102 
(b) CLERICAL AMENDMENT.—The chapter analysis 
for chapter 249 is amended by adding at the end the fol-
lowing: 
‘‘24910. Rail cooperative research program.’’. 
SEC. 524. HIGH-SPEED INTERCITY RAIL FACILITY BONDS. 
(a) AMENDMENT.—Chapter 261 of title 49, United 
States Code, is amended by adding at the end the fol-
lowing new section: 
‘‘§ 26106. High-speed rail infrastructure bonds 
‘‘(a) DESIGNATION.—The Secretary may designate 
bonds for purposes of subsection (f) or section 54 of the 
Internal Revenue Code of 1986 if— 
‘‘(1) the bonds are to be issued by— 
‘‘(A) a State, if the entire railroad pas-
senger transportation corridor containing the 
infrastructure project to be financed is within 
the State; 
‘‘(B) 1 or more of the States that have en-
tered into an agreement or an interstate com-
pact consented to by Congress under section 
410(a) of Public Law 105–134 (49 U.S.C 
24101 nt); or 
‘‘(C) an agreement or an interstate com-
pact described in subparagraph (B); 
‘‘(2) the bonds are for the purpose of financ-
ing— 
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‘‘(A) projects that make a substantial con-
tribution to providing the infrastructure and 
equipment required to complete a high-speed 
rail transportation corridor (including projects 
for the acquisition, financing, or refinancing of 
equipment and other capital improvements, in-
cluding the introduction of new high-speed tech-
nologies such as magnetic levitation systems, 
track or signal improvements, the elimination of 
grade crossings, development of intermodal fa-
cilities, improvement of train speeds or safety, 
or both, and station rehabilitation or construc-
tion), but only if the Secretary determines that 
the projects are part of a viable and comprehen-
sive high-speed rail transportation corridor de-
sign for intercity passenger service, including a 
design for minimally operable segments of a 
corridor designated under section 104(d)(2) of 
title 23, United States Code; or 
‘‘(B) projects for the Alaska Railroad; 
‘‘(3) for a railroad passenger transportation 
corridor design that includes the use of rights-of-way 
owned by a freight railroad, a written agreement ex-
ists between the applicant and the freight railroad 
regarding such use and ownership, including com-
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pensation for such use and assurances regarding the 
adequacy of infrastructure capacity to accommodate 
both existing and future freight and passenger oper-
ations, and including an assurance by the freight 
railroad that collective bargaining agreements with 
the freight railroad’s employees (including terms 
regulating the contracting of work) shall remain in 
full force and effect according to their terms for 
work performed by the freight railroad on such rail-
road passenger transportation corridor; 
‘‘(4) the corridor design eliminates existing rail-
way-highway grade crossings that the Secretary de-
termines would impede high-speed rail operations; 
‘‘(5) the applicant agrees to comply with— 
‘‘(A) the standards of section 24312, as in 
effect on September 1, 2002, with respect to 
the project in the same manner that the Na-
tional Railroad Passenger Corporation is re-
quired to comply with such standards for con-
struction work financed under an agreement 
made under section 24308(a); and 
‘‘(B) the protective arrangements estab-
lished under section 504 of the Railroad Revi-
talization and Regulatory Reform Act of 1976 
(45 U.S.C. 836) with respect to employees af-
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fected by actions taken in connection with the 
project to be financed by the bond; and 
‘‘(6) the applicant agrees not to pay the prin-
cipal or interest on the bonds using funds derived di-
rectly or indirectly from the Highway Trust Fund, 
except as permitted by law as of the date of the en-
actment of this section. 
‘‘(b) BOND AMOUNT LIMITATION.— 
‘‘(1) IN GENERAL.—The amount of bonds des-
ignated under this section may not exceed— 
‘‘(A) in the case of subsection (f) bonds, 
$1,200,000,000 for each of the fiscal years 
2007 through 2016; and 
‘‘(B) in the case of section 54 bonds, 
$1,200,000,000 for each of the fiscal years 
2007 through 2016. 
‘‘(2) CARRYOVER OF UNUSED LIMITATION.—If 
for any fiscal year the limitation amount under sub-
paragraph (A) or (B) of paragraph (1) exceeds— 
‘‘(A) with respect to subparagraph (A) of 
paragraph (1), the amount of subsection (f) 
bonds issued during such year; or 
‘‘(B) with respect to subparagraph (B) of 
paragraph (1), the amount of section 54 bonds 
issued during such year, 
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the limitation amount under subparagraph (A) or 
(B) of paragraph (1), as the case may be, for the 
following fiscal year (through fiscal year 2020) shall 
be increased by the amount of such excess. 
‘‘(c) PREFERENCE.—The Secretary shall give pref-
erence to the designation under this section of bonds for 
projects— 
‘‘(1) to be funded through a combination of 
subsection (f) bonds and section 54 bonds; 
‘‘(2) which propose to link rail passenger serv-
ice with other modes of transportation; 
‘‘(3) expected to have a significant impact on 
air traffic congestion; 
‘‘(4) expected to also improve commuter rail op-
erations; 
‘‘(5) where all environmental work has already 
been completed and the project is ready to com-
mence; or 
‘‘(6) that have received financial commitments 
and other support of State and local governments. 
‘‘(d) TIMELY DISPOSITION OF APPLICATION.—The 
Secretary shall grant or deny a requested designation 
within 9 months after receipt of an application. 
‘‘(e) ANNUAL REPORTS.— 
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‘‘(1) FROM ISSUER OF BONDS.—The issuer of 
bonds designated under subsection (a) shall report 
annually to the Secretary regarding the terms of 
outstanding designated bonds and the progress made 
with respect to the project financed by the bonds. 
‘‘(2) FROM
SECRETARY.—The Secretary, in 
consultation with the Secretary of the Treasury, 
shall transmit to the Congress an annual report 
which includes— 
‘‘(A) reports received under paragraph (1); 
and 
‘‘(B) an assessment of the progress made 
toward completion of high-speed rail transpor-
tation corridors resulting from projects financed 
by bonds designated under subsection (a). 
‘‘(f) TAX TREATMENT OF SUBSECTION (f) BONDS.— 
‘‘(1) EXCLUSION FROM GROSS INCOME.—The 
interest on a bond designated by the Secretary 
under subsection (a) for purposes of this subsection 
shall be excluded from gross income under section 
103 of the Internal Revenue Code of 1986, notwith-
standing section 149(c) of such Code. 
‘‘(2) EXEMPTION
FROM
VOLUME
CAP.—For 
purposes of section 146 of such Code, a bond des-
ignated by the Secretary under subsection (a) for 
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108 
purposes of this subsection shall be considered to be 
exempt from the volume cap of the issuing authority 
in the same manner as bonds listed in subsection (g) 
of such section 146. 
‘‘(g) REFINANCING RULES.—Bonds designated by 
the Secretary under subsection (a) may be issued for refi-
nancing projects only if the indebtedness being refinanced 
(including any obligation directly or indirectly refinanced 
by such indebtedness) was originally incurred by the 
issuer— 
‘‘(1) after the date of the enactment of this sec-
tion; 
‘‘(2) for a term of not more than 3 years; 
‘‘(3) to finance projects described in subsection 
(a)(2); and 
‘‘(4) in anticipation of being refinanced with 
proceeds of a bond designated under subsection (a). 
‘‘(h) PROVISIONS REGARDING HIGH-SPEED RAIL 
SERVICE.— 
‘‘(1) STATUS AS EMPLOYER OR CARRIER.—Any 
entity providing railroad transportation (within the 
meaning of section 20102) that begins operations 
after the date of the enactment of this section and 
that uses property acquired pursuant to this section 
(except as provided in subsection (a)(2)(B)), shall be 
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109 
considered an employer for purposes of the Railroad 
Retirement Act of 1974 (45 U.S.C. 231 et seq.) and 
considered a carrier for purposes of the Railway 
Labor Act (45 U.S.C. 151 et seq.). 
‘‘(2) COLLECTIVE BARGAINING AGREEMENT.— 
Any entity providing high-speed intercity passenger 
railroad transportation (within the meaning of sec-
tion 20102) that begins operations after the date of 
enactment of this section on a project funded in 
whole or in part by bonds designated under sub-
section (a), and replaces intercity rail passenger 
service that was provided by another entity as of the 
date of enactment of this section, shall enter into an 
agreement with the authorized bargaining agent or 
agents for employees of the predecessor provider 
that— 
‘‘(A) gives each employee of the prede-
cessor provider priority in hiring according to 
the employee’s seniority on the predecessor pro-
vider for each position with the replacing entity 
that is in the employee’s craft or class and is 
available within three years after the termi-
nation of the service being replaced; 
‘‘(B) establishes a procedure for notifying 
such an employee of such positions; 
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‘‘(C) establishes a procedure for such an 
employee to apply for such positions; and 
‘‘(D) establishes rates of pay, rules, and 
working conditions. 
‘‘(3) IMMEDIATE REPLACEMENT OF EXISTING 
RAIL PASSENGER SERVICE.— 
‘‘(A) NEGOTIATIONS.—If the replacement 
of preexisting intercity rail passenger service oc-
curs concurrent with or within a reasonable 
amount of time before the commencement of 
the replacing entity’s high-speed rail passenger 
service, the replacing entity shall give written 
notice of its plan to replace existing rail pas-
senger service to the authorized collective bar-
gaining agent or agents for the employees of 
the predecessor provider at least 90 days prior 
to the date it plans to commence service. With-
in 5 days after the date of receipt of such writ-
ten notice, negotiations between the replacing 
entity and the collective bargaining agent or 
agents for the employees of the predecessor pro-
vider shall commence for the purpose of reach-
ing agreement with respect to all matters set 
forth in paragraph (2) (A)–(D). The negotia-
tions shall continue for 30 days or until an 
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111 
agreement is reached, whichever is sooner. If at 
the end of 30 days the parties have not entered 
into an agreement with respect to all such mat-
ters, the unresolved issues shall be submitted 
for arbitration in accordance with the procedure 
set forth in subparagraph (B). 
‘‘(B) ARBITRATION.—If an agreement has 
not been entered into with respect to all mat-
ters set forth in paragraph (2) (A)–(D) as pro-
vided in subparagraph (A) of this paragraph, 
the parties shall select an arbitrator. If the par-
ties are unable to agree upon the selection of 
such arbitrator within 5 days, either or both 
parties shall notify the National Mediation 
Board, which shall provide a list of seven arbi-
trators with experience in arbitrating rail labor 
protection disputes. Within 5 days after such 
notification, the parties shall alternately strike 
names from the list until only one name re-
mains, and that person shall serve as the neu-
tral arbitrator. Within 45 days after selection of 
the arbitrator, the arbitrator shall conduct a 
hearing on the dispute and shall render a deci-
sion with respect to the unresolved issues set 
forth in paragraph (2) (A)–(D). This decision 
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shall be final, binding, and conclusive upon the 
parties. The salary and expenses of the arbi-
trator shall be borne equally by the parties; all 
other expenses shall be paid by the party incur-
ring them. 
‘‘(C) SERVICE
COMMENCEMENT.—A re-
placing entity under this paragraph shall com-
mence service only after an agreement is en-
tered into with respect to the matters set forth 
in paragraph (2) (A)–(D) or the decision of the 
arbitrator has been rendered. 
‘‘(4) SUBSEQUENT REPLACEMENT OF EXISTING 
RAIL PASSENGER SERVICE.—If the replacement of 
existing rail passenger service takes place within 3 
years after the replacing entity commences high- 
speed rail passenger service, the replacing entity and 
the collective bargaining agent or agents for the em-
ployees of the predecessor provider shall enter into 
an agreement with respect to the matters set forth 
in paragraph (2) (A)–(D). If the parties have not 
entered into an agreement with respect to all such 
matters within 60 days after the date on which the 
replacing entity replaces the predecessor provider, 
the parties shall select an arbitrator using the proce-
dures set forth in paragraph (3)(B), who shall, with-
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in 20 days after the commencement of the arbitra-
tion, conduct a hearing and decide all unresolved 
issues. This decision shall be final, binding, and con-
clusive upon the parties. 
‘‘(i) ISSUANCE OF REGULATIONS.—Not later than 6 
months after the date of the enactment of this section, 
the Secretary shall issue regulations for carrying out this 
section. 
‘‘(j) DEFINITIONS.—For purposes of this section— 
‘‘(1) SUBSECTION (f) BOND.—The term ‘sub-
section (f) bond’ means a bond designated by the 
Secretary under subsection (a) for purposes of sub-
section (f). 
‘‘(2) SECTION 54 BOND.—The term ‘section 54 
bond’ means a bond designated by the Secretary 
under subsection (a) for purposes of section 54 of 
the Internal Revenue Code of 1986 (relating to cred-
it to holders of qualified high-speed rail infrastruc-
ture bonds).’’. 
(b) TABLE OF SECTIONS AMENDMENT.—The table of 
sections of chapter 261 of title 49, United States Code, 
is amended by adding after the item relating to section 
26105 the following new item: 
‘‘26106. High-speed rail infrastructure bonds.’’. 
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SEC. 525. TAX CREDIT TO HOLDERS OF QUALIFIED HIGH- 
SPEED RAIL INFRASTRUCTURE BONDS. 
(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 adding at the end the 
following new subpart: 
‘‘Subpart H—Nonrefundable Credit for Holders of 
Qualified High-Speed Rail Infrastructure Bonds 
‘‘Sec. 54. Credit to holders of qualified high-speed rail infrastructure bonds. 
‘‘SEC. 54. CREDIT TO HOLDERS OF QUALIFIED HIGH-SPEED 
RAIL INFRASTRUCTURE BONDS. 
‘‘(a) ALLOWANCE OF CREDIT.—In the case of a tax-
payer who holds a qualified high-speed rail infrastructure 
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 high-speed rail 
infrastructure bond is 25 percent of the annual cred-
it determined with respect to such bond. 
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‘‘(2) ANNUAL CREDIT.—The annual credit de-
termined with respect to any qualified high-speed 
rail infrastructure 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 (2), 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 sale 
of the issue) on outstanding long-term corporate 
debt obligations (determined under regulations pre-
scribed by the Secretary). 
‘‘(4) CREDIT ALLOWANCE DATE.—For purposes 
of this section, the term ‘credit allowance date’ 
means— 
‘‘(A) March 15, 
‘‘(B) June 15, 
‘‘(C) September 15, and 
‘‘(D) December 15. 
Such term includes the last day on which the bond 
is outstanding. 
‘‘(5) SPECIAL RULE FOR ISSUANCE AND RE-
DEMPTION.—In the case of a bond which is issued 
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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 this part (other than this subpart and 
subpart C). 
‘‘(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. 
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‘‘(d) 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. 
‘‘(e) QUALIFIED HIGH-SPEED RAIL INFRASTRUC-
TURE BOND.—For purposes of this part, the term ‘quali-
fied high-speed rail infrastructure bond’ means any bond 
issued as part of an issue if— 
‘‘(1) the issuer certifies that the Secretary of 
Transportation has designated the bond for purposes 
of this section under section 26106(a) of title 49, 
United States Code, as in effect on the date of the 
enactment of this section, 
‘‘(2) 95 percent or more of the proceeds from 
the sale of such issue are to be used for expenditures 
incurred after the date of the enactment of this sec-
tion for any project described in section 26106(a)(2) 
of title 49, United States Code, 
‘‘(3) the term of each bond which is part of 
such issue does not exceed 20 years, 
‘‘(4) the payment of principal with respect to 
such bond is the obligation solely of the issuer, and 
‘‘(5) the issue meets the requirements of sub-
section (f) (relating to arbitrage). 
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‘‘(f) SPECIAL RULES RELATING TO ARBITRAGE.— 
‘‘(1) IN GENERAL.—Subject to paragraph (2), 
an issue shall be treated as meeting the require-
ments of this subsection if as of the date of 
issuance, the issuer reasonably expects— 
‘‘(A) to spend at least 95 percent of the 
proceeds from the sale of the issue for 1 or 
more qualified projects within the 3-year period 
beginning on such date, 
‘‘(B) to incur a binding commitment with 
a third party to spend at least 10 percent of the 
proceeds from the sale of the issue, or to com-
mence construction, with respect to such 
projects within the 6-month period beginning on 
such date, and 
‘‘(C) to proceed with due diligence to com-
plete such projects and to spend the proceeds 
from the sale of the issue. 
‘‘(2) RULES REGARDING CONTINUING COMPLI-
ANCE AFTER 3-YEAR DETERMINATION.—If at least 
95 percent of the proceeds from the sale of the issue 
is not expended for 1 or more qualified projects 
within the 3-year period beginning on the date of 
issuance, but the requirements of paragraph (1) are 
otherwise met, an issue shall be treated as con-
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tinuing to meet the requirements of this subsection 
if either— 
‘‘(A) the issuer uses all unspent proceeds 
from the sale of the issue to redeem bonds of 
the issue within 90 days after the end of such 
3-year period, or 
‘‘(B) the following requirements are met: 
‘‘(i) The issuer spends at least 75 per-
cent of the proceeds from the sale of the 
issue for 1 or more qualified projects with-
in the 3-year period beginning on the date 
of issuance. 
‘‘(ii) Either— 
‘‘(I) the issuer spends at least 95 
percent of the proceeds from the sale 
of the issue for 1 or more qualified 
projects within the 4-year period be-
ginning on the date of issuance, or 
‘‘(II) the issuer pays to the Fed-
eral Government any earnings on the 
proceeds from the sale of the issue 
that accrue after the end of the 3-year 
period beginning on the date of 
issuance and uses all unspent pro-
ceeds from the sale of the issue to re-
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