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108th CONGRESS
1st Session
H. R. 717
To amend the Internal Revenue Code of 1986 to expand the incentives for
the construction and renovation of public schools.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 12, 2003
Mr. Rangel introduced the following bill; which was referred to the
Committee on Ways and Means, and in addition to the Committee on
Education and the Workforce, for a period to be subsequently determined
by the Speaker, in each case for consideration of such provisions as
fall within the jurisdiction of the committee concerned
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to expand the incentives for
the construction and renovation of public schools.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``America's Better Classroom Act of
2003''.
SEC. 2. EXPANSION OF INCENTIVES FOR PUBLIC SCHOOLS.
(a) In General.--Chapter 1 of the Internal Revenue Code of 1986 is
amended by adding at the end the following new subchapter:
``Subchapter Z--Public School Modernization Provisions
``Sec. 1400N. Credit to holders of
qualified public school
modernization bonds.
``Sec. 1400O. Qualified school
construction bonds.
``Sec. 1400P. Qualified zone academy
bonds.
``SEC. 1400N. CREDIT TO HOLDERS OF QUALIFIED PUBLIC SCHOOL
MODERNIZATION BONDS.
``(a) Allowance of Credit.--In the case of a taxpayer 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 determined 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 respect 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
corporate debt obligations (determined under regulations
prescribed by the Secretary).
``(4) Special rule for issuance and redemption.--In the
case of a bond which is issued during the 3-month period ending
on a credit allowance date, the amount of the credit determined
under this subsection with respect to such credit allowance
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 redeemed.
``(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 imposed by
section 55, over
``(B) the sum of the credits allowable under part
IV of subchapter A (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) Qualified Public School Modernization Bond; Credit Allowance
Date.--For purposes of this section--
``(1) Qualified public school modernization bond.--The term
`qualified public school modernization 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 includes 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 obligation.
``(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 primarily used
for athletic contests or exhibitions or other events
for which admission is charged to the general public, or
``(B) any facility which is not owned by a State or
local government or any agency or instrumentality of a
State or local government.
``(f) 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 treated as interest income.
``(g) Recapture of Portion of Credit Where Cessation of
Compliance.--
``(1) In general.--If any bond which when issued purported
to be a qualified public school modernization bond ceases to be
a qualified public school modernization bond, the issuer shall
pay to the United States (at the time required by the
Secretary) an amount equal to the sum of--
``(A) the aggregate of the credits allowable under
this section with respect to such bond (determined
without regard to subsection (c)) for taxable years
ending during the calendar year in which such cessation
occurs and the 2 preceding calendar years, and
``(B) interest at the underpayment rate under
section 6621 on the amount determined under
subparagraph (A) for each calendar year for the period
beginning on the first day of such calendar year.
``(2) Failure to pay.--If the issuer fails to timely pay
the amount required by paragraph (1) with respect to such bond,
the tax imposed by this chapter on each holder of any such bond
which is part of such issue shall be increased (for the taxable
year of the holder in which such cessation occurs) by the
aggregate decrease in the credits allowed under this section to
such holder for taxable years beginning in such 3 calendar
years which would have resulted solely from denying any credit
under this section with respect to such issue for such taxable
years.
``(3) Special rules.--
``(A) Tax benefit rule.--The tax for the taxable
year shall be increased under paragraph (2) only with
respect to credits allowed by reason of this section
which were used to reduce tax liability. In the case of
credits not so used to reduce tax liability, the
carryforwards and carrybacks under section 39 shall be
appropriately adjusted.
``(B) No credits against tax.--Any increase in tax
under paragraph (2) shall not be treated as a tax
imposed by this chapter for purposes of determining--
``(i) the amount of any credit allowable
under this part, or
``(ii) the amount of the tax imposed by
section 55.
``(h) Bonds Held by Regulated Investment Companies.--If any
qualified public school modernization bond is held by a regulated
investment company, the credit determined under subsection (a) shall be
allowed to shareholders of such company under procedures prescribed by
the Secretary.
``(i) Credits May Be Stripped.--Under regulations prescribed by the
Secretary--
``(1) In general.--There may be a separation (including at
issuance) of the ownership of a qualified public school
modernization bond and the entitlement 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 evidencing 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 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.
``(j) 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
bond on a credit allowance date shall be treated as if it were a
payment of estimated tax made by the taxpayer on such date.
``(k) Credit May Be Transferred.--Nothing in any law or rule of law
shall be construed to limit the transferability of the credit allowed
by this section through sale and repurchase agreements.
``(l) Reporting.--Issuers of qualified public school modernization
bonds shall submit reports similar to the reports required under
section 149(e).
``(m) Termination.--This section shall not apply to any bond issued
after September 30, 2008.
``SEC. 1400O. 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, rehabilitation, 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 government
within the jurisdiction of which such school is located,
``(3) the issuer designates such bond for purposes 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 Designated.--The maximum
aggregate face amount of bonds issued during any calendar year which
may be designated under subsection (a) by any issuer shall not exceed
the sum of--
``(1) the limitation amount allocated under subsection (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 construction bond limitation for each
calendar year. Such limitation is--
``(1) $11,000,000,000 for 2004,
``(2) $11,000,000,000 for 2005, and
``(3) except as provided in subsection (f), zero after
2005.
``(d) 60 Percent of Limitation Allocated Among States.--
``(1) In general.--60 percent of the limitation applicable
under subsection (c) for any calendar year shall be allocated
by the Secretary among the States in proportion to the
respective numbers of children in each State who have attained
age 5 but not age 18 for the most recent fiscal year ending
before such calendar year. The limitation amount allocated to a
State under the preceding sentence shall be allocated by the
State to issuers within such State.
``(2) Minimum allocations to states.--
``(A) In general.--The Secretary shall adjust the
allocations under this subsection for 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 educational
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 calendar 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 Education Act of 1965 (20
U.S.C. 6334(d)) for such State for the most recent
fiscal year ending before such calendar year.
``(3) Allocations to certain possessions.--The amount to be
allocated under paragraph (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
allocated under paragraph (1) shall be reduced by the aggregate
amount allocated under this paragraph to possessions of the
United States.
``(4) Allocations for indian schools.--In addition to the
amounts otherwise allocated under this subsection, $200,000,000
for calendar year 2004, and $200,000,000 for calendar year
2005, shall be allocated by the Secretary of the Interior for
purposes of the construction, rehabilitation, and repair of
schools funded by the Bureau of Indian Affairs. 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.
``(e) 40 Percent of Limitation Allocated Among Largest School
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