HR 1760 IH

To amend the Internal Revenue Code of 1986 to expand the incentives for the construction, repair, rehabilitation, and renovation of public schools.

May 11, 1999

Mrs. JOHNSON of Connecticut 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

To amend the Internal Revenue Code of 1986 to expand the incentives for the construction, repair, rehabilitation, 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 Classrooms Act of 1999'.

SEC. 2. FINDINGS.

The Congress hereby finds:

(1) Public school buildings in urban, suburban, and rural school districts across the United States need extensive repair, rehabilitation, and renovation.

(2) New buildings will be needed in many school districts as a result of a surge in student enrollments.

(3) The General Accounting Office has found that more than 14 million children attend schools in need of extensive repair or replacement, 7 million children attend schools with safety code violations, and 12 million children attend schools with leaky roofs.

(4) Many public schools do not have the appropriate infrastructure to be able to use computers and other technology needed to adequately prepare students to meet the challenges of the 21st Century.

(5) The Federal Government can support public school repair, modernization, and construction without interfering with local control.

SEC. 3. CREDIT TO HOLDERS OF QUALIFIED PUBLIC SCHOOL CONSTRUCTION BONDS.

(a) IN GENERAL- Subpart B of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

`SEC. 30B. CREDIT TO HOLDERS OF QUALIFIED PUBLIC SCHOOL CONSTRUCTION BONDS.

`(a) ALLOWANCE OF CREDIT- In the case of a taxpayer who holds a qualified school construction 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 school construction 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 school construction 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) QUALIFIED SCHOOL CONSTRUCTION BOND- For purposes of this section--

`(1) IN GENERAL- The term `qualified 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 facility or for the acquisition of land on which such a facility is to be constructed with part of the proceeds of such issue,

`(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) LIMITATION ON AMOUNT OF BONDS DESIGNATED- The maximum aggregate face amount of bonds issued during any calendar year which may be designated under paragraph (1) by any issuer shall not exceed the limitation amount allocated under paragraph (3) for such calendar year to such issuer.

`(3) NATIONAL LIMITATION ON AMOUNT OF BONDS DESIGNATED- There is a national qualified school construction bond limitation for each calendar year. Such limitation is--

`(A) $12,500,000,000 for 2000,

`(B) $12,500,000,000 for 2001, and

`(C) except as provided in paragraph (5), zero after 2001.

`(4) ALLOCATION OF LIMITATION AMONG STATES-

`(A) IN GENERAL- The limitation applicable under paragraph (3) for any calendar year shall be allocated among the States by the Secretary. The amount allocated to a State for a calendar year shall be equal to the sum of--

`(i) the amount allocated to the State for such year under subparagraph (B), and

`(ii) the amount allocated to the State for such year under subparagraph (C).

The limitation amount allocated 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.

`(B) ALLOCATION ON BASIS OF BASIC GRANTS UNDER TITLE I OF THE ELEMENTARY AND SECONDARY EDUCATION ACT OF 1965- One-half of the limitation applicable under paragraph (3) for any calendar year shall be allocated among the States in proportion to the respective amounts each such State 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.

`(C) ALLOCATION ON BASIS OF TOTAL ELEMENTARY AND SECONDARY SCHOOL AGE POPULATION- One-half of the limitation applicable under paragraph (3) for any calendar year shall be allocated 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.

`(D) MINIMUM ALLOCATIONS TO STATES-

`(i) IN GENERAL- The Secretary shall adjust the allocations under this paragraph for any calendar year for each State to the extent necessary to ensure that the amount allocated to such State under this paragraph for such year is not less than an amount equal to such State's minimum percentage of one-half of the amount to be allocated under subparagraph (A) for the calendar year.

`(ii) 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.

`(E) ALLOCATIONS TO CERTAIN POSSESSIONS- The amount to be allocated under subparagraph (A) to any possession of the United States other than Puerto Rico shall be the amount which would have been allocated if all allocations under subparagraph (A) 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 subparagraph (A) shall be reduced by the aggregate amount allocated under this subparagraph to possessions of the United States.

`(F) APPROVED STATE APPLICATION- For purposes of subparagraph (A), the term `approved State application' means an application which is approved by the Secretary of Education and which includes--

`(i) the results of a recent publicly-available survey (undertaken by the State with the involvement of local education officials, members of the public, and experts in school construction and management) of such State's needs for public school facilities, including descriptions 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 infrastructure needed to provide a high-quality education to all students, and

`(ii) a description of how the State will allocate to local educational agencies, or otherwise use, its allocation under this subsection to address the needs identified under subparagraph (A), including a description of how it will--

`(I) give high 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 subsection to assist localities that lack the fiscal capacity to issue bonds on their own,

`(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, and

`(IV) ensure that the needs of both rural and urban areas are recognized.

Any allocation under subparagraph (A) by a State education agency shall be binding if such agency reasonably determined that the allocation was in accordance with the plan approved under this subparagraph.

`(5) CARRYOVER OF UNUSED LIMITATION- If for any calendar year--

`(A) the amount allocated under paragraph (4) to any State, exceeds

`(B) the amount of bonds issued during such year which are designated under paragraph (1) pursuant to such allocation,

the limitation amount under paragraph (4) for such State for the following calendar year shall be increased by the amount of such excess.

`(d) 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.

`(e) OTHER DEFINITIONS- For purposes of this section--

`(1) 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.

`(2) 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.

`(3) BOND- The term `bond' includes any obligation.

`(4) STATE- The term `State' includes the District of Columbia and any possession of the United States.

`(5) 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 (d)) and the amount so included shall be treated as interest income.

`(g) BONDS HELD BY REGULATED INVESTMENT COMPANIES- If any qualified school construction 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.

`(h) 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 school construction 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 school construction 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 school construction 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.

`(j) 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.

`(k) REPORTING- Issuers of qualified school construction 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 December 31, 2004.'

(b) REPORTING- Subsection (d) of section 6049 of such Code (relating to returns regarding payments of interest) is amended by adding at the end the following new paragraph:

`(8) REPORTING OF CREDIT ON QUALIFIED SCHOOL CONSTRUCTION BONDS-

`(A) IN GENERAL- For purposes of subsection (a), the term `interest' includes amounts includible in gross income under section 30B(f) and such amounts shall be treated as paid on the credit allowance date (as defined in section 30B(e)(1)).

`(B) REPORTING TO CORPORATIONS, ETC- Except as otherwise provided in regulations, 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 Secretary may prescribe such regulations as are necessary or appropriate to carry out the purposes of this paragraph, including regulations which require more frequent or more detailed reporting.'

(c) CONFORMING AMENDMENTS-

(1) Subchapter U of chapter 1 of such Code is amended by striking part IV, by redesignating part V as part IV, and by redesignating section 1397F as section 1397E.

(2) The table of parts of subchapter U of chapter 1 of such Code is amended by striking the last 2 items and inserting the following item:

`Part IV. Regulations.'

(3) The table of sections for subpart B of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

`Sec. 30B. Credit to holders of qualified public school construction bonds.'

(d) EFFECTIVE DATE- The amendments made by this section shall apply to obligations issued after December 31, 1999.

SEC. 4. APPLICATION OF CERTAIN LABOR STANDARDS ON CONSTRUCTION PROJECTS FINANCED UNDER PUBLIC SCHOOL CONSTRUCTION PROGRAM.

Section 439 of the General Education Provisions Act (relating to labor standards) is amended--

(1) by inserting `(a)' before `All laborers and mechanics', and

(2) by adding at the end the following:

`(b)(1) For purposes of this section, the term `applicable program' also includes the qualified zone academy bond provisions enacted by section 226 of the Taxpayer Relief Act of 1997 and the program established by section 3 of the America's Better Classrooms Act of 1999.

`(2) A State or local government participating in a program described in paragraph (1) shall--

`(A) in the awarding of contracts, give priority to contractors with substantial numbers of employees residing in the local education area to be served by the school being constructed; and

`(B) include in the construction contract for such school a requirement that the contractor give priority in hiring new workers to individuals residing in such local education area.

`(3) In the case of a program described in paragraph (1), nothing in this subsection or subsection (a) shall be construed to deny any tax credit allowed under such program. If amounts are required to be withheld from contractors to pay wages to which workers are entitled, such amounts shall be treated as expended for construction purposes in determining whether the requirements of such program are met.'.

SEC. 5. EMPLOYMENT AND TRAINING ACTIVITIES RELATING TO CONSTRUCTION OR RECONSTRUCTION OF PUBLIC SCHOOL FACILITIES.

(a) IN GENERAL- Section 134 of the Workforce Investment Act of 1998 (29 U.S.C. 2864) is amended by adding at the end the following:

`(f) LOCAL EMPLOYMENT AND TRAINING ACTIVITIES RELATING TO CONSTRUCTION OR RECONSTRUCTION OF PUBLIC SCHOOL FACILITIES-

`(1) IN GENERAL- In order to provide training services related to construction or reconstruction of public school facilities receiving funding assistance under an applicable program, each State shall establish a specialized program of training meeting the following requirements:

`(A) The specialized program provides training for jobs in the construction industry.

`(B) The program is designed to provide trained workers for projects for the construction or reconstruction of public school facilities receiving funding assistance under an applicable program.

`(C) The program is designed to ensure that skilled workers (residing in the area to be served by the school facilities) will be available for the construction or reconstruction work.

`(2) COORDINATION- The specialized program established under paragraph (1) shall be integrated with other activities under this Act, with the activities carried out under the National Apprenticeship Act of 1937 by the State Apprenticeship Council or through the Bureau of Apprenticeship and Training in the Department of Labor, as appropriate, and with activities carried out under the Carl D. Perkins Vocational and Technical Education Act of 1998. Nothing in this subsection shall be construed to require services duplicative of those referred to in the preceding sentence.

`(3) APPLICABLE PROGRAM- In this subsection, the term `applicable program' has the meaning given the term in section 439(b) of the General Education Provisions Act (relating to labor standards).'.

(b) STATE PLAN- Section 112(b)(17)(A) of the Workforce Investment Act of 1998 (29 U.S.C. 2822(b)(17)(A)) is amended--

(1) in clause (iii), by striking `and' at the end;

(2) by redesignating clause (iv) as clause (v); and

(3) by inserting after clause (iii) the following:

`(iv) how the State will establish and carry out a specialized program of training under section 134(f); and'.

END