I
106TH CONGRESS
1ST SESSION
H. R. 2574
To amend the Internal Revenue Code of 1986 to provide comprehensive
tax relief for American families and businesses to encourage family
stability, economic growth, and tax simplification.
IN THE HOUSE OF REPRESENTATIVES
JULY 20, 1999
Mr. MALONEY of Connecticut (for himself, Mr. ROEMER, Mr. DOOLEY of Cali-
fornia, Mr. SMITH of Washington, Mr. WEYGAND, Mr. SHERMAN, Ms.
HOOLEY of Oregon, Ms. STABENOW, Mr. ETHERIDGE, Mr. GONZALEZ,
Mr. MOORE, AND Mr. STUPAK) 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
comprehensive tax relief for American families and busi-
nesses to encourage family stability, economic growth,
and tax simplification.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Pro-Family, Pro-Growth, Pro-Reform Tax Reduction Act
of 1999’’.
(b) TABLE OF CONTENTS.—
Sec. 1. Short title; etc.
TITLE I—CAPITAL GAINS
Sec. 101. Repeal of application of alternative minimum tax to stock transferred
pursuant to incentive stock options.
TITLE II—EDUCATION
Sec. 201. Extension of exclusion for employer-provided educational assistance;
exclusion to apply to assistance provided for graduate edu-
cation.
Sec. 202. Employer-provided workplace literacy tax credit.
Sec. 203. Credit for information technology training program expenses.
Sec. 204. Teacher Technology Access Act.
Sec. 205. Teacher Technology Training Act.
Sec. 206. Increase in Hope and Lifetime Learning tax credits.
Sec. 207. Tax treatment of student loan forgiveness.
Sec. 208. Exclusion of certain amounts received under the national health serv-
ice corps scholarship program, the F. Edward Hebert Armed
Forces Health Professions Scholarship and Financial Assist-
ance Program, and certain other programs.
Sec. 209. Elimination of 60-month limit on student loan interest deduction.
Sec. 210. Credit for school construction bonds in high-growth areas.
Sec. 211. Credit for school modernization bonds in distressed areas.
TITLE III—EMPLOYMENT
Sec. 301. Extension of Work Opportunity Credit and Welfare-to-Work credit.
TITLE IV—ENERGY
Sec. 401. Credit for certain energy-efficient property used in business.
Sec. 402. Extension of credit for qualified electric vehicles.
Sec. 403. Modifications to credit for electricity produced from certain renewable
resources.
Sec. 404. Credit for certain nonbusiness energy property.
Sec. 405. Extension of wind and biomass tax credit.
Sec. 406. Kerosene Tax Equalizer Act.
TITLE V—ENVIRONMENT
Sec. 501. Better America Bonds tax credit.
Sec. 502. Permanent extension of brownfields tax deduction at 100 percent.
Sec. 503. Restoration of deduction for demolition of certain structures.
Sec. 504. Increase in land donation tax deduction from 30 percent to 50 per-
cent.
Sec. 505. Temporary suspension of maximum amount of amortizable reforest-
ation expenditures.
TITLE VI—ESTATE TAX REDUCTION
Sec. 601. Repeal of limitation on estate tax deduction for family-owned busi-
ness interests.
Sec. 602. Unified credit increased by unused unified credit of predeceased
spouse.
TITLE VII—FAMILY ENHANCEMENT
Sec. 701. Nonrefundable personal credits allowed against alternative minimum
tax.
Sec. 702. Elimination of marriage penalty in standard deduction.
Sec. 703. Expansion of dependent care tax credit.
Sec. 704. Employer-provided child care services.
TITLE VIII—HEALTH CARE
Sec. 801. Credit for taxpayers with long-term care needs.
Sec. 802. Credit for employer health care costs.
Sec. 803. Emergency Medical Services Enhancement Act.
Sec. 804. Deduction for health insurance costs for self-employed individuals.
TITLE IX—HOUSING
Sec. 901. Extension of first-time District of Columbia home buyer tax credit.
Sec. 902. Increase in State ceiling in low-income housing tax credit.
TITLE X—RESEARCH AND BUSINESS
Sec. 1001. Increase in expense treatment for small businesses.
Sec. 1002. Medical innovation tax credit.
Sec. 1003. Permanent extension of research credit.
TITLE XI—RETIREMENT SECURITY
Sec. 1101. Adjustment in monthly exempt amount for purposes of the social se-
curity earnings test.
Sec. 1102. Small business credit for pension plan start-up costs.
Sec. 1103. Increase in taxpayer IRA contributions.
TITLE XII—NATIONAL COMMISSION ON TAX SIMPLIFICATION
AND REFORM
Sec. 1201. Establishment.
Sec. 1202. Functions.
Sec. 1203. Administration.
Sec. 1204. General.
TITLE XIII—AMOUNT OF REVENUES RESERVED FOR SOCIAL
SECURITY AND MEDICARE
Sec. 1301. Amount of revenues reserved for Social Security and Medicare.
TITLE I—CAPITAL GAINS
SEC. 101. REPEAL OF APPLICATION OF ALTERNATIVE MIN-
IMUM TAX TO STOCK TRANSFERRED PURSU-
ANT TO INCENTIVE STOCK OPTIONS.
(a) IN GENERAL.—Subsection (b) of section 56 of the
Internal Revenue Code of 1986 (relating to adjustments
in computing alternative minimum taxable income) is
amended by striking paragraph (3).
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply with respect to options exercised
after December 31, 1999.
TITLE II—EDUCATION
SEC. 201. EXTENSION OF EXCLUSION FOR EMPLOYER-PRO-
VIDED EDUCATIONAL ASSISTANCE; EXCLU-
SION TO APPLY TO ASSISTANCE PROVIDED
FOR GRADUATE EDUCATION.
(a) EXTENSION.—Subsection (d) of section 127 of
the Internal Revenue Code of 1986 is hereby repealed.
(b) EXCLUSION TO APPLY
TO GRADUATE STU-
DENTS.—The last sentence of section 127(c)(1) of such
Code is amended by striking ‘‘hobbies’’ and all that follows
and inserting ‘‘hobbies.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to courses beginning after June
30, 1999.
SEC. 202. EMPLOYER-PROVIDED WORKPLACE LITERACY
TAX CREDIT.
(a) GENERAL RULE.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to business related credits) is amended by
adding at the end thereof the following new section:
‘‘SEC. 45D. EXPENDITURES TO PROVIDE LANGUAGE TRAIN-
ING TO EMPLOYEES.
‘‘(a) GENERAL RULE.—For purposes of section 38,
the amount of the language training credit determined
under this section for the taxable year is 10 percent of
the qualified language training expenses paid or incurred
by the taxpayer during the taxable year.
‘‘(b) DOLLAR LIMIT PER EMPLOYEE.—The max-
imum credit determined under this section with respect
to each employee shall not exceed $525.
‘‘(c) QUALIFIED LANGUAGE TRAINING EXPENSES.—
For purposes of this section—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, the term ‘qualified language
training expenses’ means—
‘‘(A) amounts paid or incurred by the tax-
payer with respect to expenses incurred by or
on behalf of an employee for qualified language
training of such employee (including but not
limited to tuition, fees, and similar payments,
books and supplies), and
‘‘(B) the following expenses paid or in-
curred by the taxpayer—
‘‘(i) wages (as defined in section
41(b)(2)(D)) paid or incurred by the tax-
payer to an employee for services con-
sisting of providing qualified language
training to employees of the taxpayer, and
‘‘(ii) expenses of books and supplies
used in connection with the provision of
such training,
but only if such expenses are incurred pursuant to
a program which meets the requirements of para-
graphs (2) and (3) of section 127.
‘‘(2) ONLY
DOMESTIC
EMPLOYMENT
QUALI-
FIED.—Amounts may be taken into account under
paragraph (1) with respect to any employee receiv-
ing qualified language training only if—
‘‘(A) the employee is a citizen or resident
of the United States and has attained age 18,
and
‘‘(B) substantially all of the services per-
formed by such employee during the taxable
year for the taxpayer are performed in the
United States or any possession of the United
States.
‘‘(d) QUALIFIED LANGUAGE TRAINING.—For pur-
poses of this section, the term ‘qualified language training’
means—
‘‘(1) training in English language and literacy
to individuals with limited English proficiency, and
‘‘(2) remedial training in English language and
literacy.
‘‘(e) EXCLUSION
FROM
EMPLOYEE’S
INCOME.—
Amounts taken into account in determining the credit
under this section shall not be includible in the gross in-
come of the employee.’’.
(b) CREDIT MADE PART OF GENERAL BUSINESS
CREDIT.—Subsection (b) of section 38 of such Code is
amended by striking ‘‘plus’’ at the end of paragraph (11),
by striking the period at the end of paragraph (12) and
inserting ‘‘, plus’’, and by adding at the end thereof the
following new paragraph:
‘‘(13) the language training credit determined
under section 45D(a).’’.
(c) DENIAL OF DOUBLE BENEFIT.—Section 280C of
such Code is amended by adding at the end thereof the
following new subsection:
‘‘(d) CREDIT
FOR LITERACY ENHANCEMENT EX-
PENSES.—No deduction shall be allowed for that portion
of the qualified literacy education expenses (as defined in
section 45D(b)) otherwise allowable as a deduction for the
taxable year which is equal to the amount of the credit
determined for such taxable year under section 45D(a).’’
(d) CREDIT ALLOWABLE AGAINST MINIMUM TAX.—
Subsection (c) of section 38 of such Code is amended by
redesignating paragraph (3) as paragraph (4) and by in-
serting after paragraph (2) the following new paragraph:
‘‘(3) LANGUAGE
TRAINING
CREDIT
ALLOWED
AGAINST MINIMUM TAX.—
‘‘(A) IN
GENERAL.—The amount deter-
mined under paragraph (1)(A) shall be reduced
by the portion of the language training credit
not used against the normal limitation.
‘‘(B) PORTION
OF
LANGUAGE
TRAINING
CREDIT NOT USED AGAINST NORMAL LIMITA-
TION.—For purposes of subparagraph (A), the
portion of the language training credit not used
against the normal limitation is the excess (if
any) of—
‘‘(i) the portion of the credit allowable
under subsection (a) which is attributable
to the language training credit, over
‘‘(ii) the limitation of paragraph (1)
(determined without regard to this para-
graph) reduced by the portion of the credit
under subsection (a) which is not so attrib-
utable.’’
(e) CLERICAL AMENDMENT.—The table of sections
for subpart D of part IV of subchapter A of chapter 1
of such Code is amended by adding at the end thereof
the following new section:
‘‘Sec. 45D. Expenditures to provide language training to employ-
ees.’’.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
SEC. 203. CREDIT FOR INFORMATION TECHNOLOGY TRAIN-
ING PROGRAM EXPENSES.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to business-related credits) is amended by
adding at the end the following:
‘‘SEC. 45E. INFORMATION TECHNOLOGY TRAINING PRO-
GRAM EXPENSES.
‘‘(a) GENERAL RULE.—For purposes of section 38,
in the case of an employer, the information technology
training program credit determined under this section is
an amount equal to 20 percent of information technology
training program expenses paid or incurred by the tax-
payer during the taxable year.
‘‘(b) ADDITIONAL CREDIT PERCENTAGE FOR CER-
TAIN PROGRAMS.—The percentage under subsection (a)
shall be increased by 5 percentage points for information
technology training program expenses paid or incurred by
the taxpayer with respect to a program operated—
‘‘(1) in an empowerment zone or enterprise
community designated under part I of subchapter U,
‘‘(2) in a school district in which at least 50
percent of the students attending schools in such
district are eligible for free or reduced-cost lunches
under the school lunch program established under
the National School Lunch Act,
‘‘(3) in an area designated as a disaster area by
the Secretary of Agriculture or by the President
under the Disaster Relief and Emergency Assistance
Act in the taxable year or the 4 preceding taxable
years,
‘‘(4) in a rural enterprise community designated
under section 766 of the Agriculture, Rural Develop-
ment, Food and Drug Administration, and Related
Agencies Appropriations Act, 1999,
‘‘(5) in an area designated by the Secretary of
Agriculture as a Rural Economic Area Partnership
Zone, or
‘‘(6) by an employer who has 200 or fewer em-
ployees for each working day in each of 20 or more
calendar weeks in the current or preceding calendar
year.
‘‘(c) LIMITATION.—The amount of information tech-
nology training program expenses with respect to an indi-
vidual which may be taken into account under subsection
(a) for the taxable year shall not exceed $6,000.
‘‘(d) INFORMATION TECHNOLOGY TRAINING PRO-
GRAM EXPENSES.—For purposes of this section—
‘‘(1) IN
GENERAL.—The term ‘information
technology training program expenses’ means ex-
penses paid or incurred by reason of the participa-
tion of the employer in any information technology
training program.
‘‘(2) INFORMATION
TECHNOLOGY
TRAINING
PROGRAM.—The term ‘information technology train-
ing program’ means a program—
‘‘(A) for the training of computer program-
mers, systems analysts, and computer scientists
or engineers (as such occupations are defined
by the Bureau of Labor Statistics),
‘‘(B) involving a partnership of—
‘‘(i) employers, and
‘‘(ii) State training programs, school
districts, university systems, or certified
commercial information technology train-
ing providers, and
‘‘(C) at least 50 percent of the costs of
which are paid or incurred by the employers.
‘‘(3) CERTIFIED
COMMERCIAL
INFORMATION
TECHNOLOGY TRAINING PROVIDER.—The term ‘cer-
tified commercial information technology training
providers’ means a private sector provider of edu-
cational products and services utilized for training in
information technology which is certified with re-
spect to—
‘‘(A) the curriculum that is used for the
training, or
‘‘(B) the technical knowledge of the in-
structors of such provider,
by 1 or more software publishers or hardware manu-
facturers the products of which are a subject of the
training.
‘‘(e) DENIAL OF DOUBLE BENEFIT.—No deduction
or credit under any other provision of this chapter shall
be allowed with respect to information technology training
program expenses (determined without regard to the limi-
tation under subsection (c)).
‘‘(f) ALLOCATIONS.—For purposes of this section,
rules similar to the rules of section 41(f)(2) shall apply.’’
(b) CREDIT TO BE PART OF GENERAL BUSINESS
CREDIT.—Section 38(b) of the Internal Revenue Code of
1986 (relating to current year business credit) is amended
by striking ‘‘plus’’ at the end of paragraph (12), by strik-
ing the period at the end of paragraph (13) and inserting
‘‘, plus’’, and by adding at the end the following:
‘‘(14) the information technology training pro-
gram credit determined under section 45E.’’
(c) NO CARRYBACKS.—Subsection (d) of section 39
of the Internal Revenue Code of 1986 (relating to
carryback and carryforward of unused credits) is amended
by adding at the end the following:
‘‘(9) NO CARRYBACK OF SECTION 45E CREDIT
BEFORE EFFECTIVE DATE.—No portion of the un-
used business credit for any taxable year which is
attributable to the information technology training
program credit determined under section 45E may
be carried back to a taxable year ending before the
date of the enactment of section 45E.’’
(d) CLERICAL AMENDMENT.—The table of sections
for subpart D of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 is amended by add-
ing at the end the following:
‘‘Sec. 45E. Information technology training program expenses.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts paid or incurred after
the date of enactment of this Act in taxable years ending
after such date.
SEC. 204. TEACHER TECHNOLOGY ACCESS ACT.
(a) FINDINGS.—The Congress finds the following:
(1) There is a need for widespread commitment
to provide each child with a high quality education
that will prepare that child to successfully compete
in a global marketplace.
(2) The technological transformation of our
schools will go to waste if elementary and secondary
teachers are not provided with the support they need
to effectively integrate technologies into their teach-
ing.
(3) Teachers should be provided with the tools
and time required to master a variety of techno-
logical skills, redesign their lesson plans around
technology-enhanced resources, and take on a com-
plex new role in the technologically transformed
classroom.
(4) Teachers receive little support for these fun-
damental changes, and most teachers are left largely
on their own as they struggle to integrate technology
into their curricula.
(5) Just as our Nation’s businesses are pro-
vided with a variety of tax incentives to improve
their business operations in order to strengthen the
American economy, so also it is necessary and ap-
propriate that our Nation’s secondary and elemen-
tary teachers are afforded similar opportunities in
order to fulfill our commitment to providing every
child with a high quality education.
(b) CREDIT FOR ACQUISITION OF COMPUTER HARD-
WARE AND SOFTWARE BY ELEMENTARY AND SECONDARY
TEACHERS.—
(1) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code
of 1986 (relating to nonrefundable personal credits)
is amended by inserting after section 25A the fol-
lowing new section:
‘‘SEC. 25B. ACQUISITION OF COMPUTER HARDWARE AND
SOFTWARE 
BY 
ELEMENTARY 
AND 
SEC-
ONDARY TEACHERS.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an eli-
gible individual, there shall be allowed as a credit against
the tax imposed by this chapter for a taxable year an
amount equal to the qualified computer expenditures made
by such individual for the taxable year.
‘‘(b) LIMITATION.—No amount shall be allowed as a
credit under subsection (a) for a taxable year if such
amount, when added to all previous amounts allowed as
a credit under subsection (a) for any taxable year, exceeds
$2,000.
‘‘(c) DEFINITIONS.—For purposes of subsection
(a)—
‘‘(1) QUALIFIED COMPUTER EXPENDITURES.—
‘‘(A) IN
GENERAL.—The term ‘qualified
computer expenditures’ means the amount paid
or incurred for the acquisition of a computer,
related peripheral equipment, and computer
software. Such term shall not include computer
software that is primarily used for entertain-
ment or amusement.
‘‘(B) COMPUTER, RELATED
PERIPHERAL
EQUIPMENT.—The terms ‘computer’ and ‘re-
lated peripheral equipment’ have the meanings
given to such terms by section 168(i)(2)(B).
‘‘(C) COMPUTER
SOFTWARE.—The term
‘computer software’ has the meaning given to
such term by section 197(e)(3)(B), except that
such term shall include educational software
available only to educators.
‘‘(2) ELIGIBLE INDIVIDUAL.—The term ‘eligible
individual’ means an individual who is a teacher in
the classroom in an elementary or secondary school.
‘‘(d) DENIAL OF DOUBLE BENEFIT.—No deduction
or credit shall be allowed under any other provision of this
chapter for any amount allowed as a credit under this sec-
tion.
‘‘(e) TERMINATION.—Subsection (a) shall not apply
to expenditures made after December 31, 2004.’’.
(2) CLERICAL AMENDMENT.—The table of sec-
tions for subpart A of part IV of subchapter A of
chapter 1 of such Code is amended by inserting
after the item relating to section 25A the following
new item:
‘‘Sec. 25B. Acquisition of computer hardware and software by ele-
mentary and secondary teachers.’’.
(3) EFFECTIVE DATE.—The amendments made
by this section shall apply to taxable years beginning
after December 31, 1999.
SEC. 205. TEACHER TECHNOLOGY TRAINING ACT.
(a) IN GENERAL.—Subsection (c) of section 25A of
the Internal Revenue Code of 1986 (relating to lifetime
learning credit) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(3) SPECIAL RULE FOR TECHNOLOGY TRAIN-
ING
FOR
ELEMENTARY
AND
SECONDARY
TEACH-
ERS.—If any portion of the qualified tuition and re-
lated expenses to which this subsection applies—
‘‘(A) is paid or incurred by an individual
who is a teacher in the classroom in an elemen-
tary or secondary school, and
‘‘(B) is incurred before January 1, 2005—
‘‘(i) for the enrollment or attendance
of such individual in a course of instruc-
tion on basic or advanced computer func-
tions or computer software (including edu-
cational software offered by a single insti-
tution) approved for such individual by
such local educational agency, and
‘‘(ii) for purposes of integrating mate-
rials covered by such course into the
courses taught in the elementary or sec-
ondary classroom,
paragraph (1) shall be applied with respect to such
portion by substituting ‘50 percent’ for ‘20 per-
cent’.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to expenses paid after December
31, 1999, for education furnished in academic periods be-
ginning after such date.
SEC. 206. INCREASE IN HOPE AND LIFETIME LEARNING
TAX CREDITS.
(a) INCREASE IN MAXIMUM CREDIT.—
(1) HOPE
SCHOLARSHIP
CREDIT.—Paragraph
(1) of section 25A(b) of the Internal Revenue Code
of 1986 is amended by striking ‘‘$1,000’’ each place
it appears and inserting ‘‘$2,500’’.
(2) LIFETIME LEARNING CREDIT.—Paragraph
(1) of section 25A(c) of such Code is amended by
striking ‘‘$10,000 ($5,000’’ and inserting ‘‘$13,000
($6,500’’.
(b) HOPE CREDIT TO APPLY TO ALL 4 YEARS.—
Paragraph (2) of section 25A(b) is amended by striking
‘‘2’’ each place it appears and inserting ‘‘4’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1999.
SEC. 207. TAX TREATMENT OF STUDENT LOAN FORGIVE-
NESS.
(a) IN GENERAL.—Section 108(f) of the Internal
Revenue Code of 1986 is amended by adding at the end
the following new paragraph:
‘‘(4) WILLIAM
D. 
FORD
FEDERAL
DIRECT
LOANS.—For purposes of this subsection, the term
‘student loan’ includes loans made under the William
D. Ford Federal Direct Loan Program if loan repay-
ment and forgiveness are contingent on the bor-
rower’s income level.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to loans canceled after December
31, 1999.
SEC. 208. EXCLUSION OF CERTAIN AMOUNTS RECEIVED
UNDER THE NATIONAL HEALTH SERVICE
CORPS SCHOLARSHIP PROGRAM, THE F. ED-
WARD HEBERT ARMED FORCES HEALTH PRO-
FESSIONS SCHOLARSHIP AND FINANCIAL AS-
SISTANCE PROGRAM, AND CERTAIN OTHER
PROGRAMS.
(a) IN GENERAL.—Section 117(c) of the Internal
Revenue Code of 1986 (relating to the exclusion from
gross income amounts received as a qualified scholarship)
is amended—
(1) by striking ‘‘Subsections (a)’’ and inserting
the following:
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), subsections (a)’’, and
(2) by adding at the end the following new
paragraph:
‘‘(2) EXCEPTIONS.—Paragraph (1) shall not
apply to any amount received by an individual
under—
‘‘(A) the National Health Service Corps
Scholarship 
program 
under 
section
338A(g)(1)(A) of the Public Health Service
Act,
‘‘(B) the Armed Forces Health Professions
Scholarship and Financial Assistance program
under subchapter I of chapter 105 of title 10,
United States Code,
‘‘(C) the National Institutes of Health Un-
dergraduate Scholarship program under section
487D of the Public Health Service Act, or
‘‘(D) any State program determined by the
Secretary to have substantially similar objec-
tives as such programs.’’
(b) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by subsection (a)
shall apply to amounts received in taxable years be-
ginning after December 31, 1993.
(2) STATE
PROGRAMS.—Section 117(c)(2)(D)
of the Internal Revenue Code of 1986 (as added by
the amendments made by subsection (a)) shall apply
to amounts received in taxable years beginning after
December 31, 1999.
SEC. 209. ELIMINATION OF 60-MONTH LIMIT ON STUDENT
LOAN INTEREST DEDUCTION.
(a) IN GENERAL.—Section 221 of the Internal Rev-
enue Code of 1986 (relating to interest on education
loans) is amended by striking subsection (d) and by redes-
ignating subsections (e), (f), and (g) as subsections (d),
(e), and (f), respectively.
(b) CONFORMING AMENDMENT.—Section 6050(e) of
the Internal Revenue Code of 1986 is amended by striking
‘‘section 221(e)(1)’’ and inserting ‘‘section 221(d)(1)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to any loan interest
paid after December 31, 1999.
SEC. 210. CREDIT FOR SCHOOL CONSTRUCTION BONDS IN
HIGH-GROWTH AREAS.
(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 fol-
lowing calendar month. The credit rate for any
month is the percentage which the Secretary esti-
mates will on average permit the issuance of quali-
fied public school construction bonds without dis-
count and without 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.
‘‘(2) TEMPORARY PERIOD EXCEPTION.—A bond
shall not be treated as failing to meet the require-
ment of paragraph (1)(A) solely by reason of the
fact that the proceeds of the issue of which such
bond is a part are invested for a reasonable tem-
porary period (but not more than 36 months) until
such proceeds are needed for the purpose for which
such issue was issued. Any earnings on such pro-
ceeds during such period shall be treated as proceeds
of the issue for purposes of applying paragraph
(1)(A).
‘‘(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 limitation amount allocated under subsection (d) for
such calendar year to such issuer.
‘‘(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) $3,600,000,000 for 2000,
‘‘(2) $3,600,000,000 for 2001, and
‘‘(3) except as provided in subsection (e), zero
after 2001.
‘‘(d) ALLOCATION OF LIMITATION AMONG STATES.—
‘‘(1) IN GENERAL.—The Secretary shall allo-
cate the national qualified school construction bond
limitation for any calendar year among the States
with projected enrollment increases. The amount al-
located to a State under the preceding sentence shall
be allocated by the State education agency to issuers
within such State and such allocations may be made
only if there is an approved State application.
‘‘(2) ALLOCATION FORMULA.—
‘‘(A) IN GENERAL.—The national qualified
school construction bond limitation shall be al-
located among the States with projected enroll-
ment increases in proportion to their respective
shares of the national projected enrollment in-
crease.
‘‘(B) 
PROJECTED
ENROLLMENT
IN-
CREASE.—The amount of projected enrollment
increase for the United States or any State is
the amount of the increase (as projected by the
Secretary of Education using data as of Janu-
ary 1, 1998) in enrollment in public elementary
and secondary schools in the United States or
in such State (as the case may be) during the
10-year period beginning with 1997.
‘‘(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 2003.’’
(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, 1999.
SEC. 211. CREDIT FOR SCHOOL MODERNIZATION BONDS IN
DISTRESSED AREAS.
(a) IN GENERAL.—Chapter 1 of the Internal Rev-
enue Code of 1986 is amended by adding at the end the
following new subchapter:
‘‘Subchapter X—Public School Modernization
Provisions
‘‘Part I. Credit to holders of qualified public school modernization
bonds.
‘‘Part II. Qualified school construction bonds.
‘‘Part III. Incentives for education zones.
‘‘PART I—CREDIT TO HOLDERS OF QUALIFIED
PUBLIC SCHOOL MODERNIZATION BONDS
‘‘Sec. 1400F. Credit to holders of qualified public school mod-
ernization bonds.
‘‘SEC. 1400F. CREDIT TO HOLDERS OF QUALIFIED PUBLIC
SCHOOL MODERNIZATION BONDS.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of a tax-
payer who holds a qualified public 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 public 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 public 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 day before the date of
issuance of the issue) on outstanding long-term cor-
porate debt obligations (determined under regula-
tions prescribed 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 PUBLIC SCHOOL MODERNIZATION
BOND; CREDIT ALLOWANCE DATE.—For purposes of this
section—
‘‘(1) QUALIFIED PUBLIC SCHOOL MODERNIZA-
TION BOND.—The term ‘qualified public school mod-
ernization bond’ means—
‘‘(A) a qualified zone academy bond, and
‘‘(B) a qualified school construction bond.
‘‘(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.
‘‘(e) OTHER DEFINITIONS.—For purposes of this
subchapter—
‘‘(1) LOCAL EDUCATIONAL AGENCY.—The term
‘local educational agency’ has the meaning given to
such term by section 14101 of the Elementary and
Secondary Education Act of 1965. Such term in-
cludes the local educational agency that serves the
District of Columbia but does not include any other
State agency.
‘‘(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—
‘‘(A) any stadium or other facility pri-
marily used for athletic contests or exhibitions
or other events for which admission is charged
to the general public, or
‘‘(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 public
school modernization bond as if it were a stripped
bond and to the credit under this section as if it
were a stripped coupon.
‘‘(i) TREATMENT FOR ESTIMATED TAX PURPOSES.—
Solely for purposes of sections 6654 and 6655, the credit
allowed by this section to a taxpayer by reason of holding
a qualified public 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.
‘‘(j) 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.
‘‘(k) REPORTING.—Issuers of qualified public school
modernization bonds shall submit reports similar to the
reports required under section 149(e).
‘‘(l) TERMINATION.—This section shall not apply to
any bond issued after September 30, 2004.
‘‘PART II—QUALIFIED SCHOOL CONSTRUCTION
BONDS
‘‘Sec. 1400G. Qualified school construction bonds.
‘‘SEC. 1400G. QUALIFIED SCHOOL CONSTRUCTION BONDS.
‘‘(a) QUALIFIED SCHOOL CONSTRUCTION BOND.—
For purposes of this subchapter, the term ‘qualified school
construction bond’ means any bond issued as part of an
issue if—
‘‘(1) 95 percent or more of the proceeds of such
issue are to be used for the construction, rehabilita-
tion, or repair of a public school facility or for the
acquisition of land on which such a facility 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,
‘‘(3) the issuer designates such bond for pur-
poses of this section, and
‘‘(4) the term of each bond which is part of
such issue does not exceed 15 years.
‘‘(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
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 2000,
‘‘(2) $11,000,000,000 for 2001, and
‘‘(3) except as provided in subsection (f), zero
after 2001.
‘‘(d) HALF
OF LIMITATION ALLOCATED AMONG
STATES.—
‘‘(1) IN GENERAL.—One-half of the limitation
applicable under subsection (c) for any calendar year
shall be allocated among the States under paragraph
(2) by the Secretary. The limitation amount allo-
cated to a State under the preceding sentence shall
be allocated by the State to issuers within such
State and such allocations may be made only if there
is an approved State application.
‘‘(2) ALLOCATION FORMULA.—The amount to
be allocated under paragraph (1) for any calendar
year shall be allocated among the States in propor-
tion to the respective amounts each such State re-
ceived for Basic Grants under subpart 2 of part A
of title I of the Elementary and Secondary Edu-
cation Act of 1965 (20 U.S.C. 6331 et seq.) for the
most recent fiscal year ending before such calendar
year. For purposes of the preceding sentence, Basic
Grants attributable to large local educational agen-
cies (as defined in subsection (e)) shall be dis-
regarded.
‘‘(3) MINIMUM ALLOCATIONS TO STATES.—
‘‘(A) IN
GENERAL.—The Secretary shall
adjust the allocations under this subsection for
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 minimum percentage of the amount to
be allocated under paragraph (1) for the cal-
endar year.
‘‘(B) MINIMUM
PERCENTAGE.—A State’s
minimum percentage for any calendar year is
the minimum percentage described in section
1124(d) of the Elementary and Secondary Edu-
cation Act of 1965 (20 U.S.C. 6334(d)) for
such State for the most recent fiscal year end-
ing before such calendar year.
‘‘(4) 
ALLOCATIONS
TO
CERTAIN
POSSES-
SIONS.—The amount to be allocated under para-
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.
‘‘(5) ALLOCATIONS FOR INDIAN SCHOOLS.—In
addition to the amounts otherwise allocated under
this subsection, $200,000,000 for calendar year
2000, and $200,000,000 for calendar year 2001,
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 7871) shall be treated as qualified
issuers for purposes of this subchapter.
‘‘(6) 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 highest priority to localities
with the greatest needs, as demonstrated
by inadequate school facilities coupled with
a low level of resources to meet those
needs,
‘‘(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 shall
be binding if such State reasonably determined that
the allocation was in accordance with the plan ap-
proved under this paragraph.
‘‘(e) HALF
OF LIMITATION ALLOCATED AMONG
LARGEST SCHOOL DISTRICTS.—
‘‘(1) IN GENERAL.—One-half of the limitation
applicable under subsection (c) for any calendar year
shall be allocated under paragraph (2) by the Sec-
retary among local educational agencies which are
large local educational agencies for such year. No
qualified school construction bond may be issued by
reason of an allocation to a large local educational
agency under the preceding sentence unless such
agency has an approved local application.
‘‘(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—
‘‘(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.
‘‘(5) APPROVED
LOCAL
APPLICATION.—For
purposes of paragraph (1), the term ‘approved local
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 local educational
agency or the State with the involvement of
school officials, members of the public, and ex-
perts in school construction and management)
of such agency’s needs for public school facili-
ties, including descriptions of—
‘‘(i) the overall condition of the local
educational agency’s school facilities, in-
cluding health and safety problems,
‘‘(ii) the capacity of the agency’s
schools to house projected enrollments, and
‘‘(iii) the extent to which the agency’s
schools offer the physical infrastructure
needed to provide a high-quality education
to all students,
‘‘(B) a description of how the local edu-
cational agency will use its allocation under this
subsection to address the needs identified under
subparagraph (A), and
‘‘(C) a description of how the local edu-
cational agency will ensure that its allocation
under this subsection is used only to supple-
ment, and not supplant, the amount of school
construction, rehabilitation, or repair in the lo-
cality that would have occurred in the absence
of such allocation.
A rule similar to the rule of the last sentence of sub-
section (d)(6) shall apply for purposes of this para-
graph.
‘‘(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
by the amount of such excess. A similar rule shall apply
to the amounts allocated under subsection (d)(5) or (e).
‘‘(g) SPECIAL RULES RELATING TO ARBITRAGE.—
‘‘(1) IN GENERAL.—A bond shall not be treated
as failing to meet the requirement of subsection
(a)(1) solely by reason of the fact that the proceeds
of the issue of which such bond is a part are in-
vested for a temporary period (but not more than 36
months) until such proceeds are needed for the pur-
pose for which such issue was issued.
‘‘(2) BINDING COMMITMENT REQUIREMENT.—
Paragraph (1) shall apply to an issue only if, as of
the date of issuance, there is a reasonable expecta-
tion that—
‘‘(A) at least 10 percent of the proceeds of
the issue will be spent within the 6-month pe-
riod beginning on such date for the purpose for
which such issue was issued, and
‘‘(B) the remaining proceeds of the issue
will be spent with due diligence for such pur-
pose.
‘‘(3) EARNINGS ON PROCEEDS.—Any earnings
on proceeds during the temporary period shall be
treated as proceeds of the issue for purposes of ap-
plying subsection (a)(1) and paragraph (1) of this
subsection.
‘‘PART III—INCENTIVES FOR EDUCATION ZONES
‘‘Sec. 1400H. Qualified zone academy bonds.
‘‘Sec. 1400I. Corporate contributions to specialized training cen-
ters.
‘‘SEC. 1400H. QUALIFIED ZONE ACADEMY BONDS.
‘‘(a) QUALIFIED ZONE ACADEMY BOND.—For pur-
poses of this subchapter—
‘‘(1) IN GENERAL.—The term ‘qualified zone
academy 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 a qualified pur-
pose with respect to a qualified zone academy
established by a local educational agency,
‘‘(B) the bond is issued by a State or local
government within the jurisdiction of which
such academy is located,
‘‘(C) the issuer—
‘‘(i) designates such bond for purposes
of this section,
‘‘(ii) certifies that it has written as-
surances that the private business con-
tribution requirement of paragraph (2) will
be met with respect to such academy, and
‘‘(iii) certifies that it has the written
approval of the local educational agency
for such bond issuance, and
‘‘(D) the term of each bond which is part
of such issue does not exceed 15 years.
Rules similar to the rules of section 1400G(g) shall
apply for purposes of paragraph (1).
‘‘(2) PRIVATE
BUSINESS
CONTRIBUTION
RE-
QUIREMENT.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the private business contribution re-
quirement of this paragraph is met with respect
to any issue if the local educational agency that
established the qualified zone academy has writ-
ten commitments from private entities to make
qualified contributions having a present value
(as of the date of issuance of the issue) of not
less than 10 percent of the proceeds of the
issue.
‘‘(B) QUALIFIED
CONTRIBUTIONS.—For
purposes of subparagraph (A), the term ‘quali-
fied contribution’ means any contribution (of a
type and quality acceptable to the local edu-
cational agency) of—
‘‘(i) equipment for use in the qualified
zone academy (including state-of-the-art
technology and vocational equipment),
‘‘(ii) technical assistance in developing
curriculum or in training teachers in order
to promote appropriate market driven tech-
nology in the classroom,
‘‘(iii) services of employees as volun-
teer mentors,
‘‘(iv) internships, field trips, or other
educational opportunities outside the acad-
emy for students, or
‘‘(v) any other property or service
specified by the local educational agency.
‘‘(3) QUALIFIED
ZONE
ACADEMY.—The term
‘qualified zone academy’ means any public school (or
academic program within a public school) which is
established by and operated under the supervision of
a local educational agency to provide education or
training below the postsecondary level if—
‘‘(A) such public school or program (as the
case may be) is designed in cooperation with
business to enhance the academic curriculum,
increase graduation and employment rates, and
better prepare students for the rigors of college
and the increasingly complex workforce,
‘‘(B) students in such public school or pro-
gram (as the case may be) will be subject to the
same academic standards and assessments as
other students educated by the local educational
agency,
‘‘(C) the comprehensive education plan of
such public school or program is approved by
the local educational agency, and
‘‘(D)(i) such public school is located in an
empowerment zone or enterprise community
(including any such zone or community des-
ignated after the date of the enactment of this
section), or
‘‘(ii) there is a reasonable expectation (as
of the date of issuance of the bonds) that at
least 35 percent of the students attending such
school or participating in such program (as the
case may be) will be eligible for free or reduced-
cost lunches under the school lunch program es-
tablished under the National School Lunch Act.
‘‘(4) QUALIFIED
PURPOSE.—The term ‘quali-
fied purpose’ means, with respect to any qualified
zone academy—
‘‘(A) constructing, rehabilitating, or repair-
ing the public school facility in which the acad-
emy is established,
‘‘(B) acquiring the land on which such fa-
cility is to be constructed with part of the pro-
ceeds of such issue,
‘‘(C) providing equipment for use at such
academy,
‘‘(D) developing course materials for edu-
cation to be provided at such academy, and
‘‘(E) training teachers and other school
personnel in such academy.
‘‘(b) LIMITATIONS
ON AMOUNT
OF BONDS DES-
IGNATED.—
‘‘(1) IN GENERAL.—There is a national zone
academy bond limitation for each calendar year.
Such limitation is—
‘‘(A) $400,000,000 for 1998,
‘‘(B) $400,000,000 for 1999,
‘‘(C) $1,000,000,000 for 2000,
‘‘(D) $1,400,000,000 for 2001, and
‘‘(E) except as provided in paragraph (3),
zero after 2001.
‘‘(2) ALLOCATION OF LIMITATION.—
‘‘(A) ALLOCATION AMONG STATES.—
‘‘(i) 1998 and 1999 LIMITATIONS.—
The national zone academy bond limita-
tions for calendar years 1998 and 1999
shall be allocated by the Secretary among
the States on the basis of their respective
populations of individuals below the pov-
erty line (as defined by the Office of Man-
agement and Budget).
‘‘(ii) LIMITATION
AFTER
1999.—The
national zone academy bond limitation for
any calendar year after 1999 shall be allo-
cated by the Secretary among the States in
the 
manner 
prescribed 
by 
section
1400G(d); except that in making the allo-
cation under this clause, the Secretary
shall take into account—
‘‘(I) Basic Grants attributable to
large local educational agencies (as
defined in section 1400G(e)).
‘‘(II) the national zone academy
bond limitation.
‘‘(B) 
ALLOCATION
TO
LOCAL
EDU-
CATIONAL
AGENCIES.—The limitation amount
allocated to a State under subparagraph (A)
shall be allocated by the State education agency
to qualified zone academies within such State.
‘‘(C) DESIGNATION SUBJECT TO LIMITA-
TION AMOUNT.—The maximum aggregate face
amount of bonds issued during any calendar
year which may be designated under subsection
(a) with respect to any qualified zone academy
shall not exceed the limitation amount allocated
to such academy under subparagraph (B) for
such calendar year.
‘‘(3) CARRYOVER OF UNUSED LIMITATION.—If
for any calendar year—
‘‘(A) the limitation amount under this sub-
section for any State, exceeds
‘‘(B) the amount of bonds issued during
such year which are designated under sub-
section (a) (or the corresponding provisions of
prior law) with respect to qualified zone acad-
emies within such State,
the limitation amount under this subsection for such
State for the following calendar year shall be in-
creased by the amount of such excess.
‘‘SEC. 1400I. CORPORATE CONTRIBUTIONS TO SPECIALIZED
TRAINING CENTERS.
‘‘(a) GENERAL RULE.—For purposes of section 38,
in the case of a corporation, the specialized training center
credit determined under this section is an amount equal
to 50 percent of the amount of the designated qualified
contributions made by the taxpayer during the taxable
year to a specialized training center.
‘‘(b) DEFINITIONS.—For purposes of this section—
‘‘(1) SPECIALIZED
TRAINING
CENTER.—The
term ‘specialized training center’ means any quali-
fied 
zone 
academy 
(as 
defined 
in 
section
1400H(a)(3))—
‘‘(A) which is located in an empowerment
zone or enterprise community, or
‘‘(B) which is located in proximity to such
a zone or community and a significant number
of the students attending such academy have
their principal place of abode in such zone or
community.
‘‘(2) 
DESIGNATED
QUALIFIED
CONTRIBU-
TIONS.—The term ‘designated qualified contribution’
means any contribution—
‘‘(A) which is made pursuant to an agree-
ment under which the taxpayer participates in
the design of the academic program of the spe-
cialized training center, and
‘‘(B) which is designated under subsection
(c).
‘‘(c) DESIGNATION OF CONTRIBUTIONS.—
‘‘(1) LIMITATION ON AMOUNT DESIGNATED.—
The maximum amount of contributions made which
may be designated under this subsection with re-
spect to all specialized training centers located in an
empowerment zone or enterprise community shall
not exceed—
‘‘(A) $8,000,000 in the case of an em-
powerment zone, and
‘‘(B) $2,000,000 in the case of an enter-
prise community.
‘‘(2) DESIGNATIONS.—Designations under this
subsection shall be made (in consultation with the
local educational agency) by the local government
agency responsible for implementing the strategic
plan described in section 1391(f)(2) for the em-
powerment zone or enterprise community.
‘‘(d) VALUE OF CONTRIBUTIONS.—The amount of
any designated qualified contribution which may be taken
into account under this section shall be—
‘‘(1) the amount of such contribution which
would be allowed as a deduction under section 170
without regard to section 280C(d), or
‘‘(2) in the case of a contribution of services
performed on the premises of a specialized training
center by an employee of the taxpayer, the amount
of wages (as defined in section 3306(b) but without
regard to any dollar limitation contained in such sec-
tion) paid by the taxpayer for such services.’’
(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 MODERNIZATION BONDS.—
‘‘(A) IN GENERAL.—For purposes of sub-
section (a), the term ‘interest’ includes amounts
includible in gross income under section
1400F(f) and such amounts shall be treated as
paid on the credit allowance date (as defined in
section 1400F(d)(2)).
‘‘(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) CONFORMING AMENDMENTS RELATED TO CRED-
IT
FOR CORPORATE CONTRIBUTIONS
TO SPECIALIZED
TRAINING CENTERS.—
(1) DENIAL
OF
DOUBLE
BENEFIT.—Section
280C of such Code is amended by adding at the end
the following new subsection:
‘‘(d) CREDIT FOR CORPORATE CONTRIBUTIONS TO
SPECIALIZED TRAINING CENTERS.—No deduction shall
be allowed for that portion of the designated qualified con-
tributions (as defined in section 1400I(b)) made during
the taxable year which is equal to the credit determined
for the taxable year under section 1400I(a). Paragraph
(3) of subsection (b) shall apply for purposes of this sub-
section.’’
(2) CREDIT TO BE PART OF GENERAL BUSI-
NESS CREDIT.—
(A) Section 38(b) of such Code is
amended—
(i) by striking ‘‘plus’’ at the end of
paragraph (11),