[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 930 Introduced in House (IH)]







108th CONGRESS
  1st Session
                                H. R. 930

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 26, 2003

 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

_______________________________________________________________________

                                 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) $11,900,000,000 for 2004,
            ``(2) $11,900,000,000 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, $215,000,000 
        for calendar year 2004, and $215,000,000 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 
Districts.--
            ``(1) In general.--40 percent of the limitation applicable 
        under subsection (c) for any calendar year shall be allocated 
        under paragraph (2) by the Secretary among local educational 
        agencies which are large local educational agencies for such 
        year.
            ``(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 calendar 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 Secretary 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 educational 
                agencies (other than those described in subparagraph 
                (A)) that the Secretary of Education 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.
    ``(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) pursuant 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)(4) 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 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) Binding commitment requirement.--Paragraph (1) shall 
        apply to an issue only if, as of the date of issuance, there is 
        a reasonable expectation that--
                    ``(A) at least 10 percent of the proceeds of the 
                issue will be spent within the 6-month period 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 purpose.
            ``(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 (a)(1) and paragraph 
        (1) of this subsection.

``SEC. 1400P. QUALIFIED ZONE ACADEMY BONDS.

    ``(a) Qualified Zone Academy Bond.--For purposes 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 purpose 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 
                        assurances that the private business 
                        contribution 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 1400O(g) shall apply for 
        purposes of paragraph (1).
            ``(2) Private business contribution requirement.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the private business contribution requirement of this 
                paragraph is met with respect to any issue if the local 
                educational agency that established the qualified zone 
                academy has written 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 `qualified contribution' 
                means any contribution (of a type and quality 
                acceptable to the local educational 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 technology in 
                        the classroom,
                            ``(iii) services of employees as volunteer 
                        mentors,
                            ``(iv) internships, field trips, or other 
                        educational opportunities outside the academy 
                        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 program (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 designated 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 established under the National School Lunch 
                Act.
            ``(4) Qualified purpose.--The term `qualified purpose' 
        means, with respect to any qualified zone academy--
                    ``(A) constructing, rehabilitating, or repairing 
                the public school facility in which the academy is 
                established,
                    ``(B) acquiring the land on which such facility is 
                to be constructed with part of the proceeds of such 
                issue,
                    ``(C) providing equipment for use at such academy,
                    ``(D) developing course materials for education to 
                be provided at such academy, and
                    ``(E) training teachers and other school personnel 
                in such academy.
    ``(b) Limitations on Amount of Bonds Designated.--
            ``(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) $400,000,000 for 2000,
                    ``(D) $400,000,000 for 2001,
                    ``(E) $400,000,000 for 2002,
                    ``(F) $400,000,000 for 2003,
                    ``(G) $1,500,000,000 for 2004,
                    ``(H) $1,500,000,000 for 2005, and
                    ``(I) except as provided in paragraph (3), zero 
                after 2005.
            ``(2) Allocation of limitation.--
                    ``(A) Allocation among states.--
                            ``(i) Pre-2004 limitations.--The national 
                        zone academy bond limitations for calendar 
                        years before 2004 shall be allocated by the 
                        Secretary among the States on the basis of 
                        their respective populations of individuals 
                        below the poverty line (as defined by the 
                        Office of Management and Budget).
                            ``(ii) Limitation after 2003.--The national 
                        zone academy bond limitation for any calendar 
                        year after 2003 shall be allocated by the 
                        Secretary 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.
                    ``(B) Allocation to local educational agencies.--
                The limitation amount allocated to a State under 
                subparagraph (A) shall be allocated by the State to 
                qualified zone academies within such State.
                    ``(C) Designation subject to limitation 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 subsection 
                for any State, exceeds
                    ``(B) the amount of bonds issued during such year 
                which are designated under subsection (a) (or the 
                corresponding provisions of prior law) with respect to 
                qualified zone academies within such State,
        the limitation amount under this subsection for such State for 
        the following calendar year shall be increased by the amount of 
        such excess.''
    (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 public school 
        modernization bonds.--
                    ``(A) In general.--For purposes of subsection (a), 
                the term `interest' includes amounts includible in 
                gross income under section 1400N(f) and such amounts 
                shall be treated as paid on the credit allowance date 
                (as defined in section 1400N(d)(2)).
                    ``(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 subchapters for chapter 1 of such Code is 
        amended by adding at the end the following new item:

                              ``Subchapter Z. Public school 
                                        modernization provisions.''
            (3) 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.''
    (d) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        obligations issued after December 31, 2003.
            (2) Repeal of restriction on zone academy bond holders.--In 
        the case of bonds to which section 1397E of the Internal 
        Revenue Code of 1986 (as in effect before the date of the 
        enactment of this Act) applies, the limitation of such section 
        to eligible taxpayers (as defined in subsection (d)(6) of such 
        section) shall not apply after the date of the enactment of 
        this Act.

SEC. 3. APPLICATION OF CERTAIN LABOR STANDARDS ON CONSTRUCTION PROJECTS 
              FINANCED UNDER PUBLIC SCHOOL MODERNIZATION 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 2 of the America's Better Classroom Act 
of 2003.
    ``(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. 4. 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 provides trained workers for 
                projects for the construction or reconstruction of 
                public school facilities receiving funding assistance 
                under an applicable program.
                    ``(C) The program ensures 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''.
                                 <all>