I
107TH CONGRESS
1ST SESSION
H. R. 2152
To provide for the issuance of bonds to construct and modernize Indian
schools and to provide a credit against Federal income tax for holders
of such bonds.
IN THE HOUSE OF REPRESENTATIVES
JUNE 13, 2001
Mr. CARSON of Oklahoma introduced the following bill; which was referred to
the Committee on Ways and Means, and in addition to the Committees
on Education and the Workforce and Resources, for a period to be subse-
quently determined by the Speaker, in each case for consideration of such
provisions as fall within the jurisdiction of the committee concerned
A BILL
To provide for the issuance of bonds to construct and mod-
ernize Indian schools and to provide a credit against
Federal income tax for holders of such bonds.
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 ‘‘Indian School Con-
struction Act of 2001’’.
SEC. 2. INDIAN SCHOOL CONSTRUCTION.
(a) DEFINITIONS.—In this section:
(1) BUREAU.—The term ‘‘Bureau’’ means the
Bureau of Indian Affairs of the Department of the
Interior.
(2) INDIAN.—The term ‘‘Indian’’ means any in-
dividual who is a member of a tribe.
(3) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of the Interior.
(4) TRIBAL SCHOOL.—The term ‘‘tribal school’’
means an elementary school, secondary school, or
dormitory that is operated by a tribal organization
or the Bureau for the education of Indian children
and that receives financial assistance for its oper-
ation under an appropriation for the Bureau under
section 102, 103(a), or 208 of the Indian Self-Deter-
mination and Education Assistance Act (25 U.S.C.
450f, 450h(a), and 458d) or under the Tribally Con-
trolled Schools Act of 1988 (25 U.S.C. 2501 et seq.)
under a contract, a grant, or an agreement, or for
a Bureau-operated school.
(5) TRIBE.—The term ‘‘tribe’’ has the meaning
given the term ‘‘Indian tribal government’’ by sec-
tion 7701(a)(40) of the Internal Revenue Code of
1986, including the application of section 7871(d) of
such Code. Such term includes any consortium of
tribes approved by the Secretary.
(b) ISSUANCE OF BONDS.—
(1) IN GENERAL.—The Secretary shall establish
a pilot program under which eligible tribes have the
authority to issue qualified tribal school moderniza-
tion bonds to provide funding for the construction,
rehabilitation, or repair of tribal schools, including
the advance planning and design thereof.
(2) ELIGIBILITY.—
(A) IN GENERAL.—To be eligible to issue
any qualified tribal school modernization bond
under the program under paragraph (1), a tribe
shall—
(i) prepare and submit to the Sec-
retary a plan of construction that meets
the requirements of subparagraph (B);
(ii) provide for quarterly and final in-
spection of the project by the Bureau; and
(iii) pledge that the facilities financed
by such bond will be used primarily for ele-
mentary and secondary educational pur-
poses for not less than the period such
bond remains outstanding.
(B) PLAN OF CONSTRUCTION.—A plan of
construction meets the requirements of this
subparagraph if such plan—
(i) contains a description of the con-
struction to be undertaken with funding
provided under a qualified tribal school
modernization bond;
(ii) demonstrates that a comprehen-
sive survey has been undertaken con-
cerning the construction needs of the tribal
school involved;
(iii) contains assurances that funding
under the bond will be used only for the
activities described in the plan;
(iv) contains response to the evalua-
tion criteria contained in Instructions and
Application for Replacement School Con-
struction, Revision 6, dated February 6,
1999; and
(v) contains any other reasonable and
related information determined appropriate
by the Secretary.
(C) PRIORITY.—In determining whether a
tribe is eligible to participate in the program
under this subsection, the Secretary shall give
priority to tribes that, as demonstrated by the
relevant plans of construction, will fund
projects—
(i) described in the Education Facili-
ties Replacement Construction Priorities
List as of FY 2000 of the Bureau of In-
dian Affairs (65 Fed. Reg. 4623–4624);
(ii) described in any subsequent prior-
ities list published in the Federal Register;
or
(iii) which meet the criteria for rank-
ing schools as described in Instructions
and Application for Replacement School
Construction, Revision 6, dated February
6, 1999.
(D) ADVANCE
PLANNING
AND
DESIGN
FUNDING.—A tribe may propose in its plan of
construction to receive advance planning and
design funding from the tribal school mod-
ernization escrow account established under
paragraph (6)(B). Before advance planning and
design funds are allocated from the escrow ac-
count, the tribe shall agree to issue qualified
tribal school modernization bonds after the re-
ceipt of such funds and agree as a condition of
each bond issuance that the tribe will deposit
into such account or a fund managed by the
trustee as described in paragraph (4)(C) an
amount equal to the amount of such funds re-
ceived from the escrow account.
(3) PERMISSIBLE ACTIVITIES.—In addition to
the use of funds permitted under paragraph (1), a
tribe may use amounts received through the issuance
of a qualified tribal school modernization bond to—
(A) enter into and make payments under
contracts with licensed and bonded architects,
engineers, and construction firms in order to
determine the needs of the tribal school and for
the design and engineering of the school;
(B) enter into and make payments under
contracts with financial advisors, underwriters,
attorneys, trustees, and other professionals who
would be able to provide assistance to the tribe
in issuing bonds; and
(C) carry out other activities determined
appropriate by the Secretary.
(4) BOND TRUSTEE.—
(A) IN
GENERAL.—Notwithstanding any
other provision of law, any qualified tribal
school modernization bond issued by a tribe
under this subsection shall be subject to a trust
agreement between the tribe and a trustee.
(B) TRUSTEE.—Any bank or trust com-
pany that meets requirements established by
the Secretary may be designated as a trustee
under subparagraph (A).
(C) CONTENT OF TRUST AGREEMENT.—A
trust agreement entered into by a tribe under
this paragraph shall specify that the trustee,
with respect to any bond issued under this sub-
section shall—
(i) act as a repository for the proceeds
of the bond;
(ii) make payments to bondholders;
(iii) receive, as a condition to the
issuance of such bond, a transfer of funds
from the tribal school modernization es-
crow account established under paragraph
(6)(B) or from other funds furnished by or
on behalf of the tribe in an amount, which
together with interest earnings from the
investment of such funds in obligations of
or fully guaranteed by the United States or
from other investments authorized by para-
graph (10), will produce moneys sufficient
to timely pay in full the entire principal
(ii) CONTRACTS.—Each contract re-
ferred to in paragraph (3) shall specify, or
be renegotiated to specify, that payments
under the contract shall be made in ac-
cordance with this paragraph.
(5) PAYMENTS OF PRINCIPAL AND INTEREST.—
(A) PRINCIPAL.—No principal payments
on any qualified tribal school modernization
bond shall be required until the final, stated
maturity of such bond, which stated maturity
shall be within 15 years from the date of
issuance. Upon the expiration of such period,
the entire outstanding principal under the bond
shall become due and payable.
(B) INTEREST.—In lieu of interest on a
qualified tribal school modernization bond there
shall be awarded a tax credit under section
1400K of the Internal Revenue Code of 1986.
(6) BOND GUARANTEES.—
(A) IN GENERAL.—Payment of the prin-
cipal portion of a qualified tribal school mod-
ernization bond issued under this subsection
shall be guaranteed solely by amounts deposited
with each respective bond trustee as described
in paragraph (4)(C)(iii).
(B) ESTABLISHMENT OF ACCOUNT.—
(i) IN
GENERAL.—Notwithstanding
any other provision of law, beginning in
fiscal year 2002, from amounts made
available for school replacement under the
construction account of the Bureau, the
Secretary is authorized to deposit not more
than $30,000,000 each fiscal year into a
tribal school modernization escrow account.
(ii) PAYMENTS.—The Secretary shall
use any amounts deposited in the escrow
account under clauses (i) and (iii) to make
payments to trustees appointed and acting
pursuant to paragraph (4) or to make pay-
ments described in paragraph (2)(D).
(iii) TRANSFERS
OF
EXCESS
PRO-
CEEDS.—Excess proceeds held under any
trust agreement that are not needed for
any of the purposes described in clauses
(iii) and (v) of paragraph (4)(C) shall be
transferred, from time to time, by the
trustee for deposit into the tribal school
modernization escrow account.
(7) LIMITATIONS.—
(A) OBLIGATION
TO
REPAY.—Notwith-
standing any other provision of law, the prin-
cipal amount on any qualified tribal school
modernization bond issued under this sub-
section shall be repaid only to the extent of any
escrowed funds furnished under paragraph
(4)(C)(iii). No qualified tribal school moderniza-
tion bond issued by a tribe shall be an obliga-
tion of, nor shall payment of the principal
thereof be guaranteed by, the United States.
(B) LAND AND FACILITIES.—Any land or
facilities purchased or improved with amounts
derived from qualified tribal school moderniza-
tion bonds issued under this subsection shall
not be mortgaged or used as collateral for such
bonds.
(8) SALE OF BONDS.—Qualified tribal school
modernization bonds may be sold at a purchase price
equal to, in excess of, or at a discount from the par
amount thereof.
(9) TREATMENT OF TRUST AGREEMENT EARN-
INGS.—Any amounts earned through the investment
of funds under the control of a trustee under any
trust agreement described in paragraph (4) shall not
be subject to Federal income tax.
(10) INVESTMENT
OF
SINKING
FUNDS.—Any
sinking fund established for the purpose of the pay-
ment of principal on a qualified tribal school mod-
ernization bond shall be invested in obligations
issued by or guaranteed by the United States or in
such other assets as the Secretary of the Treasury
may by regulation allow.
(c) EXPANSION
OF
INCENTIVES
FOR
TRIBAL
SCHOOLS.—
(1) IN GENERAL.—Chapter 1 of the Internal
Revenue Code of 1986 is amended by adding at the
end the following new subchapter:
‘‘Subchapter Y—Tribal School Modernization
Provisions
‘‘Sec. 1400K. Credit to holders of qualified tribal school modernization bonds.
‘‘SEC. 1400K. CREDIT TO HOLDERS OF QUALIFIED TRIBAL
SCHOOL MODERNIZATION BONDS.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of a tax-
payer who holds a qualified tribal 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 tribal 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 tribal 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 date of sale of the issue) on
outstanding long-term corporate obligations (as de-
termined 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) QUALIFIED TRIBAL SCHOOL MODERNIZATION
BOND; OTHER
DEFINITIONS.—For purposes of this
section—
‘‘(1) QUALIFIED TRIBAL SCHOOL MODERNIZA-
TION BOND.—
‘‘(A) IN
GENERAL.—The term ‘qualified
tribal school modernization bond’ means, sub-
ject to subparagraph (B), any bond issued as
part of an issue under section 2(b) of the In-
dian School Construction Act of 2001, as in ef-
fect on the date of the enactment of this sec-
tion, if—
‘‘(i) 95 percent or more of the pro-
ceeds of such issue are to be used for the
construction, rehabilitation, or repair of a
school facility funded by the Bureau of In-
dian Affairs of the Department of the Inte-
rior or for the acquisition of land on which
such a facility is to be constructed with
part of the proceeds of such issue,
‘‘(ii) the bond is issued by a tribe,
‘‘(iii) the issuer designates such bond
for purposes of this section, and
‘‘(iv) the term of each bond which is
part of such issue does not exceed 15
years.
‘‘(B) NATIONAL LIMITATION ON AMOUNT
OF BONDS DESIGNATED.—
‘‘(i) NATIONAL LIMITATION.—There is
a national qualified tribal school mod-
ernization bond limitation for each cal-
endar year. Such limitation is—
‘‘(I) $200,000,000 for 2002,
‘‘(II) $200,000,000 for 2003,
and
‘‘(III) zero after 2003.
‘‘(ii) ALLOCATION OF LIMITATION.—
The national qualified tribal school mod-
ernization bond limitation shall be allo-
cated to tribes by the Secretary of the In-
terior subject to the provisions of section 2
of the Indian School Construction Act of
2001, as in effect on the date of the enact-
ment of this section.
‘‘(iii) DESIGNATION SUBJECT TO LIMI-
TATION
AMOUNT.—The maximum aggre-
gate face amount of bonds issued during
any calendar year which may be designated
under subsection (d)(1) with respect to any
tribe shall not exceed the limitation
amount allocated to such government
under clause (ii) for such calendar year.
‘‘(iv) CARRYOVER OF UNUSED LIMITA-
TION.—If for any calendar year—
‘‘(I) the limitation amount under
this subparagraph, exceeds
‘‘(II) the amount of qualified
tribal school modernization bonds
issued during such year,
the limitation amount under this subpara-
graph for the following calendar year shall
be increased by the amount of such excess.
The preceding sentence shall not apply if
such following calendar year is after 2010.
‘‘(2) CREDIT
ALLOWANCE
DATE.—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.
‘‘(3) BOND.—The term ‘bond’ includes any ob-
ligation.
‘‘(4) TRIBE.—The term ‘tribe’ has the meaning
given the term ‘Indian tribal government’ by section
7701(a)(40), including the application of section
7871(d). Such term includes any consortium of
tribes approved by the Secretary of the Interior.
‘‘(e) 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.
‘‘(f) BONDS HELD
BY REGULATED INVESTMENT
COMPANIES.—If any qualified tribal 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.
‘‘(g) 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 tribal school modernization bond and the entitle-
ment 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 person who
on the credit allowance date holds the instrument ev-
idencing 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 tribal
school modernization bond as if it were a stripped
bond and to the credit under this section as if it
were a stripped coupon.
‘‘(h) TREATMENT
FOR
ESTIMATED
TAX
PUR-
POSES.—Solely for purposes of sections 6654 and 6655,
the credit allowed by this section to a taxpayer by reason
of holding a qualified tribal 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.
‘‘(i) 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.
‘‘(j) CREDIT TREATED AS ALLOWED UNDER PART
IV OF SUBCHAPTER A.—For purposes of subtitle F, the
credit allowed by this section shall be treated as a credit
allowable under part IV of subchapter A of this chapter.
‘‘(k) REPORTING.—Issuers of qualified tribal school
modernization bonds shall submit reports similar to the
reports required under section 149(e).’’.
(2) CLERICAL AMENDMENT.—The table of sub-
chapters for chapter 1 of the Internal Revenue Code
of 1986 is amended by adding at the end the fol-
lowing new item:
‘‘Subchapter Y. Tribal school modernization provisions.’’
(d) SOVEREIGN IMMUNITY.—This section and the
amendments made by this section shall not be construed
to impact, limit, or affect the sovereign immunity of the
Federal Government or any State or tribal government.
(e) EFFECTIVE DATE.—This section and the amend-
ments made by this section shall take effect on the date
of the enactment of this Act with respect to bonds issued
after December 31, 2001.
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