[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2446 Introduced in House (IH)]







106th CONGRESS
  1st Session
                                H. R. 2446

 To amend the Internal Revenue Code of 1986 to allow a credit against 
             income tax to holders of Better America Bonds.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              July 1, 1999

Mr. Matsui (for himself, Mr. Doggett, Mr. Blumenauer, Mr. Gephardt, Mr. 
  Bonior, Mr. Rangel, Mr. Coyne, Mr. Levin, Mr. Cardin, Mr. Lewis of 
 Georgia, Mr. Neal of Massachusetts, Mr. Jefferson, Mrs. Thurman, Mr. 
Becerra, Mr. Allen, Ms. Baldwin, Mr. Barrett of Wisconsin, Mr. Berman, 
Ms. Brown of Florida, Mr. Brown of California, Mr. Brown of Ohio, Mrs. 
  Capps, Ms. Carson, Mrs. Christensen, Mr. Cummings, Ms. DeGette, Ms. 
 DeLauro, Mr. Dixon, Mr. Dooley of California, Mr. Doyle, Mr. Farr of 
California, Mr. Fattah, Mr. Frost, Mr. Hinchey, Mr. Hoeffel, Mr. Holt, 
 Mr. Larson, Mr. Maloney of Connecticut, Mr. Meehan, Mr. Menendez, Ms. 
 Millender-McDonald, Mr. George Miller of California, Mrs. Napolitano, 
 Ms. Norton, Ms. Pelosi, Mr. Serrano, Ms. Schakowsky, Mr. Thompson of 
 Mississippi, Mr. Tierney, Mrs. Jones of Ohio, Mr. Udall of Colorado, 
  Mr. Udall of New Mexico, Mr. Waxman, Mr. Weygand, and Ms. Woolsey) 
 introduced the following bill; which was referred to the Committee on 
                             Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to allow a credit against 
             income tax to holders of Better America Bonds.

    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 ``Better America Bonds Act of 1999''.

SEC. 2. CREDIT TO HOLDERS OF BETTER AMERICA 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 BETTER AMERICA BONDS.

    ``(a) Allowance of Credit.--In the case of a taxpayer who holds a 
Better America 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 Better America 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 Better America 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) Better America Bond.--For purposes of this section--
            ``(1) In general.--The term `Better America 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 any qualified purpose,
                    ``(B) the bond is issued by a State or local 
                government within the jurisdiction of which the 
                qualified purpose of the issue is to be carried out,
                    ``(C) the issuer designates such bond for purposes 
                of this section,
                    ``(D) the term of each bond which is part of such 
                issue does not exceed 15 years,
                    ``(E) the requirements of section 147(f) are met 
                with respect to such issue, and
                    ``(F) except in the case of the proceeds of such 
                issue which are to be used for the qualified purpose 
                described in paragraph (2)(A)(iv), the payment of the 
                principal of such issue is secured by taxes of general 
                applicability imposed by a general purpose governmental 
                unit.
            ``(2) Qualified purpose.--
                    ``(A) In general.--The term `qualified purpose' 
                means any of the following:
                            ``(i) The acquisition of land for use as 
                        open space, wetlands, public parks, or 
                        greenways, and the provision of visitor 
                        facilities (such as campgrounds and hiking or 
                        biking trails) for land so used, but only if--
                                    ``(I) such land and facilities are 
                                to be owned by the issuer or a 
                                qualified owner, and
                                    ``(II) the initial owner of such 
                                land and facilities records pursuant to 
                                State law a qualified restrictive 
                                covenant with respect to such land and 
                                facilities.
                            ``(ii) The remediation of land acquired 
                        under clause (i) (or other publicly owned land) 
                        to enhance water quality by--
                                    ``(I) restoring hydrology or 
                                planting trees or other vegetation,
                                    ``(II) undertaking reasonable 
                                measures to control erosion,
                                    ``(III) restoring wetlands, or
                                    ``(IV) remediating conditions 
                                caused by the prior disposal of toxic 
                                or other waste.
                            ``(iii) The acquisition by the issuer or 
                        any qualified owner of any restriction on 
                        privately owned open land which 
prevents commercial development and any substantial change in the use 
or character of the land if such restriction would, if contributed by 
the owner of the open land to a qualified organization (as defined in 
section 170(h)(3)), be a qualified conservation contribution (as 
defined in section 170(h)).
                            ``(iv) The environmental assessment and 
                        remediation of real property owned by any State 
                        or local government if--
                                    ``(I) such property was acquired by 
                                such government as a result of being 
                                abandoned by the prior owner, and
                                    ``(II) such property is located in 
                                an area at or on which there has been a 
                                release (or threat of release) or 
                                disposal of any hazardous substance (as 
                                defined in section 198).
                    ``(B) Remediation of national priorities listed 
                sites not qualified purpose.--Subparagraph (A)(ii) 
                shall not apply to remediation of any site which is on, 
                or proposed for, the national priorities list under 
                section 105(a)(8)(B) of the Comprehensive Environmental 
                Response, Compensation, and Liability Act of 1980.
                    ``(C) Qualified owner.--For purposes of this 
                paragraph, the term `qualified owner' means any 
                organization described in section 501(c)(3) whose 
                exempt purpose includes environmental protection.
                    ``(D) Qualified restrictive covenant.--For purposes 
                of subparagraph (A)(i)(II), the term `qualified 
                restrictive covenant' means, with respect to land or 
                facilities, any covenant which prohibits the person who 
                owns such land or facilities at the end of the term of 
                the bond from selling or otherwise permitting a use of 
                such land or facilities which is not described in 
                subparagraph (A) unless--
                            ``(i) a reasonable period is allowed for a 
                        qualified owner to purchase such land or 
                        facilities,
                            ``(ii) the purchase price is not greater 
                        than the price originally paid in conjunction 
                        with the expenditure of bond proceeds, and
                            ``(iii) the purchaser records pursuant to 
                        State law a covenant with respect to the 
                        purchased land and facilities which protects in 
                        perpetuity the use of such land and facilities 
                        for a use described in subparagraph (A).
            ``(3) Public availability requirement, etc.--
                    ``(A) In general.--The term `Better America Bond' 
                shall not include any bond which is part of an issue 
                if--
                            ``(i) any portion of the proceeds of the 
                        issue are to be used for any private business 
                        use (as defined in section 141(b)(6)), or
                            ``(ii) the payment of the principal of, or 
                        the interest on, any portion of such proceeds 
                        is (under the terms of such issue or any 
                        underlying arrangement) directly or indirectly 
                        secured or to be derived as described in 
                        subparagraph (A) or (B) of section 141(b)(2).
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to proceeds used for a qualified purpose described in 
                paragraph (2)(A)(iv).
    ``(d) Limitation on Amount of Bonds Designated.--
            ``(1) In general.--The maximum aggregate face amount of 
        bonds issued during any calendar year which may be designated 
        under subsection (c)(1) by any issuer shall not exceed the 
        limitation amount allocated under paragraph (3) for such 
        calendar year to such issuer.
            ``(2) National limitation on amount of bonds designated.--
        There is a national Better America Bond limitation for each 
        calendar year. Such limitation is--
                    ``(A) $1,900,000,000 for each of calendar years 
                2000, 2001, 2002, 2003, and 2004, and
                    ``(B) except as provided in paragraph (4), zero 
                after 2004.
            ``(3) Allocation of limitation among states and local 
        governments.--
                    ``(A) In general.--The national Better America Bond 
                limitation for any calendar year shall be allocated by 
                the EPA Administrator to States and local governments 
                having approved applications. As part of the 
                competitive application process, the Environmental 
                Protection Agency should, when possible, allocate such 
                limitation on a per capita basis.
                    ``(B) Approved application.--For purposes of 
                subparagraph (A), the term `approved application' means 
                an application which is approved by the EPA 
                Administrator and includes such information as the EPA 
                Administrator shall specify.
            ``(4) Carryover of unused limitation.--If for any calendar 
        year--
                    ``(A) the amount allocated under paragraph (4) to 
                any State or local government, exceeds
                    ``(B) the amount of bonds issued during such year 
                which are designated under subsection (c)(1) pursuant 
                to such allocation,
        the limitation amount under paragraph (3) for such State or 
        local government for the following calendar year shall be 
        increased by the amount of such excess.
    ``(e) 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.
    ``(f) 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) Bond.--The term `bond' includes any obligation.
            ``(3) State.--The term `State' includes the District of 
        Columbia, any possession of the United States, and any Indian 
        tribal government (within the meaning of section 7871).
            ``(4) Local government.--The term `local government' 
        means--
                    ``(A) any county, city, town, township, parish, 
                village, or other general purpose political subdivision 
                of a State, and
                    ``(B) any combination of political subdivisions 
                described in subparagraph (A) recognized by the EPA 
                Administrator.
            ``(5) EPA administrator.--The term `EPA Administrator' 
        means the Administrator of the Environmental Protection Agency.
    ``(g) 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 (e)) and the amount so 
included shall be treated as interest income.
    ``(h) Special Rules Relating to Arbitrage.--
            ``(1) In general.--A bond shall not be treated as failing 
        to meet the requirements of subsection (c)(1) solely by reason 
        of the fact that the proceeds of the issue of which such bond 
        is a part are invested for a temporary period (but not more 
        than 36 months) until such proceeds are needed for the purpose 
        for which such issue was issued.
            ``(2) Reasonable expectation and binding commitment 
        requirements.--Paragraph (1) shall apply to an issue only if, 
        as of the date of issuance--
                    ``(A) the issuer reasonably expects that--
                            ``(i) at least 95 percent of the proceeds 
                        of the issue will be spent for a qualified 
                        purpose within the 3-year period beginning on 
                        such date, and
                            ``(ii) property financed with such proceeds 
                        will be used for qualified purposes for at 
                        least 15 years after being so financed,
                    ``(B) there is a binding commitment with a third 
                party to spend at least 10 percent of the proceeds of 
                the issue for qualified purposes within the 6-month 
                period beginning on such date, and
                    ``(C) the issuer reasonably expects that the 
                remaining proceeds of the issue will be spent with due 
                diligence for qualified purposes.
            ``(3) Earnings on proceeds.--Any earnings on proceeds 
        during the temporary period shall be treated as proceeds of the 
        issue for purposes of applying subsection (c)(1) and paragraph 
        (1) of this subsection.
    ``(i) Denial of Deduction for Environmental Remediation 
Expenditures.--Expenditures financed by any Better America Bond shall 
not be allowed as a deduction under section 198.
    ``(j) Other Special Rules.--
            ``(1) Bonds held by regulated investment companies.--If any 
        Better America 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.
            ``(2) Credits may be stripped.--Under regulations 
        prescribed by the Secretary--
                    ``(A) In general.--There may be a separation 
                (including at issuance) of the ownership of a Better 
                America 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.
                    ``(B) Certain rules to apply.--In the case of a 
                separation described in subparagraph (A), the rules of 
                section 1286 shall apply to the Better America Bond as 
                if it were a stripped bond and to the credit under this 
                section as if it were a stripped coupon.
            ``(3) 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 Better America 
        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.
            ``(4) 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.
            ``(5) Reporting.--Issuers of Better America Bonds shall 
        submit reports similar to the reports required under section 
        149(e).
    ``(k) Recapture of Portion of Credit Where Cessation of Qualified 
Use.--
            ``(1) In general.--If any bond which when issued purported 
        to be a Better America Bond ceases to meet the requirements of 
        subsection (c), the issuer shall pay to the United States (at 
the time required by the Secretary) an amount equal to the aggregate of 
the credits allowable under this section (determined without regard to 
subsection (e)) for taxable years ending during the calendar year in 
which such cessation occurs and the 2 preceding calendar years.
            ``(2) Failure to pay.--If the issuer fails to timely pay 
        the amount required by paragraph (1) with respect to any issue, 
        the tax imposed by this chapter on each holder of any 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.
    ``(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 better america bonds.--
                    ``(A) In general.--For purposes of subsection (a), 
                the term `interest' includes amounts includible in 
                gross income under section 30B(g) and such amounts 
                shall be treated as paid on the credit allowance date 
                (as defined in section 30B(f)(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 Amendment.--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 Better 
                                        America Bonds.''
    (d) Effective Date.--The amendments made by this section shall 
apply to obligations issued after December 31, 1999.
    (e) Guidelines for Applications.--Not later than January 1, 2000, 
guidelines specifying the criteria to be used in approving applications 
under section 30B(d)(3) of the Internal Revenue Code of 1986 (as added 
by this Act) shall be developed and published by the Administrator of 
the Environmental Protection Agency in the Federal Register.
                                 <all>