular need of assistance, based on a low
level of resources for school construction, a high
level of enrollment growth, or such other factors
as the Secretary deems appropriate.
‘‘(5) APPROVED
LOCAL
APPLICATION.—For
purposes of paragraph (1), the term ‘approved local
application’ means an application which is approved
by the Secretary of Education and which includes—
‘‘(A) the results of a recent publicly-avail-
able survey (undertaken by the local educational
agency or the State with the involvement of
school officials, members of the public, and ex-
perts in school construction and management)
of such agency’s needs for public school facili-
ties, including descriptions of—
‘‘(i) the overall condition of the local
educational agency’s school facilities, in-
cluding health and safety problems,
‘‘(ii) the capacity of the agency’s
schools to house projected enrollments, and
‘‘(iii) the extent to which the agency’s
schools offer the physical infrastructure
needed to provide a high-quality education
to all students,
‘‘(B) a description of how the local edu-
cational agency will use its allocation under this
subsection to address the needs identified under
subparagraph (A), and
‘‘(C) a description of how the local edu-
cational agency will ensure that its allocation
under this subsection is used only to supple-
ment, and not supplant, the amount of school
construction, rehabilitation, or repair in the lo-
cality that would have occurred in the absence
of such allocation.
A rule similar to the rule of the last sentence of sub-
section (d)(6) shall apply for purposes of this para-
graph.
‘‘(f) CARRYOVER OF UNUSED LIMITATION.—If for
any calendar year—
‘‘(1) the amount allocated under subsection (d)
to any State, exceeds
‘‘(2) the amount of bonds issued during such
year which are designated under subsection (a) pur-
suant to such allocation,
the limitation amount under such subsection for such
State for the following calendar year shall be increased
by the amount of such excess. A similar rule shall apply
to the amounts allocated under subsection (d)(5) or (e).
‘‘(g) SPECIAL RULES RELATING TO ARBITRAGE.—
‘‘(1) IN GENERAL.—A bond shall not be treated
as failing to meet the requirement of subsection
(a)(1) solely by reason of the fact that the proceeds
of the issue of which such bond is a part are in-
vested for a temporary period (but not more than 36
months) until such proceeds are needed for the pur-
pose for which such issue was issued.