Short title

This Act may be cited as the

Gulf Opportunity Zone Public Finance Relief Act of 2005

Gulf tax credit bonds

(a)

In general

Subpart H 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:

54A.

Credit to holders of Gulf tax credit bonds

(a)

Allowance of credit

If a taxpayer holds a Gulf tax credit bond on one or more credit allowance dates of the bond occurring during any taxable year, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of the credits determined under subsection (b) with respect to such dates. (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 Gulf tax credit 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 Gulf tax credit bond is the product of— (A)the credit rate determined by the Secretary under paragraph (3) for the day on which such bond was sold, multiplied by (B)the outstanding face amount of the bond. (3)

Determination

For purposes of paragraph (2), with respect to any Gulf tax credit bond, the Secretary shall determine daily or cause to be determined daily a credit rate which shall apply to the first day on which there is a binding, written contract for the sale or exchange of the bond. The credit rate for any day is the credit rate which the Secretary or the Secretary’s designee estimates will permit the issuance of Gulf tax credit bonds with a specified maturity or redemption date without discount and without interest cost to the issuer. (4)

Credit allowance date

For purposes of this section, the term credit allowance date means March 15, June 15, September 15, and December 15. Such term also includes the last day on which the bond is outstanding. (5)

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 or matures. (c)

Limitation based on amount of tax

The credit allowed under subsection (a) for any taxable year shall not exceed the excess of— (1)the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over (2)the sum of the credits allowable under this part (other than subpart C and this section). (d)

Gulf tax credit bond

For purposes of this section— (1)

In general

The term Gulf tax credit bond means any bond issued as part of an issue if— (A)the bond is issued by the State of Alabama, Louisiana, or Mississippi, (B)95 percent or more of the proceeds of such issue are to be used to— (i)pay principal, interest, or premiums on qualified bonds issued by such State or any political subdivision of such State, or (ii)make a loan to any political subdivision of such State to pay principal, interest, or premiums on qualified bonds issued by such political subdivision, (C)the Governor of such State designates such bond for purposes of this section, (D)the bond is a general obligation of such State and is in registered form (within the meaning of section 149(a)), (E)the maturity of such bond does not exceed 2 years, and (F)the bond is issued after December 31, 2005, and before January 1, 2007. (2)

State matching requirement

A bond shall not be treated as a Gulf tax credit bond unless— (A)the issuer of such bond pledges as of the date of the issuance of the issue an amount equal to the face amount of such bond to be used for payments described in clause (i) of paragraph (1)(B), or loans described in clause (ii) of such paragraph, as the case may be, with respect to the issue of which such bond is a part, and (B)any such payment or loan is made in equal amounts from the proceeds of such issue and from the amount pledged under subparagraph (A).

The requirement of subparagraph (B) shall be treated as met with respect to any such payment or loan made during the 1-year period beginning on the date of the issuance (or any successor 1-year period) if such requirement is met when applied with respect to the aggregate amount of such payments and loans made during such period.

(3)

Aggregate limit on bond designations

The maximum aggregate face amount of bonds which may be designated under this section by the Governor of a State shall not exceed— (A)$200,000,000 in the case of the State of Louisiana, (B)$100,000,000 in the case of the State of Mississippi, and (C)$50,000,000 in the case of the State of Alabama. (4)

Special rules relating to arbitrage

A bond which is part of an issue shall not be treated as a Gulf tax credit bond unless, with respect to the issue of which the bond is a part, the issuer satisfies the arbitrage requirements of section 148 with respect to proceeds of the issue and any loans made with such proceeds. (e)

Qualified bond

For purposes of this section— (1)

In general

The term qualified bond means any obligation of a State or political subdivision thereof which was outstanding on August 28, 2005. (2)

Exception for private activity bonds

Such term shall not include any private activity bond. (3)

Exception for advance refundings

Such term shall not include any bond— (A)which is designated as an advance refunding bond under section 149(d)(7), or (B)with respect to which there is any outstanding bond to refund such bond. (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)

Other definitions and special rules

For purposes of this section— (1)

Bond

The term bond includes any obligation. (2)

Partnership; S corporation; and other pass-thru entities

(A)

In general

Under regulations prescribed by the Secretary, in the case of a partnership, trust, S corporation, or other pass-thru entity, rules similar to the rules of section 41(g) shall apply with respect to the credit allowable under subsection (a). (B)

No basis adjustment

In the case of a bond held by a partnership or an S corporation, rules similar to the rules under section 1397E(i) shall apply. (3)

Bonds held by regulated investment companies

If any Gulf tax credit 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. (4)

Reporting

Issuers of Gulf tax credit bonds shall submit reports similar to the reports required under section 149(e).

(b)

Conforming amendments

(1)Paragraph (2) of section 54(c) of such Code is amended by inserting , section 54A, after subpart C. (2)Subparagraph (A) of section 6049(d)(8) of such Code is amended— (A)by inserting or 54A(f) after section 54(g), and (B)by inserting or 54A(b)(4), as the case may be after section 54(b)(4). (3)The table of sections for subpart H of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

Sec. 54A. Credit to holders of Gulf tax credit bonds

(c)

Effective date

The amendments made by this section shall apply to taxable years ending after December 31, 2005.

Advance refundings of certain tax-exempt bonds

(a)

In general

Subsection (d) of section 149 of the Internal Revenue Code of 1986 (relating to advance refundings) is amended by redesignating paragraph (7) as paragraph (8) and by inserting after paragraph (6) the following new paragraph:

(7)

Advance refundings of certain Gulf Coast bonds

(A)

In general

With respect to a bond described in subparagraph (C) which is not a qualified 501(c)(3) bond, one additional advance refunding after the date of the enactment of this paragraph and before January 1, 2011, shall be allowed under the applicable rules of this subsection if— (i)the Governor of the State designates the advance refunding bond for purposes of this paragraph, and (ii)the requirements of subparagraph (E) are met. (B)

Certain private activity bonds

With respect to a bond described in subparagraph (C) which is an exempt facility bond described in paragraph (1) or (2) of section 142(a), one advance refunding after the date of the enactment of this paragraph and before January 1, 2011, shall be allowed under the applicable rules of this subsection (notwithstanding paragraph (2)) if the requirements of clauses (i) and (ii) of subparagraph (A) are met. (C)

Bonds described

A bond is described in this subparagraph if such bond was outstanding on August 28, 2005, and is issued by the State of Alabama, Louisiana, or Mississippi, or a political subdivision thereof. (D)

Aggregate limit

The maximum aggregate face amount of bonds which may be designated under this paragraph by the Governor of a State shall not exceed— (i)$4,500,000,000 in the case of the State of Louisiana, (ii)$2,250,000,000 in the case of the State of Mississippi, and (iii)$1,125,000,000 in the case of the State of Alabama. (E)

Additional requirements

The requirements of this subparagraph are met with respect to any advance refunding of a bond described in subparagraph (C) if— (i)no advance refundings of such bond would be allowed under this title on or after August 28, 2005, (ii)the advance refunding bond is the only other outstanding bond with respect to the refunded bond, and (iii)the requirements of section 148 are met with respect to all bonds issued under this paragraph.

(b)

Effective date

The amendments made by this section shall apply to advance refundings after the date of the enactment of this Act.

Federal guarantee of certain State bonds

(a)

State bonds described

This section shall apply to a bond issued as part of an issue if— (1)the issue of which such bond is part is an issue of the State of Alabama, Louisiana, or Mississippi, (2)the bond is a general obligation of the issuing State and is in registered form, (3)the proceeds of the bond are distributed to one or more political subdivisions of the issuing State, (4)the maturity of such bond does not exceed 5 years, (5)the bond is issued after the date of the enactment of this Act and before January 1, 2008, and (6)the bond is designated by the Secretary of the Treasury for purposes of this section. (b)

Application

(1)

In general

The Secretary of the Treasury may only designate a bond for purposes of this section pursuant to an application submitted to the Secretary by the State which demonstrates the need for such designation on the basis of the criteria specified in paragraph (2). (2)

Criteria

For purposes of paragraph (1), the criteria specified in this paragraph are— (A)the loss of revenue base of one or more political subdivisions of the State by reason of Hurricane Katrina, (B)the need for resources to fund infrastructure within, or operating expenses of, any such political subdivision, (C)the lack of access of such political subdivision to capital, and (D)any other criteria as may be determined by the Secretary. (3)

Guidance for submission and consideration of applications

The Secretary of the Treasury shall prescribe regulations or other guidance which provide for the time and manner for the submission and consideration of applications under this subsection. (c)

Federal guarantee

A bond described in subsection (a) is guaranteed by the United States in an amount equal to 50 percent of the outstanding principal with respect to such bond. (d)

Aggregate limit on bond designations

The maximum aggregate face amount of bonds which may be issued under this section shall not exceed $3,000,000,000.