I
107TH CONGRESS
1ST SESSION
H. R. 771
To amend the Elementary and Secondary Education Act of 1965 to authorize
grants to States for the construction, repair, renovation, and moderniza-
tion of public school facilities, to amend the Internal Revenue Code
of 1986 to expand the tax incentives for such undertakings, and for
other purposes.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 28, 2001
Mr. BLAGOJEVICH introduced the following bill; which was referred to the
Committee on Education and the Workforce, and in addition to the Com-
mittee on Ways and Means, for a period to be subsequently 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 Elementary and Secondary Education Act
of 1965 to authorize grants to States for the construc-
tion, repair, renovation, and modernization of public
school facilities, to amend the Internal Revenue Code
of 1986 to expand the tax incentives for such under-
takings, 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 ‘‘Federal School Con-
struction Act of 2001’’. This Act may also be cited as the
‘‘Schools for the 21st Century Act’’.
SEC. 2. FINDINGS.
The Congress finds as follows:
(1) In 1950, the United States was suffering
the effects of an inadequate transportation system.
The conventional wisdom was that roads were a local
concern.
(2) President Dwight D. Eisenhower deter-
mined that a deficient transportation system was a
threat to our economy and our national security.
(3) Today, the interstate highway system
stands as a testament to discarding old ways of
thinking to meet modern demands.
(4) Like the interstate highway system in the
1950’s, the state of our public school facilities is a
national concern, with national consequences.
(5) According to the National Center for Edu-
cation Statistics, it will cost $127,000,000,000 to
render the condition of public elementary and sec-
ondary school facilities in the United States ade-
quate.
(6) Of the $112,000,000,000 that the Comp-
troller General of the United States estimated in
1996 was needed for such purpose, approximately
$11,000,000,000 was deemed necessary in order to
comply with Federal mandates, such as asbestos re-
moval and ensuring access for students with disabil-
ities.
(7) According to the American Society of Civil
Engineers, the United States needs to spend
$60,000,000,000 for new school construction to ac-
commodate 3,000,000 students.
(8) According to the National Center for Edu-
cation Statistics, 3⁄4 of the schools in the United
States reported needing to spend money on repairs,
renovations, and modernization in order to put
school buildings into good overall condition.
(9) In 1999, the average age of school buildings
in the United States was 40, the age at which most
buildings can deteriorate rapidly.
(10) The Comptroller General of the United
States reported that the largest proportion of
schools reporting deteriorating school conditions
were in central cities serving more than 50 percent
minority students or 70 percent or more of poor stu-
dents. However, one of every two rural school re-
ported at least one inadequate school structural fea-
ture.
(11) According to the National Center for Edu-
cation Statistics, the average dollar amount schools
reported needing to spend for repair per school was
$2,200,000, or approximately $3,800 per student.
(12) Estimates of the cost of new construction
for schools vary. According to the magazine School
Planning and Management, in terms of the national
profile of new schools being constructed, the median
cost for an elementary school is $8,000,000, for a
middle school is $12,000,000, and for a high school
is $18,900,000. According to the magazine Amer-
ican School and University such median costs are
$9,200,000, $14,300,000, and $21,500,000, respec-
tively. There are regional variations in costs as well.
(13) In examining trends in annual State school
construction expenditures since 1990, it becomes evi-
dent that they range from $37 per student to $934
per student, with a national average of $473.
(14) According to the National Center for Edu-
cation Statistics, approximately 1⁄4 of public schools
are overcrowded and, of those, the larger schools
with higher minority enrollments are more seriously
overcrowded, that is, are more than 25 percent over-
enrolled.
SEC. 3. GRANTS FOR SCHOOL CONSTRUCTION AND REN-
OVATION.
Title XII of the Elementary and Secondary Edu-
cation Act of 1965 (20 U.S.C. 8501 et seq.) is amended
to read as follows:
‘‘TITLE XII—SCHOOL FACILITIES
INFRASTRUCTURE IMPROVE-
MENT
‘‘SEC. 12001. GRANTS FOR SCHOOL CONSTRUCTION, RE-
PAIR, RENOVATION, AND MODERNIZATION.
‘‘(a) PROGRAM AUTHORITY.—
‘‘(1) RESERVATION FOR NATIVE AMERICAN AND
ALASKA NATIVE CHILDREN IN SCHOOL.—
‘‘(A) IN GENERAL.—From the amount ap-
propriated under each of subsections (b) and
(c) of section 12003 to carry out this title for
any fiscal year, the Secretary shall reserve 1
percent to provide Federal financial assistance
to elementary and secondary schools operated
predominately for Native American or Alaska
Native children and youth, an Indian tribe, a
tribally sanctioned educational authority, or an
elementary or secondary school that is operated
or funded by the Bureau of Indian Affairs.
‘‘(B) DEFINITIONS.—For purposes of this
paragraph:
‘‘(i) INDIAN
TRIBE.—The term ‘In-
dian tribe’ means any Indian tribe, band,
nation, or other organized group or com-
munity, including any Alaska Native vil-
lage or regional or village corporation as
defined in or established pursuant to the
Alaska Native Claims Settlement Act (43
U.S.C. 1601 et seq.), that is recognized for
the special programs and services provided
by the United States to Indians because of
their status as Indians.
‘‘(ii) TRIBALLY
SANCTIONED
EDU-
CATIONAL AUTHORITY.—The term ‘tribally
sanctioned educational authority’ means—
‘‘(I) any department or division
of education operating within the ad-
ministrative structure of the duly con-
stituted governing body of an Indian
tribe; and
‘‘(II) any nonprofit institution or
organization that is chartered by the
governing body of an Indian tribe to
operate any such school or otherwise
to oversee the delivery of educational
services to members of that tribe and
approved by the Secretary for the pur-
pose of this paragraph.
‘‘(2) GRANTS TO LOCAL EDUCATIONAL AGEN-
CIES.—From the funds appropriated to carry out
this title for each fiscal year and not reserved under
paragraph (1), the Secretary shall award grants to
local educational agencies in each of the following
categories:
‘‘(A) Local educational agencies in which
the number of students enrolled is less than
2,500.
‘‘(B) Such agencies in which such number
is 2,500 or greater but less than 5,000.
‘‘(C) Such agencies in which such number
is 5,000 or greater but less than 10,000.
‘‘(D) Such agencies in which such number
is 10,000 or greater but less than 25,000.
‘‘(E) Such agencies in which such number
is 25,000 or greater but less than 50,000.
‘‘(F) Such agencies in which such number
is 50,000 or greater.
‘‘(3) MAXIMUM
AWARD
AMOUNTS.—The Sec-
retary shall annually set the maximum award
amounts for each category described in subsection
paragraph (2).
‘‘(ii) such other criteria as the Sec-
retary may prescribe by regulation.
‘‘(C) GUARANTEED STATE MINIMUM.—To
the maximum extent practicable, local edu-
cational agencies from each State collectively
shall receive at least 0.5 percent of the amount
awarded under this title for each fiscal year.
‘‘(b) USES OF FUNDS.—
‘‘(1) IN
GENERAL.—Each eligible local edu-
cational agency receiving a grant under this title—
‘‘(A) for new construction shall use the
grant funds only for—
‘‘(i) constructing new public elemen-
tary and secondary school structures—
‘‘(I) suitable for classrooms, lab-
oratories, libraries, media centers, or
related facilities; and
‘‘(II) whose primary purpose is
the academic or vocational instruction
of public elementary and secondary
school students; or
‘‘(ii) acquiring the land on which such
a structure is to be constructed; and
‘‘(B) for repair, renovation, or moderniza-
tion shall use the grant funds only for such ac-
tivities with respect to such a structure.
‘‘(2) IMPERMISSIBLE
USES
OF
FUNDS.—No
funds received under this title may be used for—
‘‘(A) payment of maintenance costs in con-
nection with any projects constructed in whole
or part with Federal funds provided under this
title; or
‘‘(B) stadiums or other facilities primarily
used for athletic contests or exhibitions or other
events for which admission is charged to the
general public.
‘‘SEC. 12002. GENERAL PROVISIONS.
‘‘(a) CHARTER SCHOOLS.—A public charter school
that constitutes a local educational agency under State law
shall be eligible for assistance under this title under the
same terms and conditions as any other local educational
agency.
‘‘(b) SUPPLEMENT, NOT SUPPLANT.—A local edu-
cational agency shall use Federal funds subject to this title
only to supplement the amount of funds that would, in
the absence of such Federal funds, be made available from
non-Federal sources.
‘‘(c) SPECIAL RULE.—Each local educational agency
that receives funds under this title shall ensure that, if
it carries out construction, repair, renovation, or mod-
ernization through a contract, any such contract process
ensures the maximum number of qualified bidders, includ-
ing small, minority, and women-owned businesses, through
full and open competition.
‘‘(d) PUBLIC COMMENT.—Each local educational
agency receiving funds under this title—
‘‘(1) shall provide parents, educators, and all
other interested members of the community the op-
portunity to consult on the use of funds;
‘‘(2) shall provide the public with adequate and
efficient notice of the opportunity described in para-
graph (1) in a widely read and distributed medium;
and
‘‘(3) shall provide the opportunity described in
paragraph (1) in accordance with any applicable
State and local law specifying how the comments
may be received and how the comments may be re-
viewed by any member of the public.
‘‘(e) REPORTING.—Each local educational agency re-
ceiving funds under this title shall submit a report to the
Secretary, at such time as the Secretary may require, de-
scribing the use of such funds.
‘‘SEC. 12003. AUTHORIZATION OF APPROPRIATIONS.
‘‘(a) IN GENERAL.—There are authorized to be ap-
propriated to carry out this title $26,600,000,000 for each
of fiscal years 2002 through 2006.
‘‘(b) 
SCHOOL
CONSTRUCTION.—Of 
such 
total
amount, $8,400,000,000 are authorized to be appro-
priated for each such fiscal year for grants for con-
structing new public elementary and secondary school fa-
cilities and acquiring the land on which such facilities are
to be constructed.
‘‘(c) SCHOOL REPAIR, RENOVATION, AND MOD-
ERNIZATION.—Of such total amount, $18,200,000,000
are authorized to be appropriated for each such fiscal year
for grants for repair, renovation, and modernization of
public elementary and secondary school facilities.’’.
SEC. 4. EXPANSION OF INCENTIVES FOR PUBLIC SCHOOLS.
(a) IN GENERAL.—Chapter 1 of the Internal Rev-
enue Code of 1986 is amended by adding at the end the
following new subchapter:
‘‘Subchapter XI—Public School
Modernization Provisions
‘‘Sec. 1400K. Credit to holders of qualified public school mod-
ernization bonds.
‘‘Sec. 1400L. Qualified school modernization bonds.
‘‘SEC. 1400K. CREDIT TO HOLDERS OF QUALIFIED PUBLIC
SCHOOL MODERNIZATION BONDS.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of a tax-
payer who holds a qualified public 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 public 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 public 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 day before the date of
issuance of the issue) on outstanding long-term cor-
porate debt obligations (determined under regula-
tions prescribed 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) CREDIT ALLOWANCE DATE.—For purposes of
this section, the term ‘credit allowance date’ means—
‘‘(1) March 15,
‘‘(2) June 15,
‘‘(3) September 15, and
‘‘(4) December 15.
Such term includes the last day on which the bond is out-
standing.
‘‘(e) OTHER DEFINITIONS.—For purposes of this
subchapter—
‘‘(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, 2007.
‘‘SEC. 1400L. QUALIFIED PUBLIC SCHOOL MODERNIZATION
BONDS.
‘‘(a) QUALIFIED SCHOOL CONSTRUCTION BOND.—
For purposes of this subchapter, the term ‘qualified school
modernization 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, repair, or modernization of a public school fa-
cility 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 amounts allocated under
subsection (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 amounts
allocated under subsection (e) for such calendar year
to such agency.
‘‘(c) NATIONAL LIMITATIONS ON AMOUNT OF BONDS
DESIGNATED.—
‘‘(1) SCHOOL CONSTRUCTION.—In the case of
bonds issued as part of an issue where 95 percent
or more of the proceeds of such issue are to be used
for the construction of a public school facility or for
the acquisition of land on which such a facility is to
be constructed, there is a national qualified school
construction bond limitation for each calendar year.
Such limitation is—
‘‘(A) $1,584,000,000 for 2002,
‘‘(B) $1,584,000,000 for 2003,
‘‘(C) $1,584,000,000 for 2004,
‘‘(D) $1,584,000,000 for 2005,
‘‘(E) $1,584,000,000 for 2006, and
‘‘(F) except as provided in subsection (f),
zero after 2006.
‘‘(2) SCHOOL
REHABILITATION, REPAIR, OR
MODERNIZATION.—In the case of bonds issued as
part of an issue where 95 percent or more of the
proceeds of such issue are to be used for the reha-
bilitation, repair, or modernization of a public school
facility, there is a national qualified school mod-
ernization bond limitation for each calendar year.
Such limitation is—
‘‘(A) $7,722,000,000 for 2002,
‘‘(B) $7,722,000,000 for 2003,
‘‘(C) $7,722,000,000 for 2004,
‘‘(D) $7,722,000,000 for 2005,
‘‘(E) $7,722,000,000 for 2006, and
‘‘(F) except as provided in subsection (f),
zero after 2006.
‘‘(d) 60 PERCENT
OF LIMITATIONS ALLOCATED
AMONG STATES.—
‘‘(1) IN GENERAL.—60 percent of each of the
limitations applicable under subsection (c) for any
calendar year shall be allocated by the Secretary
among the States in proportion to the respective
numbers of children in each State who have attained
age 5 but not age 18 for the most recent fiscal year
ending before such calendar year, except that no
State shall receive less than 0.5 percent of any such
limitation. The limitation amounts allocated 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) 
ALLOCATIONS
TO
CERTAIN
POSSES-
SIONS.—The amounts to be allocated under para-
graph (1) to any possession of the United States
other than Puerto Rico shall be the amounts 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 amounts to be allo-
cated under paragraph (1) shall be reduced by the
aggregate amount allocated under this paragraph to
possessions of the United States.
‘‘(3) ALLOCATIONS FOR INDIAN SCHOOLS.—
‘‘(A) SCHOOL
CONSTRUCTION.—In addi-
tion to the amounts otherwise allocated under
this subsection, $16,000,000 for each of cal-
endar years 2002 through 2006 shall be allo-
cated by the Secretary of the Interior for pur-
poses of the construction of schools funded by
the Bureau of Indian Affairs.
‘‘(B) SCHOOL
REHABILITATION, REPAIR,
OR
MODERNIZATION.—In 
addition 
to 
the
amounts otherwise allocated under this sub-
section, $78,000,000 for each of calendar years
2002 through 2006 shall be allocated by the
Secretary of the Interior for purposes of the re-
habilitation, 
repair, 
and 
modernization 
of
schools funded by the Bureau of Indian Affairs.
‘‘(C) TREATMENT OF INDIAN TRIBAL GOV-
ERNMENTS.—In the case of amounts allocated
under this paragraph, Indian tribal govern-
ments (as defined in section 7871) shall be
treated as qualified issuers for purposes of this
subchapter.
‘‘(4) 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) ensure that the needs of both
rural and urban areas will be recognized,
‘‘(ii) 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,
‘‘(iii) use its allocations under this
subsection to assist localities that lack the
fiscal capacity to issue bonds on their own,
and
‘‘(iv) ensure that its allocations under
this subsection are used only to supple-
ment, and not supplant, the amount of
school construction, rehabilitation, repair,
and modernization in the State that would
have occurred in the absence of such allo-
cation.
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) 40 PERCENT
OF LIMITATIONS ALLOCATED
AMONG LARGEST SCHOOL DISTRICTS.—
‘‘(1) IN GENERAL.—40 percent of each of the
limitations applicable under subsection (c) for any
calendar year shall be allocated under paragraph (2)
by the Secretary among local educational agencies
which are large local educational agencies for such
year. No qualified school modernization bond may be
‘‘(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)
‘‘(f) CARRYOVER OF UNUSED LIMITATION.—If for
any calendar year—
‘‘(1) any 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)(3) 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.
‘‘(2) BINDING COMMITMENT REQUIREMENT.—
Paragraph (1) shall apply to an issue only if, as of
the date of issuance, there is a reasonable expecta-
tion that—
‘‘(A) at least 10 percent of the proceeds of
the issue will be spent within the 6-month pe-
riod beginning on such date for the purpose for
which such issue was issued, and
‘‘(B) the remaining proceeds of the issue
will be spent with due diligence for such pur-
pose.
‘‘(3) EARNINGS ON PROCEEDS.—Any earnings
on proceeds during the temporary period shall be
treated as proceeds of the issue for purposes of ap-
plying subsection (a)(1) and paragraph (1) of this
subsection.’’.
(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
1400K(f) and such amounts shall be treated as
paid on the credit allowance date (as defined in
section 1400K(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) CONFORMING AMENDMENTS.—
(1) Subchapter U of chapter 1 of such Code is
amended by striking part IV, by redesignating part
V as part IV, and by redesignating section 1397F
as section 1397E.
(2) The table of subchapters for chapter 1 of
such Code is amended by adding at the end the fol-
lowing new item:
‘‘Subchapter XI. Public school modernization provisions.’’
(3) The table of parts of subchapter U of chap-
ter 1 of such Code is amended by striking the last
2 items and inserting the following item:
‘‘Part IV. Regulations.’’
(d) EFFECTIVE DATES.—
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by
this section shall apply to obligations issued after
December 31, 2001.
(2) REPEAL OF RESTRICTION ON ZONE ACAD-
EMY
BOND
HOLDERS.—In the case of bonds to
which section 1397E of the Internal Revenue Code
of 1986 (as in effect before the date of the enact-
ment of this Act) applies, the limitation of such sec-
tion to eligible taxpayers (as defined in subsection
(d)(6) of such section) shall not apply after the date
of the enactment of this Act.
SEC. 5. APPLICATION OF CERTAIN LABOR STANDARDS ON
CONSTRUCTION 
PROJECTS 
FINANCED
UNDER PUBLIC SCHOOL MODERNIZATION
PROGRAM.
Section 439 of the General Education Provisions Act
(relating to labor standards) is amended—
(1) by inserting ‘‘(a)’’ before ‘‘All laborers and
mechanics’’, and
(2) by adding at the end the following:
‘‘(b)(1) For purposes of this section, the term ‘appli-
cable program’ also includes the qualified zone academy
bond provisions enacted by section 226 of the Taxpayer
Relief Act of 1997 and the program established by section
4 of the Federal School Construction Act of 2001.
‘‘(2) A State or local government participating in a
program described in paragraph (1) shall—
‘‘(A) in the awarding of contracts, give priority
to contractors with substantial numbers of employ-
ees residing in the local education area to be served
by the school being constructed; and
‘‘(B) include in the construction contract for
such school a requirement that the contractor give
priority in hiring new workers to individuals residing
in such local education area.
‘‘(3) In the case of a program described in paragraph
(1), nothing in this subsection or subsection (a) shall be
construed to deny any tax credit allowed under such pro-
gram. If amounts are required to be withheld from con-
tractors to pay wages to which workers are entitled, such
amounts shall be treated as expended for construction pur-
poses in determining whether the requirements of such
program are met.’’.
SEC. 6. EMPLOYMENT AND TRAINING ACTIVITIES RELAT-
ING TO CONSTRUCTION OR RECONSTRUC-
TION OF PUBLIC SCHOOL FACILITIES.
(a) IN GENERAL.—Section 134 of the Workforce In-
vestment Act of 1998 (29 U.S.C. 2864) is amended by
adding at the end the following:
‘‘(f) LOCAL EMPLOYMENT AND TRAINING ACTIVI-
TIES RELATING TO CONSTRUCTION OR RECONSTRUCTION
OF PUBLIC SCHOOL FACILITIES.—
‘‘(1) IN GENERAL.—In order to provide training
services related to construction or reconstruction of
public school facilities receiving funding assistance
under an applicable program, each State shall estab-
lish a specialized program of training meeting the
following requirements:
‘‘(A) The specialized program provides
training for jobs in the construction industry.
‘‘(B) The program provides trained work-
ers for projects for the construction or recon-
struction of public school facilities receiving
funding assistance under an applicable pro-
gram.
‘‘(C) The program ensures that skilled
workers (residing in the area to be served by
the school facilities) will be available for the
construction or reconstruction work.
‘‘(2) COORDINATION.—The specialized program
established under paragraph (1) shall be integrated
with other activities under this Act, with the activi-
ties carried out under the National Apprenticeship
Act of 1937 by the State Apprenticeship Council or
through the Bureau of Apprenticeship and Training
in the Department of Labor, as appropriate, and
with activities carried out under the Carl D. Perkins
Vocational and Technical Education Act of 1998.
Nothing in this subsection shall be construed to re-
quire services duplicative of those referred to in the
preceding sentence.
‘‘(3) APPLICABLE
PROGRAM.—In this sub-
section, the term ‘applicable program’ has the mean-
ing given the term in section 439(b) of the General
Education Provisions Act (relating to labor stand-
ards).’’.
(b) STATE PLAN.—Section 112(b)(17)(A) of the
Workforce 
Investment 
Act 
of 
1998 
(29 
U.S.C.
2822(b)(17)(A)) is amended—
(1) in clause (iii), by striking ‘‘and’’ at the end;
(2) by redesignating clause (iv) as clause (v);
and
(3) by inserting after clause (iii) the following:
‘‘(iv) how the State will establish and
carry out a specialized program of training
under section 134(f); and’’.
Æ