I
105TH CONGRESS
2D SESSION
H. R. 3652
To amend the Internal Revenue Code of 1986 to provide a source of interest-
free capital, in addition to that recommended in the President’s budget
proposal, for the construction and renovation of public schools in States
experiencing large increases in public school enrollment.
IN THE HOUSE OF REPRESENTATIVES
APRIL 1, 1998
Mr. ETHERIDGE (for himself, Mr. PRICE of North Carolina, Mr. RANGEL, Mr.
MCINTYRE, Mr. FROST, Mr. LEWIS of Georgia, Mr. NEAL of Massachu-
setts, Mr. DOOLEY of California, Mr. MCGOVERN, Mrs. THURMAN, Mr.
FAZIO of California, Mr. PALLONE, Mr. HEFNER, Mrs. MEEK of Florida,
Ms. SANCHEZ, Mr. MATSUI, Mrs. CLAYTON, Ms. CARSON, Mrs.
TAUSCHER, Mr. WATT of North Carolina, Mr. BROWN of California, Mr.
DELAHUNT, Ms. PELOSI, Mr. STENHOLM, and Mr. MORAN of Virginia)
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 provide
a source of interest-free capital, in addition to that rec-
ommended in the President’s budget proposal, for the
construction and renovation of public schools in States
experiencing large increases in public school enrollment.
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 ‘‘School Construction
Act of 1998’’.
SEC. 2. INCENTIVES FOR PUBLIC SCHOOL CONSTRUCTION.
(a) IN GENERAL.—Part IV of subchapter A of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
credits against tax) is amended by inserting after subpart
G the following new subpart:
‘‘Subpart H—Credit to Holders of Qualified Public
School Construction Bonds.
‘‘Sec. 54. Credit to holders of qualified public school construction
bonds.
‘‘Sec. 54A. Qualified public school construction bonds.
‘‘SEC. 54. CREDIT TO HOLDERS OF QUALIFIED PUBLIC
SCHOOL CONSTRUCTION BONDS.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of a tax-
payer who holds a qualified public school construction
bond on the credit allowance date of such bond which oc-
curs 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.—
‘‘(1) IN GENERAL.—The amount of the credit
determined under this subsection with respect to any
qualified public school construction bond is the
amount equal to the product of—
‘‘(A) the credit rate determined by the Sec-
retary under paragraph (2) for the month in
which such bond was issued, multiplied by
‘‘(B) the face amount of the bond held by
the taxpayer on the credit allowance date.
‘‘(2) DETERMINATION.—During each calendar
month, the Secretary shall determine a credit rate
which shall apply to bonds issued during the follow-
ing calendar month. The credit rate for any month
is the percentage which the Secretary estimates will
on average permit the issuance of qualified public
school construction bonds without discount and with-
out interest cost to the issuer.
‘‘(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 this part (other than subpart 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) DEFINITIONS.—For purposes of this subpart—
‘‘(1) CREDIT
ALLOWANCE
DATE.—The term
‘credit allowance date’ means, with respect to any
issue, the last day of the 1-year period beginning on
the date of issuance of such issue and the last day
of each successive 1-year period thereafter.
‘‘(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 any stadium
or other facility primarily used for athletic contests
or exhibitions or other events for which admission is
charged to the general public.
‘‘(e) 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.
‘‘(f) BONDS HELD BY REGULATED INVESTMENT
COMPANIES.—If any qualified public school construction
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. 54A. QUALIFIED PUBLIC SCHOOL CONSTRUCTION
BONDS.
‘‘(a) QUALIFIED PUBLIC SCHOOL CONSTRUCTION
BOND.—For purposes of this subpart—
‘‘(1) IN GENERAL.—The term ‘qualified public
school construction 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 the construction,
rehabilitation, or repair of a public school facil-
ity,
‘‘(B) the bond is issued by a State or local
government within the jurisdiction of which
such school is located,
‘‘(C) the issuer designates such bond for
purposes of this section, and
‘‘(D) the term of each bond which is part
of such issue does not exceed 15 years.
‘‘(3) 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 priority to localities experi-
encing the largest increases in enrollment,
‘‘(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) 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. 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 CONSTRUCTION BONDS.—
‘‘(A) IN GENERAL.—For purposes of sub-
section (a), the term ‘interest’ includes amounts
includible in gross income under section 54(e)
and such amounts shall be treated as paid on
the credit allowance date (as defined in section
54(d)(1)).
‘‘(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 AMENDMENT.—The table of subparts
for part IV of subchapter A of chapter 1 of such Code
is amended by adding at the end the following new item:
‘‘Subpart H. Credit to holders of qualified public school construc-
tion bonds.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to obligations issued after Decem-
ber 31, 1998.
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