I 
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 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 provide for the issuance of bonds to construct and mod-
ernize 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 Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Indian School Con-
struction 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 in-
dividual 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 oper-
ation under an appropriation for the Bureau under 
section 102, 103(a), or 208 of the Indian Self-Deter-
mination and Education Assistance Act (25 U.S.C. 
450f, 450h(a), and 458d) or under the Tribally Con-
trolled 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 sec-
tion 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 moderniza-
tion 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 Sec-
retary a plan of construction that meets 
the requirements of subparagraph (B); 
(ii) provide for quarterly and final in-
spection of the project by the Bureau; and 
(iii) pledge that the facilities financed 
by such bond will be used primarily for ele-
mentary and secondary educational pur-
poses 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 con-
struction to be undertaken with funding 
provided under a qualified tribal school 
modernization bond; 
(ii) demonstrates that a comprehen-
sive survey has been undertaken con-
cerning 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 evalua-
tion criteria contained in Instructions and 
Application for Replacement School Con-
struction, 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 Facili-
ties Replacement Construction Priorities 
List as of FY 2000 of the Bureau of In-
dian Affairs (65 Fed. Reg. 4623–4624); 
(ii) described in any subsequent prior-
ities list published in the Federal Register; 
or 
(iii) which meet the criteria for rank-
ing 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 mod-
ernization escrow account established under 
paragraph (6)(B). Before advance planning and 
design funds are allocated from the escrow ac-
count, the tribe shall agree to issue qualified 
tribal school modernization bonds after the re-
ceipt 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 re-
ceived 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 com-
pany 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 sub-
section 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 es-
crow 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 para-
graph (10), will produce moneys sufficient 
to timely pay in full the entire principal
amount of such bond on the stated matu-
rity 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 seg-
regated fund or account under the agree-
ment, which fund or account shall be ap-
plied 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 sub-
paragraph (C)(v) in accordance with re-
quirements that the tribe shall prescribe in 
the trust agreement entered into under 
subparagraph (C). Before making a pay-
ment to a contractor under subparagraph 
(C)(v), the trustee shall require an inspec-
tion of the project by a local financial in-
stitution or an independent inspecting ar-
chitect or engineer, to ensure the comple-
tion of the project.
(ii) CONTRACTS.—Each contract re-
ferred to in paragraph (3) shall specify, or 
be renegotiated to specify, that payments 
under the contract shall be made in ac-
cordance 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 prin-
cipal portion of a qualified tribal school mod-
ernization 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 pay-
ments described in paragraph (2)(D). 
(iii) TRANSFERS
OF
EXCESS
PRO-
CEEDS.—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.—Notwith-
standing any other provision of law, the prin-
cipal amount on any qualified tribal school 
modernization bond issued under this sub-
section shall be repaid only to the extent of any 
escrowed funds furnished under paragraph 
(4)(C)(iii). No qualified tribal school moderniza-
tion bond issued by a tribe shall be an obliga-
tion 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 moderniza-
tion 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 EARN-
INGS.—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 pay-
ment of principal on a qualified tribal school mod-
ernization 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 tax-
payer 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 de-
termined 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 re-
spect 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 de-
termined by the Secretary). 
‘‘(4) SPECIAL RULE FOR ISSUANCE AND RE-
DEMPTION.—In the case of a bond which is issued 
during the 3-month period ending on a credit allow-
ance date, the amount of the credit determined 
under this subsection with respect to such credit al-
lowance 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 re-
deemed. 
‘‘(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 im-
posed by section 55, over 
‘‘(B) the sum of the credits allowable 
under part IV of subchapter A (other than sub-
part 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 sec-
tion—
‘‘(1) QUALIFIED TRIBAL SCHOOL MODERNIZA-
TION BOND.—