I
106TH CONGRESS
1ST SESSION
H. R. 2514
To amend the Internal Revenue Code of 1986 to allow issuance of tax-
exempt private activity bonds to finance public-private partnership activi-
ties relating to school facilities in public elementary and secondary
schools, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JULY 14, 1999
Mr. SHAW 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 allow
issuance of tax-exempt private activity bonds to finance
public-private partnership activities relating to school fa-
cilities in public elementary and secondary schools, 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 ‘‘Public School Con-
struction Partnership Act’’.
SEC. 2. TREATMENT OF QUALIFIED PUBLIC EDUCATIONAL
FACILITY 
BONDS 
AS 
EXEMPT 
FACILITY
BONDS.
(a) TREATMENT AS EXEMPT FACILITY BOND.—Sub-
section (a) of section 142 of the Internal Revenue Code
of 1986 (relating to exempt facility bond) is amended by
striking ‘‘or’’ at the end of paragraph (11), by striking
the period at the end of paragraph (12) and inserting
‘‘, or’’, and by adding at the end the following:
‘‘(13) qualified public educational facilities.’’
(b) QUALIFIED
PUBLIC
EDUCATIONAL
FACILI-
TIES.—Section 142 of the Internal Revenue Code of 1986
(relating to exempt facility bond) is amended by adding
at the end the following new subsection:
‘‘(k) QUALIFIED
PUBLIC
EDUCATIONAL
FACILI-
TIES.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a)(13), the term ‘qualified public educational facil-
ity’ means any school facility which is—
‘‘(A) part of a public elementary school or
a public secondary school, and
‘‘(B) owned by a private, for-profit cor-
poration pursuant to a public-private partner-
ship agreement with a State or local edu-
cational agency described in paragraph (2).
‘‘(2) PUBLIC-PRIVATE
PARTNERSHIP
AGREE-
MENT
DESCRIBED.—A public-private partnership
agreement is described in this paragraph if it is an
agreement—
‘‘(A) under which the corporation agrees—
‘‘(i) to do 1 or more of the following:
construct, rehabilitate, refurbish, or equip
a school facility, and
‘‘(ii) at the end of the term of the
agreement, to transfer the school facility to
such agency for no additional consider-
ation, and
‘‘(B) the term of which does not exceed the
term of the issue to be used to provide the
school facility.
‘‘(3) SCHOOL FACILITY.—For purposes of this
subsection, the term ‘school facility’ means—
‘‘(A) school buildings,
‘‘(B) functionally related and subordinate
facilities and land with respect to such build-
ings, including any stadium or other facility pri-
marily used for school events, and
‘‘(C) any property, to which section 168
applies (or would apply but for section 179), for
use in the facility.
‘‘(4) PUBLIC SCHOOLS.—For purposes of this
subsection, the terms ‘elementary school’ and ‘sec-
ondary school’ have the meanings given such terms
by section 14101 of the Elementary and Secondary
Education Act of 1965 (20 U.S.C. 8801), as in ef-
fect on the date of the enactment of this subsection.
‘‘(5) ANNUAL
AGGREGATE
FACE
AMOUNT
OF
TAX-EXEMPT FINANCING.—
‘‘(A) IN GENERAL.—An issue shall not be
treated as an issue described in subsection
(a)(13) if the aggregate face amount of bonds
issued by the State pursuant thereto (when
added to the aggregate face amount of bonds
previously so issued during the calendar year)
exceeds an amount equal to the greater of—
‘‘(i) $10 multiplied by the State popu-
lation, or
‘‘(ii) $5,000,000.
‘‘(B) ALLOCATION RULES.—
‘‘(i) IN GENERAL.—Except as other-
wise provided in this subparagraph, the
State may allocate in a calendar year the
amount described in subparagraph (A) for
such year in such manner as the State de-
termines appropriate.
‘‘(ii) RULES FOR CARRYFORWARD OF
UNUSED
AMOUNT.—With respect to any
calendar year, a State may make an elec-
tion under rules similar to the rules of sec-
tion 
146(f), 
except 
that 
the 
sole
carryforward purpose with respect to such
election is the issuance of exempt facility
bonds described in section 142(a)(13).’’
(c) EXEMPTION FROM GENERAL STATE VOLUME
CAPS.—Paragraph (3) of section 146(g) of the Internal
Revenue Code of 1986 (relating to exception for certain
bonds) is amended—
(1) by striking ‘‘or (12)’’ and inserting ‘‘(12),
or (13)’’, and
(2) by striking ‘‘and environmental enhance-
ments of hydroelectric generating facilities’’ and in-
serting ‘‘environmental enhancements of hydro-
electric generating facilities, and qualified public
educational facilities’’.
(d) EXEMPTION FROM LIMITATION
ON USE
FOR
LAND ACQUISITION.—Section 147(h) of the Internal Rev-
enue Code of 1986 (relating to certain rules not to apply
to mortgage revenue bonds, qualified student loan bonds,
and qualified 501(c)(3) bonds) is amended by adding at
the end the following new paragraph:
‘‘(3) EXEMPT FACILITY BONDS FOR QUALIFIED
PUBLIC-PRIVATE SCHOOLS.—Subsection (c) shall not
apply to any exempt facility bond issued as part of
an issue described in section 142(a)(13) (relating to
qualified public-private schools).’’
(e) CONFORMING AMENDMENT.—The heading of sec-
tion 147(h) of the Internal Revenue Code of 1986 is
amended by striking ‘‘MORTGAGE REVENUE BONDS,
QUALIFIED STUDENT LOAN BONDS, AND QUALIFIED
501(c)(3) BONDS’’ in the heading and inserting ‘‘CERTAIN
BONDS’’.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to bonds issued after December
31, 1999.
SEC. 3. ADDITIONAL INCREASE IN ARBITRAGE REBATE EX-
CEPTION FOR GOVERNMENTAL BONDS USED
TO FINANCE EDUCATION FACILITIES.
(a) SPENDING REQUIREMENT FOR PUBLIC SCHOOL
CONSTRUCTION
ISSUE.—Paragraph (4)(C) of section
148(f) of the Internal Revenue Code of 1986 (relating to
required rebate to the United States) is amended by add-
ing at the end the following new clause:
‘‘(xviii) 4-YEAR
SPENDING
REQUIRE-
MENT FOR PUBLIC SCHOOL CONSTRUCTION
ISSUE.—
‘‘(I) IN GENERAL.—In the case
of a public school construction issue,
the spending requirements of clause
(ii) shall be treated as met if at least
10 percent of the available construc-
tion proceeds of the construction issue
are spent for the governmental pur-
poses of the issue within the 1-year
period beginning on the date the
bonds are issued, 30 percent of such
proceeds are spent for such purposes
within the 2-year period beginning on
such date, 50 percent of such pro-
ceeds are spent for such purposes
within the 3-year period beginning on
such date, and 100 percent of such
proceeds are spent for such purposes
within the 4-year period beginning on
such date.
‘‘(II) 
PUBLIC
SCHOOL
CON-
STRUCTION ISSUE.—For purposes of
this clause, the term ‘public school
construction issue’ means any con-
struction issue if no bond which is
part of such issue is a private activity
bond and all of the available construc-
tion proceeds of such issue are to be
used for the construction (as defined
in clause (iv)) of public school facili-
ties to provide education or training
below the postsecondary level or for
the acquisition of land that is func-
tionally related and subordinate to
such facilities.
‘‘(III) 
OTHER
RULES
TO
APPLY.—Rules similar to the rules of
the preceding provisions of this sub-
paragraph which apply to clause (ii)
shall apply to this clause.’’
(b) INCREASE IN ARBITRAGE REBATE EXCEPTION
FOR GOVERNMENTAL BONDS USED TO FINANCE EDU-
CATION FACILITIES.—Section 148(f)(4)(D)(vii) of the In-
ternal Revenue Code of 1986 (relating to increase in ex-
ception for bonds financing public school capital expendi-
tures) is amended by striking ‘‘$5,000,000’’ the second
place it appears and inserting ‘‘$10,000,000’’.
(c) EFFECTIVE DATE.—The amendment made by
this section shall apply to obligations issued after Decem-
ber 31, 1999.
SEC. 4. TREATMENT OF PUBLIC SCHOOL CONSTRUCTION
BONDS AS QUALIFIED TAX-EXEMPT OBLIGA-
TIONS.
(a) IN GENERAL.—Clause (i) of subsection (b)(3)(B)
of section 265 of the Internal Revenue Code of 1986 (re-
lating to expenses and interest relating to tax-exempt in-
come) is amended to read as follows:
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A), the term ‘qualified tax-
exempt obligation’ means a tax-exempt
obligation—
‘‘(I) which is issued after August
7, 1986, by a qualified small issuer, is
not a private activity bond (as defined
in section 141), and is designated by
the issuer for purposes of this para-
graph, or
‘‘(II) which is a public school
construction bond (within the mean-
ing 
of 
section 
148(f)(4)(C)(xviii))
issued by a qualified small education
bond issuer (as defined in subpara-
graph (F)).’’
(b) DEFINITION OF QUALIFIED SMALL EDUCATION
BOND ISSUER.—Subsection (b)(3) of section 265 of the
Internal Revenue Code of 1986 is amended by adding at
the end the following new subparagraph:
‘‘(F) QUALIFIED SMALL EDUCATION BOND
ISSUER.—For 
purposes 
of 
subparagraph
(B)(i)(II), the term ‘qualified small education
bond issuer’ means, with respect to bonds
issued during any calendar year, any issuer if
the reasonably anticipated amount of public
school construction bonds which will be issued
by such issuer during such calendar year does
not exceed $25,000,000.’’
(c) 
CONFORMING
AMENDMENT.—Section
265(b)(3)(B)(ii) of such Code is amended by striking
‘‘(i)(II)’’ in the matter preceding subclause (I) and insert-
ing ‘‘(i)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to obligations issued after Decem-
ber 31, 1999.
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