Credit to holders of qualified brownfields cleanup 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:

30B.

Credit to holders of qualified brownfields cleanup bonds

(a)

Allowance of credit

In the case of a taxpayer who holds a qualified brownfields cleanup 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 brownfields cleanup 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 brownfields cleanup 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 brownfields cleanup bond

For purposes of this section— (1)

In general

The term qualified brownfields cleanup 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 abatement or control of hazardous substances at a qualified contaminated site, (B)the bond is issued by a State or local government within the jurisdiction of which such site 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 brownfields cleanup bond limitation for each calendar year. Such limitation is— (A)$100,000,000 for 2006, (B)$150,000,000 for 2007, and (C)zero for calendar years thereafter. (4)

Allocation of limitation among States

The limitation applicable under paragraph (3) for any calendar year shall be allocated among the States by the Secretary of the Treasury. (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.

(6)

Bond to be paid back from any tax revenue increase

A bond shall not be treated as a qualified brownfields cleanup bond unless any increase in real property tax revenues (attributable to increases in assessed value) by reason of the carrying out of the purposes described in paragraph (1)(A) is reserved exclusively for debt service on the issue referred to in paragraph (1) (and similar issues) to the extent such increase does not exceed such debt service. (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)

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)

Qualified contaminated site

The term qualified contaminated site means a brownfield site designated by the Administrator of the Environmental Protection Agency. (5)

Hazardous substance

The term hazardous substance has the meaning provided by section 198(d). (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 brownfields cleanup 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 brownfields cleanup 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 brownfields cleanup 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 brownfields cleanup 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 brownfields cleanup bonds shall submit reports similar to the reports required under section 149(e).

(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 brownfields cleanup 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 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 qualified public brownfields cleanup bonds

(d)

Effective date

The amendments made by this section shall apply to obligations issued after December 31, 2005.