I
105TH CONGRESS
1ST SESSION
H. R. 2695
To amend the Internal Revenue Code of 1986 to encourage new school
construction through the creation of a new class of bond.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 22, 1997
Ms. SANCHEZ introduced the following bill; which was referred to the
Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to encourage
new school construction through the creation of a new
class of bond.
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 ‘‘Expand and Rebuild
America’s Schools Act of 1997’’.
SEC. 2. FINDINGS.
The Congress finds the following:
(1) Many States and school districts will need
to build new schools in order to accommodate in-
creasing student enrollments; the Department of
Education has predicted that the Nation will need
6,000 more schools by the year 2006.
(2) In response to reduced class mandates en-
forced by State governments and increased enroll-
ment, many school districts have been forced to uti-
lize temporary classrooms and other structures to
accommodate increased school populations, along
with resorting to year-round schedules for students.
(3) Research has proven a direct correlation be-
tween the condition of school facilities and student
achievement. Recently, researchers found that stu-
dents assigned to schools in poor condition can be
expected to fall 10.9 percentage points behind those
in buildings in excellent condition. Similar studies
have demonstrated up to a 20 percent improvement
in test scores when students were moved from a
school with poor facilities to a new facility.
(4) While school construction and maintenance
are primarily a State and local concern, States and
communities have not, on their own, met the in-
creasing burden of providing acceptable school facili-
ties, and the poorest communities have had the
greatest difficulty meeting this need.
(5) Many local educational agencies have dif-
ficulties securing financing for school facility con-
struction and renovation, especially in States that
require a 2⁄3 majority of voter approval for the pas-
sage of local bond initiatives.
(6) The Federal Government, by providing in-
terest subsidies and similar types of support, can
lower the costs of State and local school infrastruc-
ture investment, creating an incentive for businesses
to support local school infrastructure improvement
efforts.
(7) The United States competitive position
within the world economy is vulnerable if America’s
future workforce continues to be educated in schools
not equipped for the 21st century. America must do
everything in its power to properly educate its people
to compete in the global marketplace.
SEC. 3. PURPOSES.
The purposes of this Act are—
(1) to encourage public-private partnerships for
the financing of school construction and expansion,
and
(2) to help local educational agencies bring all
public school facilities up to an acceptable standard
and build the additional classrooms needed to edu-
cate the growing number of students who will enroll
in the next decade.
SEC. 4. CREDIT TO HOLDERS OF SCHOOL CONSTRUCTION
BONDS.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to business-related credits) is amended by
adding at the end the following new section:
‘‘SEC. 45D. CREDIT TO HOLDERS OF SCHOOL CONSTRUC-
TION BONDS.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an eli-
gible taxpayer who holds a school construction bond on
the 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 the
amount determined under subsection (b).
‘‘(b) AMOUNT OF CREDIT.—The amount of the credit
determined under this subsection with respect to any
school construction bond is the amount equal to the prod-
uct of—
‘‘(1) the credit rate determined by the Sec-
retary under section 1397E(b)(2) for the month in
which such bond was issued, multiplied by
‘‘(2) the face amount of the bond held by the
taxpayer on the credit allowance date.
‘‘(c) LIMITATION BASED ON AMOUNT OF TAX.—The
credit allowed under subsection (a) for any taxable year
shall not exceed the excess of—
‘‘(1) the sum of the regular tax liability (as de-
fined in section 26(b)) plus the tax imposed by sec-
tion 55, over
‘‘(2) the sum of the credits allowable under this
part (other than under this section and subpart C
thereof, relating to refundable credits) and section
1397E.
‘‘(d) SCHOOL CONSTRUCTION BOND.—For purposes
of this section—
‘‘(1) IN GENERAL.—The term ‘school construc-
tion 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 new qualified school es-
tablished by an eligible local education agency,
‘‘(B) the bond is issued by a State or local
government within the jurisdiction of which
such school 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 school, and
‘‘(iii) certifies that it has the written
approval of the eligible local education
agency for such bond issuance, and
‘‘(D) the term of each bond which is part
of such issue does not exceed the maximum
term permitted under section 1397E(d)(3).
‘‘(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 eligible local education agen-
cy that established the qualified school 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 eligible local
education agency) of—
‘‘(i) equipment for use in the qualified
school 
(including 
state-of-the-art 
tech-
nology 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
school for students, or
‘‘(v) any other property or service
specified by the eligible local education
agency.
‘‘(3) QUALIFIED SCHOOL.—
‘‘(A) IN
GENERAL.—The term ‘qualified
school’ means any public school which is estab-
lished by and operated under the supervision of
an eligible local education agency to provide
education or training below the postsecondary
level if—
‘‘(i) such public school 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,
‘‘(ii) students in such public school
will be subject to the same academic stand-
ards and assessments as other students
educated by the local education agency,
‘‘(iii) a well-structured program to al-
leviate overcrowding and to improve stu-
dents’ education has been constructed and
implemented in the opinion of the Sec-
retary of Education, and
‘‘(iv) at least 2 of the following re-
quirements are met:
‘‘(I) There is a reasonable expec-
tation (as of the date of issuance of
the bonds) that at least 35 percent of
the population attending the such
public school will be eligible for free or
reduced-cost lunches under the school
lunch program established under the
National School Lunch Act.
‘‘(II) There is a reasonable ex-
pectation (as of the date of issuance
of the bonds) that the student growth
rate over the next 5 years for the
school district in which such public
school is to be located will be at least
10 percent.
‘‘(III) The average student-teach-
er ratio for such district as of the
date of issuance of the bonds is at
least 28 to 1.
‘‘(B) ELIGIBLE LOCAL EDUCATION AGEN-
CY.—The term ‘eligible local education agency’
means any local educational agency as defined
in section 14101 of the Elementary and Sec-
ondary Education Act of 1965.
‘‘(4) QUALIFIED PURPOSE.—
‘‘(A) IN
GENERAL.—The term ‘qualified
purpose’ means, with respect to any qualified
school—
‘‘(i) constructing a new school facility,
and
‘‘(ii) providing equipment for use at
such facility.
‘‘(B) SCHOOL FACILITY.—The term ‘school
facility’ means a new public structure suitable
for use as a classroom, laboratory, library,
media center, or related facility whose primary
purpose is the instruction of public elementary
or secondary students. Such term does not in-
clude an athletic stadium, or any other struc-
ture or facility intended primarily for athletic
exhibitions, contests, games, or events for which
admission is charged to the general public.
‘‘(5) ELIGIBLE TAXPAYER.—The term ‘eligible
taxpayer’ means—
‘‘(A) a bank (within the meaning of section
581),
‘‘(B) an insurance company to which sub-
chapter L applies, and
‘‘(C) a corporation actively engaged in the
business of lending money.
‘‘(e) LIMITATION
ON AMOUNT
OF BONDS DES-
IGNATED.—
‘‘(1) NATIONAL LIMITATION.—There is a na-
tional school construction bond limitation for each
calendar year. Such limitation is $400,000,000 for
1998 and 1999, and, except for carryovers as pro-
vided under the rules applicable under paragraph
(2), zero thereafter.
‘‘(2) ALLOCATION
OF
LIMITATION.—The na-
tional school construction bond limitation for a cal-
endar year shall be allocated by the Secretary among
the States on the basis of their respective popu-
lations of individuals below the poverty line (as de-
fined by the Office of Management and Budget).
The limitation amount allocated to a State under the
preceding sentence shall be allocated by the Sec-
retary of Education to qualified schools within such
State.
‘‘(3) 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 qualified school shall not exceed the limitation
amount allocated to such school under paragraph (2)
for such calendar year.
‘‘(4) CARRYOVER OF UNUSED LIMITATION.—If
for any calendar year—
‘‘(A) the limitation amount for any State,
exceeds
‘‘(B) the amount of bonds issued during
such year which are designated under sub-
section (d)(1) with respect to qualified schools
within such State,
the limitation amount for such State for the follow-
ing calendar year shall be increased by the amount
of such excess.
‘‘(f) OTHER DEFINITIONS.—The definitions in sub-
sections (d)(6) and (f) of section 1397E shall apply for
purposes of this section.
‘‘(g) CREDIT INCLUDED IN GROSS INCOME.—Gross
income includes the amount of the credit allowed to the
taxpayer under this section.’’
(b) CONFORMING AMENDMENT.—The table of sec-
tions for subpart D of part IV of subchapter A of chapter
1 of such Code is amended by adding at the end the follow-
ing new item:
‘‘Sec. 45D. Credit to holders of school construction bonds.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to obligations issued after Decem-
ber 31, 1997.
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