308 
HR 1 PP 
(1) The heading for subsection (k) of section 
168 is amended by striking ‘‘JANUARY 1, 2009’’ and 
inserting ‘‘JANUARY 1, 2010’’. 
(2) The heading for clause (ii) of section 
168(k)(2)(B) is amended by striking ‘‘PRE-JANUARY 
1, 2009’’ and inserting ‘‘PRE-JANUARY 1, 2010’’. 
(3) Subparagraph (D) of section 168(k)(4) is 
amended— 
(A) by striking ‘‘and’’ at the end of clause 
(i), 
(B) by redesignating clause (ii) as clause 
(v), and 
(C) by inserting after clause (i) the fol-
lowing new clauses: 
‘‘(ii) ‘April 1, 2008’ shall be sub-
stituted for ‘January 1, 2008’ in subpara-
graph (A)(iii)(I) thereof, 
‘‘(iii) ‘January 1, 2009’ shall be sub-
stituted for ‘January 1, 2010’ each place it 
appears, 
‘‘(iv) ‘January 1, 2010’ shall be sub-
stituted for ‘January 1, 2011’ in subpara-
graph (A)(iv) thereof, and’’. 
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HR 1 PP 
(4) Subparagraph (B) of section 168(l)(5) is 
amended by striking ‘‘January 1, 2009’’ and insert-
ing ‘‘January 1, 2010’’. 
(5) Subparagraph (B) of section 1400N(d)(3) 
is amended by striking ‘‘January 1, 2009’’ and in-
serting ‘‘January 1, 2010’’. 
(c) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to property placed in service after De-
cember 31, 2008, in taxable years ending after such 
date. 
(2)
TECHNICAL
AMENDMENT.—Section 
168(k)(4)(D)(ii) of the Internal Revenue Code of 
1986, as added by subsection (b)(3)(C), shall apply 
to taxable years ending after March 31, 2008. 
SEC. 1402. TEMPORARY INCREASE IN LIMITATIONS ON EX-
PENSING OF CERTAIN DEPRECIABLE BUSI-
NESS ASSETS. 
(a) IN GENERAL.—Paragraph (7) of section 179(b) 
is amended— 
(1) by striking ‘‘2008’’ and inserting ‘‘2008, or 
2009’’, and 
(2) by striking ‘‘2008’’ in the heading thereof 
and inserting ‘‘2008, AND 2009’’. 
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HR 1 PP 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2008. 
PART 2—5-YEAR CARRYBACK OF OPERATING 
LOSSES 
SEC. 1411. 5-YEAR CARRYBACK OF OPERATING LOSSES. 
(a) IN GENERAL.—Subparagraph (H) of section 
172(b)(1) is amended to read as follows: 
‘‘(H) CARRYBACK FOR 2008 AND 2009 NET 
OPERATING LOSSES.— 
‘‘(i) IN GENERAL.—In the case of an 
applicable 2008 or 2009 net operating loss 
with respect to which the taxpayer has 
elected the application of this subpara-
graph— 
‘‘(I) such net operating loss shall 
be reduced by 10 percent of such loss 
(determined without regard to this 
subparagraph), 
‘‘(II) subparagraph (A)(i) shall 
be applied by substituting any whole 
number elected by the taxpayer which 
is more than 2 and less than 6 for ‘2’, 
‘‘(III) subparagraph (E)(ii) shall 
be applied by substituting the whole 
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HR 1 PP 
number which is one less than the 
whole number substituted under sub-
clause (II) for ‘2’, and 
‘‘(IV) subparagraph (F) shall not 
apply. 
‘‘(ii) APPLICABLE 2008 OR 2009 NET 
OPERATING
LOSS.—For purposes of this 
subparagraph, the term ‘applicable 2008 
or 2009 net operating loss’ means— 
‘‘(I) the taxpayer’s net operating 
loss for any taxable year ending in 
2008 or 2009, or 
‘‘(II) if the taxpayer elects to 
have this subclause apply in lieu of 
subclause (I), the taxpayer’s net oper-
ating loss for any taxable year begin-
ning in 2008 or 2009. 
‘‘(iii) ELECTION.—Any election under 
this subparagraph shall be made in such 
manner as may be prescribed by the Sec-
retary, and shall be made by the due date 
(including extension of time) for filing the 
taxpayer’s return for the taxable year of 
the net operating loss. Any such election, 
once made, shall be irrevocable. 
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HR 1 PP 
‘‘(iv)
COORDINATION
WITH
ALTER-
NATIVE TAX NET OPERATING LOSS DEDUC-
TION.—In the case of a taxpayer who 
elects to have clause (ii)(II) apply, section 
56(d)(1)(A)(ii) shall be applied by sub-
stituting ‘ending during 2001 or 2002 or 
beginning during 2008 or 2009’ for ‘end-
ing during 2001, 2002, 2008, or 2009’.’’. 
(b) ALTERNATIVE TAX NET OPERATING LOSS DE-
DUCTION.—Subclause (I) of section 56(d)(1)(A)(ii) is 
amended to read as follows: 
‘‘(I) the amount of such deduc-
tion
attributable
to
the
sum
of 
carrybacks
of
net
operating
losses 
from
taxable
years
ending
during 
2001,
2002,
2008,
or
2009
and 
carryovers of net operating losses to 
such taxable years, or’’. 
(c) LOSS FROM OPERATIONS OF LIFE INSURANCE 
COMPANIES.—Subsection (b) of section 810 is amended 
by adding at the end the following new paragraph: 
‘‘(4) CARRYBACK FOR 2008 AND 2009 LOSSES.— 
‘‘(A) IN GENERAL.—In the case of an ap-
plicable 2008 or 2009 loss from operations with 
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HR 1 PP 
respect to which the taxpayer has elected the 
application of this paragraph— 
‘‘(i) such loss from operations shall be 
reduced by 10 percent of such loss (deter-
mined without regard to this paragraph), 
and 
‘‘(ii) paragraph (1)(A) shall be ap-
plied, at the election of the taxpayer, by 
substituting ‘5’ or ‘4’ for ‘3’. 
‘‘(B) APPLICABLE 2008 OR 2009 LOSS FROM 
OPERATIONS.—For purposes of this paragraph, 
the term ‘applicable 2008 or 2009 loss from op-
erations’ means— 
‘‘(i) the taxpayer’s loss from oper-
ations for any taxable year ending in 2008 
or 2009, or 
‘‘(ii) if the taxpayer elects to have this 
clause apply in lieu of clause (i), the tax-
payer’s loss from operations for any tax-
able year beginning in 2008 or 2009. 
‘‘(C) ELECTION.—Any election under this 
paragraph shall be made in such manner as 
may be prescribed by the Secretary, and shall 
be made by the due date (including extension of 
time) for filing the taxpayer’s return for the 
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HR 1 PP 
taxable year of the loss from operations. Any 
such election, once made, shall be irrevocable. 
‘‘(D) COORDINATION WITH ALTERNATIVE 
TAX NET OPERATING LOSS DEDUCTION.—In the 
case of a taxpayer who elects to have subpara-
graph (B)(ii) apply, section 56(d)(1)(A)(ii) shall 
be applied by substituting ‘ending during 2001 
or 2002 or beginning during 2008 or 2009’ for 
‘ending during 2001, 2002, 2008, or 2009’.’’. 
(d)
CONFORMING
AMENDMENT.—Section
172
is 
amended by striking subsection (k). 
(e) EFFECTIVE DATE.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to net operating losses aris-
ing in taxable years ending after December 31, 
2007. 
(2) ALTERNATIVE TAX NET OPERATING LOSS 
DEDUCTION.—The amendment made by subsection 
(b) shall apply to taxable years ending after 1997. 
(3) LOSS FROM OPERATIONS OF LIFE INSUR-
ANCE COMPANIES.—The amendment made by sub-
section (d) shall apply to losses from operations aris-
ing in taxable years ending after December 31, 
2007. 
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315 
HR 1 PP 
(4) TRANSITIONAL RULE.—In the case of a net 
operating loss (or, in the case of a life insurance 
company, a loss from operations) for a taxable year 
ending before the date of the enactment of this 
Act— 
(A)
any
election
made
under
section 
172(b)(3) or 810(b)(3) of the Internal Revenue 
Code of 1986 with respect to such loss may 
(notwithstanding such section) be revoked be-
fore the applicable date, 
(B)
any
election
made
under
section 
172(b)(1)(H) or 810(b)(4) of such Code with 
respect to such loss shall (notwithstanding such 
section) be treated as timely made if made be-
fore the applicable date, and 
(C) any application under section 6411(a) 
of such Code with respect to such loss shall be 
treated as timely filed if filed before the appli-
cable date. 
For purposes of this paragraph, the term ‘‘applica-
ble date’’ means the date which is 60 days after the 
date of the enactment of this Act. 
SEC. 1412. EXCEPTION FOR TARP RECIPIENTS. 
The amendments made by this part shall not apply 
to— 
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HR 1 PP 
(1) any taxpayer if— 
(A) the Federal Government acquires, at 
any time, an equity interest in the taxpayer 
pursuant to the Emergency Economic Stabiliza-
tion Act of 2008, or 
(B) the Federal Government acquires, at 
any time, any warrant (or other right) to ac-
quire any equity interest with respect to the 
taxpayer pursuant to such Act, 
(2) the Federal National Mortgage Association 
and the Federal Home Loan Mortgage Corporation, 
and 
(3) any taxpayer which at any time in 2008 or 
2009 is a member of the same affiliated group (as 
defined in section 1504 of the Internal Revenue 
Code of 1986, determined without regard to sub-
section (b) thereof) as a taxpayer described in para-
graph (1) or (2). 
PART 3—INCENTIVES FOR NEW JOBS 
SEC. 1421. INCENTIVES TO HIRE UNEMPLOYED VETERANS 
AND DISCONNECTED YOUTH. 
(a) IN GENERAL.—Subsection (d) of section 51 is 
amended by adding at the end the following new para-
graph: 
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HR 1 PP 
‘‘(14)
CREDIT
ALLOWED
FOR
UNEMPLOYED 
VETERANS
AND
DISCONNECTED
YOUTH
HIRED
IN 
2009 OR 2010.— 
‘‘(A) IN GENERAL.—Any unemployed vet-
eran or disconnected youth who begins work for 
the employer during 2009 or 2010 shall be 
treated as a member of a targeted group for 
purposes of this subpart. 
‘‘(B) DEFINITIONS.—For purposes of this 
paragraph— 
‘‘(i)
UNEMPLOYED
VETERAN.—The 
term ‘unemployed veteran’ means any vet-
eran (as defined in paragraph (3)(B), de-
termined
without
regard
to
clause
(ii) 
thereof) who is certified by the designated 
local agency as— 
‘‘(I) having been discharged or 
released
from
active
duty
in
the 
Armed Forces during 2008, 2009, or 
2010, and 
‘‘(II) being in receipt of unem-
ployment compensation under State or 
Federal law for not less than 4 weeks 
during the 1-year period ending on 
the hiring date. 
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HR 1 PP 
‘‘(ii)
DISCONNECTED
YOUTH.—The 
term ‘disconnected youth’ means any indi-
vidual who is certified by the designated 
local agency— 
‘‘(I) as having attained age 16 
but not age 25 on the hiring date, 
‘‘(II) as not regularly attending 
any secondary, technical, or post-sec-
ondary school during the 6-month pe-
riod preceding the hiring date, 
‘‘(III) as not regularly employed 
during such 6-month period, and 
‘‘(IV) as not readily employable 
by reason of lacking a sufficient num-
ber of basic skills.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to individuals who begin work for 
the employer after December 31, 2008. 
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HR 1 PP 
PART 4—CLARIFICATION OF REGULATIONS RE-
LATED TO LIMITATIONS ON CERTAIN BUILT- 
IN
LOSSES
FOLLOWING
AN
OWNERSHIP 
CHANGE 
SEC. 1431. CLARIFICATION OF REGULATIONS RELATED TO 
LIMITATIONS ON CERTAIN BUILT-IN LOSSES 
FOLLOWING AN OWNERSHIP CHANGE. 
(a) FINDINGS.—Congress finds as follows: 
(1) The delegation of authority to the Secretary 
of the Treasury under section 382(m) of the Inter-
nal Revenue Code of 1986 does not authorize the 
Secretary to provide exemptions or special rules that 
are restricted to particular industries or classes of 
taxpayers. 
(2) Internal Revenue Service Notice 2008–83 is 
inconsistent with the congressional intent in enact-
ing such section 382(m). 
(3) The legal authority to prescribe Internal 
Revenue Service Notice 2008–83 is doubtful. 
(4) However, as taxpayers should generally be 
able to rely on guidance issued by the Secretary of 
the Treasury legislation is necessary to clarify the 
force and effect of Internal Revenue Service Notice 
2008–83 and restore the proper application under 
the Internal Revenue Code of 1986 of the limitation 
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on built-in losses following an ownership change of 
a bank. 
(b) DETERMINATION OF FORCE AND EFFECT OF IN-
TERNAL REVENUE SERVICE NOTICE 2008–83 EXEMPT-
ING BANKS FROM LIMITATION ON CERTAIN BUILT–IN 
LOSSES FOLLOWING OWNERSHIP CHANGE.— 
(1) IN
GENERAL.—Internal Revenue Service 
Notice 2008–83— 
(A) shall be deemed to have the force and 
effect of law with respect to any ownership 
change (as defined in section 382(g) of the In-
ternal Revenue Code of 1986) occurring on or 
before January 16, 2009, and 
(B) shall have no force or effect with re-
spect to any ownership change after such date. 
(2)
BINDING
CONTRACTS.—Notwithstanding 
paragraph (1), Internal Revenue Service Notice 
2008–83 shall have the force and effect of law with 
respect to any ownership change (as so defined) 
which
occurs
after
January
16,
2009
if
such 
change— 
(A) is pursuant to a written binding con-
tract entered into on or before such date, or 
(B) is pursuant to a written agreement en-
tered into on or before such date and such 
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agreement was described on or before such date 
in a public announcement or in a filing with the 
Securities and Exchange Commission required 
by reason of such ownership change. 
Subtitle F—Fiscal Relief for State 
and Local Governments 
PART 1—IMPROVED MARKETABILITY FOR TAX- 
EXEMPT BONDS 
SEC. 1501. DE MINIMIS SAFE HARBOR EXCEPTION FOR TAX- 
EXEMPT INTEREST EXPENSE OF FINANCIAL 
INSTITUTIONS. 
(a) IN GENERAL.—Subsection (b) of section 265 is 
amended by adding at the end the following new para-
graph: 
‘‘(7)
DE
MINIMIS
EXCEPTION
FOR
BONDS 
ISSUED DURING 2009 OR 2010.— 
‘‘(A) IN GENERAL.—In applying paragraph 
(2)(A), there shall not be taken into account 
tax-exempt obligations issued during 2009 or 
2010. 
‘‘(B) LIMITATION.—The amount of tax-ex-
empt obligations not taken into account by rea-
son of subparagraph (A) shall not exceed 2 per-
cent of the amount determined under para-
graph (2)(B). 
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‘‘(C) REFUNDINGS.—For purposes of this 
paragraph, a refunding bond (whether a current 
or advance refunding) shall be treated as issued 
on the date of the issuance of the refunded 
bond (or in the case of a series of refundings, 
the original bond).’’. 
(b) TREATMENT AS FINANCIAL INSTITUTION PREF-
ERENCE ITEM.—Clause (iv) of section 291(e)(1)(B) is 
amended by adding at the end the following: ‘‘That por-
tion of any obligation not taken into account under para-
graph (2)(A) of section 265(b) by reason of paragraph (7) 
of such section shall be treated for purposes of this section 
as having been acquired on August 7, 1986.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to obligations issued after Decem-
ber 31, 2008. 
SEC. 1502. MODIFICATION OF SMALL ISSUER EXCEPTION 
TO TAX-EXEMPT INTEREST EXPENSE ALLOCA-
TION RULES FOR FINANCIAL INSTITUTIONS. 
(a) IN GENERAL.—Paragraph (3) of section 265(b) 
(relating to exception for certain tax-exempt obligations) 
is amended by adding at the end the following new sub-
paragraph: 
‘‘(G) SPECIAL
RULES
FOR
OBLIGATIONS 
ISSUED DURING 2009 AND 2010.— 
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‘‘(i)
INCREASE
IN
LIMITATION.—In 
the case of obligations issued during 2009 
or 2010, subparagraphs (C)(i), (D)(i), and 
(D)(iii)(II) shall each be applied by sub-
stituting ‘$30,000,000’ for ‘$10,000,000’. 
‘‘(ii)
QUALIFIED
501(C)(3)
BONDS 
TREATED AS ISSUED BY EXEMPT ORGANI-
ZATION.—In
the
case
of
a
qualified 
501(c)(3) bond (as defined in section 145) 
issued during 2009 or 2010, this para-
graph shall be applied by treating the 
501(c)(3) organization for whose benefit 
such bond was issued as the issuer. 
‘‘(iii) SPECIAL RULE FOR QUALIFIED 
FINANCINGS.—In the case of a qualified fi-
nancing
issue
issued
during
2009
or 
2010— 
‘‘(I) subparagraph (F) shall not 
apply, and 
‘‘(II) any obligation issued as a 
part of such issue shall be treated as 
a qualified tax-exempt obligation if 
the requirements of this paragraph 
are met with respect to each qualified 
portion of the issue (determined by 
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treating each qualified portion as a 
separate issue issued by the qualified 
borrower with respect to which such 
portion relates). 
‘‘(iv) QUALIFIED FINANCING ISSUE.— 
For purposes of this subparagraph, the 
term ‘qualified financing issue’ means any 
composite, pooled, or other conduit financ-
ing issue the proceeds of which are used 
directly or indirectly to make or finance 
loans to one or more ultimate borrowers 
each of whom is a qualified borrower. 
‘‘(v) QUALIFIED PORTION.—For pur-
poses
of
this
subparagraph,
the
term 
‘qualified portion’ means that portion of 
the proceeds which are used with respect 
to each qualified borrower under the issue. 
‘‘(vi)
QUALIFIED
BORROWER.—For 
purposes of this subparagraph, the term 
‘qualified
borrower’
means
a
borrower 
which is a State or political subdivision 
thereof or an organization described in sec-
tion 501(c)(3) and exempt from taxation 
under section 501(a).’’. 
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HR 1 PP 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to obligations issued after Decem-
ber 31, 2008. 
SEC. 1503. TEMPORARY MODIFICATION OF ALTERNATIVE 
MINIMUM TAX LIMITATIONS ON TAX-EXEMPT 
BONDS. 
(a) INTEREST ON PRIVATE ACTIVITY BONDS ISSUED 
DURING 2009 AND 2010 NOT TREATED AS TAX PREF-
ERENCE ITEM.—Subparagraph (C) of section 57(a)(5) is 
amended by adding at the end a new clause: 
‘‘(vi) EXCEPTION FOR BONDS ISSUED 
IN 2009 AND 2010.—For purposes of clause 
(i), the term ‘private activity bond’ shall 
not include any bond issued after Decem-
ber 31, 2008, and before January 1, 2011. 
For purposes of the preceding sentence, a 
refunding bond (whether a current or ad-
vance refunding) shall be treated as issued 
on the date of the issuance of the refunded 
bond
(or
in
the
case
of
a
series
of 
refundings, the original bond).’’. 
(b)
NO
ADJUSTMENT
TO
ADJUSTED
CURRENT 
EARNINGS
FOR
INTEREST
ON
TAX-EXEMPT
BONDS 
ISSUED AFTER 2008.—Subparagraph (B) of section 
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56(g)(4) is amended by adding at the end the following 
new clause: 
‘‘(iv)
TAX
EXEMPT
INTEREST
ON 
BONDS ISSUED IN 2009 AND 2010.—Clause 
(i) shall not apply in the case of any inter-
est on a bond issued after December 31, 
2008, and before January 1, 2011. For 
purposes of the preceding sentence, a re-
funding bond (whether a current or ad-
vance refunding) shall be treated as issued 
on the date of the issuance of the refunded 
bond
(or
in
the
case
of
a
series
of 
refundings, the original bond).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to obligations issued after Decem-
ber 31, 2008. 
PART 2—TAX CREDIT BONDS FOR SCHOOLS 
SEC. 1511. QUALIFIED SCHOOL CONSTRUCTION BONDS. 
(a) IN GENERAL.—Subpart I of part IV of sub-
chapter A of chapter 1 is amended by adding at the end 
the following new section: 
‘‘SEC. 54F. QUALIFIED SCHOOL CONSTRUCTION BONDS. 
‘‘(a) QUALIFIED SCHOOL CONSTRUCTION BOND.— 
For purposes of this subchapter, the term ‘qualified school 
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construction bond’ means any bond issued as part of an 
issue if— 
‘‘(1) 100 percent of the available project pro-
ceeds of such issue are to be used for the construc-
tion, rehabilitation, or repair of a public school facil-
ity or for the acquisition of land on which such a fa-
cility 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, and 
‘‘(3) the issuer designates such bond for pur-
poses of this section. 
‘‘(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)(4)) or is issuing 
on behalf of such an agency, the limitation amount 
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allocated 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) $11,000,000,000 for 2009, 
‘‘(2) $11,000,000,000 for 2010, and 
‘‘(3) except as provided in subsection (f), zero 
after 2010. 
‘‘(d)
PERCENT
OF
LIMITATION
ALLOCATED 
AMONG STATES.— 
‘‘(1) IN GENERAL.—60 percent of the limitation 
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. The limitation amount allocated to a 
State under the preceding sentence shall be allocated 
by the State to issuers within such State. 
‘‘(2) MINIMUM ALLOCATIONS TO STATES.— 
‘‘(A) IN
GENERAL.—The Secretary shall 
adjust the allocations under this subsection for 
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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 subsection (e) to large local edu-
cational agencies in such State for such 
year, 
is not less than an amount equal to such 
State’s adjusted minimum percentage of the 
amount to be allocated under paragraph (1) for 
the calendar year. 
‘‘(B) ADJUSTED MINIMUM PERCENTAGE.— 
A State’s adjusted minimum percentage for any 
calendar year is the product of— 
‘‘(i)
the
minimum
percentage
de-
scribed in section 1124(d) of the Elemen-
tary and Secondary Education Act of 1965 
(20 U.S.C. 6334(d)) for such State for the 
most recent fiscal year ending before such 
calendar year, multiplied by 
‘‘(ii) 1.68. 
‘‘(3)
ALLOCATIONS
TO
CERTAIN
POSSES-
SIONS.—The amount to be allocated under para-
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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. 
‘‘(4) ALLOCATIONS FOR INDIAN SCHOOLS.—In 
addition to the amounts otherwise allocated under 
this subsection, $200,000,000 for calendar year 
2009, and $200,000,000 for calendar year 2010, 
shall be allocated by the Secretary of the Interior for 
purposes of the construction, rehabilitation, and re-
pair of schools funded by the Bureau of Indian Af-
fairs. In the case of amounts allocated under the 
preceding sentence, Indian tribal governments (as 
defined in section 7701(a)(40)) shall be treated as 
qualified issuers for purposes of this subchapter. 
‘‘(e)
PERCENT
OF
LIMITATION
ALLOCATED 
AMONG LARGEST SCHOOL DISTRICTS.— 
‘‘(1) IN GENERAL.—40 percent of the limitation 
applicable under subsection (c) for any calendar year 
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shall be allocated under paragraph (2) by the Sec-
retary among local educational agencies which are 
large local educational agencies for such year. 
‘‘(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) ALLOCATION OF UNUSED LIMITATION TO 
STATE.—The amount allocated under this subsection 
to a large local educational agency for any calendar 
year may be reallocated by such agency to the State 
in which such agency is located for such calendar 
year. Any amount reallocated to a State under the 
preceding sentence may be allocated as provided in 
subsection (d)(1). 
‘‘(4) 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 if such 
agency is— 
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‘‘(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. 
‘‘(f) 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 
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by the amount of such excess. A similar rule shall apply 
to the amounts allocated under subsection (d)(4) or (e).’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Paragraph (1) of section 54A(d) is amended 
by striking ‘‘or’’ at the end of subparagraph (C), by 
inserting ‘‘or’’ at the end of subparagraph (D), and 
by inserting after subparagraph (D) the following 
new subparagraph: 
‘‘(E)
a
qualified
school
construction 
bond,’’. 
(2) Subparagraph (C) of section 54A(d)(2) is 
amended by striking ‘‘and’’ at the end of clause (iii), 
by striking the period at the end of clause (iv) and 
inserting ‘‘, and’’, and by adding at the end the fol-
lowing new clause: 
‘‘(v) in the case of a qualified school 
construction bond, a purpose specified in 
section 54F(a)(1).’’. 
(3) The table of sections for subpart I of part 
IV of subchapter A of chapter 1 is amended by add-
ing at the end the following new item: 
‘‘Sec. 54F. Qualified school construction bonds.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to obligations issued after Decem-
ber 31, 2008. 
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SEC.
1512.
EXTENSION
AND
EXPANSION
OF
QUALIFIED 
ZONE ACADEMY BONDS. 
(a) IN GENERAL.—Section 54E(c)(1) is amended by 
striking ‘‘and 2009’’ and inserting ‘‘and $1,400,000,000 
for 2009 and 2010’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to obligations issued after Decem-
ber 31, 2008. 
PART 3—TAXABLE BOND OPTION FOR 
GOVERNMENTAL BONDS 
SEC. 1521. TAXABLE BOND OPTION FOR GOVERNMENTAL 
BONDS. 
(a) IN GENERAL.—Part IV of subchapter A of chap-
ter 1 is amended by adding at the end the following new 
subpart: 
‘‘Subpart J—Taxable Bond Option for Governmental 
Bonds 
‘‘Sec. 54AA. Taxable bond option for governmental bonds. 
‘‘SEC. 54AA. TAXABLE BOND OPTION FOR GOVERNMENTAL 
BONDS. 
‘‘(a) IN GENERAL.—If a taxpayer holds a taxable 
governmental bond on one or more interest payment dates 
of the bond during any taxable year, there shall be allowed 
as a credit against the tax imposed by this chapter for 
the taxable year an amount equal to the sum of the credits 
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determined under subsection (b) with respect to such 
dates. 
‘‘(b) AMOUNT OF CREDIT.—The amount of the credit 
determined under this subsection with respect to any in-
terest payment date for a taxable governmental bond is 
35 percent of the amount of interest payable by the issuer 
with respect to such date. 
‘‘(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 and this 
subpart). 
‘‘(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 (determined be-
fore the application of paragraph (1) for such suc-
ceeding taxable year). 
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‘‘(d) TAXABLE GOVERNMENTAL BOND.— 
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘taxable governmental bond’ means 
any obligation (other than a private activity bond) 
if— 
‘‘(A) the interest on such obligation would 
(but for this section) be excludable from gross 
income under section 103, and 
‘‘(B) the issuer makes an irrevocable elec-
tion to have this section apply. 
‘‘(2) APPLICABLE RULES.—For purposes of ap-
plying paragraph (1)— 
‘‘(A) a taxable governmental bond shall not 
be treated as federally guaranteed by reason of 
the credit allowed under subsection (a) or sec-
tion 6432, 
‘‘(B) the yield on a taxable governmental 
bond shall be determined without regard to the 
credit allowed under subsection (a), and 
‘‘(C) a bond shall not be treated as a tax-
able governmental bond if the issue price has 
more than a de minimis amount (determined 
under rules similar to the rules of section 
1273(a)(3)) of premium over the stated prin-
cipal amount of the bond. 
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‘‘(e) INTEREST PAYMENT DATE.—For purposes of 
this section, the term ‘interest payment date’ means any 
date on which the holder of record of the taxable govern-
mental bond is entitled to a payment of interest under 
such bond. 
‘‘(f) SPECIAL RULES.— 
‘‘(1) INTEREST ON TAXABLE GOVERNMENTAL 
BONDS
INCLUDIBLE
IN
GROSS
INCOME
FOR
FED-
ERAL INCOME TAX PURPOSES.—For purposes of this 
title, interest on any taxable governmental bond 
shall be includible in gross income. 
‘‘(2) APPLICATION OF CERTAIN RULES.—Rules 
similar to the rules of subsections (f), (g), (h), and 
(i) of section 54A shall apply for purposes of the 
credit allowed under subsection (a). 
‘‘(g) SPECIAL RULE FOR QUALIFIED BONDS ISSUED 
BEFORE 2011.—In the case of a qualified bond issued be-
fore January 1, 2011— 
‘‘(1) ISSUER
ALLOWED
REFUNDABLE
CRED-
IT.—In lieu of any credit allowed under this section 
with respect to such bond, the issuer of such bond 
shall be allowed a credit as provided in section 6432. 
‘‘(2) QUALIFIED BOND.—For purposes of this 
subsection, the term ‘qualified bond’ means any tax-
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PART
2—INCREASED
ALLOCATIONS
OF
NEW 
CLEAN
RENEWABLE
ENERGY
BONDS
AND 
QUALIFIED ENERGY CONSERVATION BONDS 
SEC. 1611. INCREASED LIMITATION ON ISSUANCE OF NEW 
CLEAN RENEWABLE ENERGY BONDS. 
Subsection (c) of section 54C is amended by adding 
at the end the following new paragraph: 
‘‘(4) ADDITIONAL
LIMITATION.—The national 
new clean renewable energy bond limitation shall be 
increased by $1,600,000,000. Such increase shall be 
allocated by the Secretary consistent with the rules 
of paragraphs (2) and (3).’’. 
SEC. 1612. INCREASED LIMITATION AND EXPANSION OF 
QUALIFIED ENERGY CONSERVATION BONDS. 
(a) INCREASED LIMITATION.—Subsection (e) of sec-
tion 54D is amended by adding at the end the following 
new paragraph: 
‘‘(4) ADDITIONAL
LIMITATION.—The national 
qualified energy conservation bond limitation shall 
be increased by $2,400,000,000. Such increase shall 
be allocated by the Secretary consistent with the 
rules of paragraphs (1), (2), and (3).’’. 
(b) LOANS
AND GRANTS
TO IMPLEMENT GREEN 
COMMUNITY PROGRAMS.— 
(1) IN GENERAL.—Subparagraph (A) of section 
54D(f)(1) is amended by inserting ‘‘(or loans or 
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