‘‘(4) PUBLIC
SCHOOL
FACILITY.—The term
‘public school facility’ shall not include any stadium
or other facility primarily used for athletic contests
or exhibitions or other events for which admission is
charged to the general public.
‘‘(f) CREDIT INCLUDED IN GROSS INCOME.—Gross
income includes the amount of the credit allowed to the
taxpayer under this section and the amount so included
shall be treated 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.
‘‘SEC. 1397F. QUALIFIED ZONE ACADEMY BONDS.
‘‘(a) QUALIFIED ZONE ACADEMY BOND.—For pur-
poses of this part—
‘‘(1) IN GENERAL.—The term ‘qualified zone
academy bond’ means any bond issued as part of an
issue if—
‘‘(A) 95 percent or more of the proceeds of
such issue are to be used for a qualified pur-
pose with respect to a qualified zone academy
established by a local educational agency,
‘‘(B) the bond is issued by a State or local
government within the jurisdiction of which
such academy is located,
‘‘(C) the issuer—
‘‘(i) designates such bond for purposes
of this section,
‘‘(ii) certifies that it has written as-
surances that the private business con-
tribution requirement of paragraph (2) will
be met with respect to such academy, and
‘‘(iii) certifies that it has the written
approval of the local educational agency
for such bond issuance, and
‘‘(D) the term of each bond which is part
of such issue does not exceed 15 years.
‘‘(2) PRIVATE
BUSINESS
CONTRIBUTION
RE-
QUIREMENT.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the private business contribution re-
quirement of this paragraph is met with respect
to any issue if the local educational agency that
established the qualified zone academy has writ-
ten commitments from private entities to make
qualified contributions having a present value
(as of the date of issuance of the issue) of not
less than 10 percent of the proceeds of the
issue.
‘‘(B) QUALIFIED
CONTRIBUTIONS.—For
purposes of subparagraph (A), the term ‘quali-
fied contribution’ means any contribution (of a
type and quality acceptable to the local edu-
cational agency) of—
‘‘(i) equipment for use in the qualified
zone academy (including state-of-the-art
technology and vocational equipment),
‘‘(ii) technical assistance in developing
curriculum or in training teachers in order
to promote appropriate market driven tech-
nology in the classroom,
‘‘(iii) services of employees as volun-
teer mentors,
‘‘(iv) internships, field trips, or other
educational opportunities outside the acad-
emy for students, or
‘‘(v) any other property or service
specified by the local educational agency.
‘‘(3) QUALIFIED
ZONE
ACADEMY.—The term
‘qualified zone academy’ means any public school (or
academic program within a public school) which is
established by and operated under the supervision of
a local educational agency to provide education or
training below the postsecondary level if—
‘‘(A) such public school or program (as the
case may be) is designed in cooperation with
business to enhance the academic curriculum,
increase graduation and employment rates, and
better prepare students for the rigors of college
and the increasingly complex workforce,
‘‘(B) students in such public school or pro-
gram (as the case may be) will be subject to the
same academic standards and assessments as
other students educated by the local educational
agency,
‘‘(C) the comprehensive education plan of
such public school or program is approved by
the local educational agency, and
‘‘(D)(i) such public school is located in an
empowerment zone or enterprise community
(including any such zone or community des-
ignated after the date of the enactment of this
section), or
‘‘(ii) there is a reasonable expectation (as
of the date of issuance of the bonds) that at
least 35 percent of the students attending such
school or participating in such program (as the
case may be) will be eligible for free or reduced-
cost lunches under the school lunch program es-
tablished under the National School Lunch Act.
‘‘(4) QUALIFIED
PURPOSE.—The term ‘quali-
fied purpose’ means, with respect to any qualified
zone academy—
‘‘(A) constructing, rehabilitating, or repair-
ing the public school facility in which the acad-
emy is established,
‘‘(B) providing equipment for use at such
academy,
‘‘(C) developing course materials for edu-
cation to be provided at such academy, and
‘‘(D) training teachers and other school
personnel in such academy.
‘‘(5) TEMPORARY PERIOD EXCEPTION.—A bond
shall not be treated as failing to meet the require-
ment of paragraph (1)(A) solely by reason of the
fact that the proceeds of the issue of which such
bond is a part are invested for a reasonable tem-
porary period (but not more than 36 months) until
such proceeds are needed for the purpose for which
such issue was issued. Any earnings on such pro-
ceeds during such period shall be treated as proceeds
of the issue for purposes of applying paragraph
(1)(A).
‘‘(b) LIMITATIONS
ON AMOUNT
OF BONDS DES-
IGNATED.—
‘‘(1) IN GENERAL.—There is a national zone
academy bond limitation for each calendar year.
Such limitation is—
‘‘(A) $400,000,000 for 1998,
‘‘(B) $1,400,000,000 for 1999,
‘‘(C) $1,400,000,000 for 2000, and
‘‘(D) except as provided in paragraph (3),
zero after 2000.
‘‘(2) ALLOCATION OF LIMITATION.—
‘‘(A) ALLOCATION AMONG STATES.—
‘‘(i) 1998 LIMITATION.—The national
zone academy bond limitation for calendar
year 1998 shall be allocated by the Sec-
retary among the States on the basis of
their respective populations of individuals
below the poverty line (as defined by the
Office of Management and Budget).
‘‘(ii) LIMITATION
AFTER
1998.—The
national zone academy bond limitation for
any calendar year after 1998 shall be allo-
cated by the Secretary among the States in
the 
manner 
prescribed 
by 
section
1397G(d); except that, in making the allo-
cation under this clause, the Secretary
shall take into account Basic Grants at-
tributable to large local educational agen-
cies (as defined in section 1397G(e)) or to
high-growth local educational agencies (as
defined in section 1397G(f)).
‘‘(B) 
ALLOCATION
TO
LOCAL
EDU-
CATIONAL
AGENCIES.—The limitation amount
allocated to a State under subparagraph (A)
shall be allocated by the State education agency
to qualified zone academies within such State.
‘‘(C) DESIGNATION SUBJECT TO LIMITA-
TION AMOUNT.—The maximum aggregate face
amount of bonds issued during any calendar
year which may be designated under subsection
(a) with respect to any qualified zone academy
shall not exceed the limitation amount allocated
to such academy under subparagraph (B) for
such calendar year.
‘‘(3) CARRYOVER OF UNUSED LIMITATION.—If
for any calendar year—
‘‘(A) the limitation amount under this sub-
section for any State, exceeds
‘‘(B) the amount of bonds issued during
such year which are designated under sub-
section (a) with respect to qualified zone acad-
emies within such State,
the limitation amount under this subsection for such
State for the following calendar year shall be in-
creased by the amount of such excess. The preceding
sentence shall not apply if such following calendar
year is after 2002.
‘‘SEC. 1397G. QUALIFIED SCHOOL CONSTRUCTION BONDS.
‘‘(a) QUALIFIED SCHOOL CONSTRUCTION BOND.—
For purposes of this part, the term ‘qualified school con-
struction 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,
‘‘(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.
Rules similar to the rules of section 1397F(a)(5) shall
apply for purposes of paragraph (1).
‘‘(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)) or is issuing on
behalf of such an agency, the limitation amount allo-
cated 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) $13,700,000,000 for 1999,
‘‘(2) $13,700,000,000 for 2000, and
‘‘(3) except as provided in subsection (g), zero
after 2000.
‘‘(d) 
ONE-THIRD
OF
LIMITATION
ALLOCATED
AMONG STATES.—
‘‘(1) IN GENERAL.—One-third 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 education agency 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)), and Basic Grants
attributable to high-growth local educational agen-
cies (as defined in subsection (f)), 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 subsections (e) and (f) to local edu-
cational agencies in such State for such
year,
is not less than an amount equal to such
State’s minimum percentage of one-third of the
national qualified school construction bond limi-
tation under subsection (c) for the calendar
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
such State for the most recent fiscal year end-
ing before such calendar year.
‘‘(4) 
ALLOCATIONS
TO
CERTAIN
POSSES-
SIONS.—The amount to be allocated under para-
graph (1) to any possession of the United States
other than Puerto Rico shall be the amount which
would have been allocated if all allocations under
paragraph (1) were made on the basis of respective
populations of individuals below the poverty line (as
defined by the Office of Management and Budget).
In making other allocations, the amount to be allo-
cated under paragraph (1) shall be reduced by the
aggregate amount allocated under this paragraph to
possessions of the United States.
‘‘(5) 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 edu-
cation agency shall be binding if such agency reason-
ably determined that the allocation was in accord-
ance with the plan approved under this paragraph.
‘‘(e) 
ONE-THIRD
OF
LIMITATION
ALLOCATED
AMONG LARGEST SCHOOL DISTRICTS.—
‘‘(1) IN GENERAL.—One-third 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) 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 (other than
a high-growth local educational agency, as defined in
subsection (f)) 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
clause (i)) that the Secretary of Education de-
termines (based on the most recent data avail-
able satisfactory to the Secretary) are in par-
ticular 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.
‘‘(4) 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 with the involvement of school officials,
members of the public, and experts in school
construction and management) of such agency’s
needs for public school facilities, including de-
scriptions 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)(5) shall apply for purposes of this sub-
section.
‘‘(f) ONE-THIRD OF LIMITATION ALLOCATED AMONG
HIGH-GROWTH SCHOOL DISTRICTS.—
‘‘(1) IN GENERAL.—One-third 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
high-growth local educational agencies for such year.
No qualified school construction bond may be issued
by reason of an allocation to a high-growth local
educational agency under the preceding sentence un-
less such agency has an approved local application
(as defined in subsection (e)(4)). A rule similar to
the rule of the last sentence of subsection (d)(5)
shall apply for purposes of this subsection.
‘‘(2) ALLOCATION FORMULA.—The amount to
be allocated under paragraph (1) for any calendar
year shall be allocated among high-growth local edu-
cational 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 Elemen-
tary 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) 
HIGH-GROWTH
LOCAL
EDUCATIONAL
AGENCY.—For purposes of this section, the term
‘high-growth local educational agency’ means, with
respect to a calendar year, any local educational
agency if—
‘‘(A) there has been at least a 7.5 percent
increase in such agency’s enrollment during the
5-year period ending with the preceding cal-
endar year, and
‘‘(B) such enrollment increase exceeds 150
students.
‘‘(g) 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 subsections (e) and (f).
The subsection shall not apply if such following calendar
year is after 2002.’’.
(b) REPORTING.—Subsection (d) of section 6049 of
such Code (relating to returns regarding payments of in-
terest) is amended by adding at the end the following new
paragraph:
‘‘(8) REPORTING
OF
CREDIT
ON
QUALIFIED
PUBLIC SCHOOL MODERNIZATION BONDS.—
‘‘(A) IN GENERAL.—For purposes of sub-
section (a), the term ‘interest’ includes amounts
includible in gross income under section
1397E(f) and such amounts shall be treated as
paid on the credit allowance date (as defined in
section 1397E(d)(2)).
‘‘(B) 
REPORTING
TO
CORPORATIONS,
ETC.—Except as otherwise provided in regula-
tions, in the case of any interest described in
subparagraph (A) of this paragraph, subsection
(b)(4) of this section shall be applied without
regard to subparagraphs (A), (H), (I), (J), (K),
and (L)(i).
‘‘(C) REGULATORY AUTHORITY.—The Sec-
retary may prescribe such regulations as are
necessary or appropriate to carry out the pur-
poses of this paragraph, including regulations
which require more frequent or more detailed
reporting.’’
(c) CLERICAL AMENDMENTS.—
(1) The table of parts for subchapter U of
chapter 1 of such Code is amended by striking the
item relating to part IV and inserting the following
new item:
‘‘Part IV. Incentives for qualified public school modernization
bonds.’’.
(2) Part V of subchapter U of chapter 1 of
such Code is amended by redesignating both section
1397F and the item relating thereto in the table of
sections for such part as section 1397H.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to obligations issued after December 31,
1998.
(2) REPEAL OF RESTRICTION ON ZONE ACAD-
EMY BOND HOLDERS.—The repeal of the limitation
of section 1397E of the Internal Revenue Code of
1986 (as in effect on the day before the date of the
enactment of this Act) to eligible taxpayers (as de-
fined in subsection (d)(6) of such section) shall
apply to obligations issued after December 31, 1997.
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