Qualified renewable school energy bonds

(a)

In general

Subchapter U of chapter 1 of the Internal Revenue Code of 1986 (relating to incentives for education zones) is amended by redesignating section 1397F as section 1397G and by adding at the end of part IV of such subchapter the following new section:

1397F.

Qualified renewable school energy bonds

(a)

Allowance of credit

If a taxpayer holds a qualified renewable school energy bond on 1 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 qualified renewable school energy 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 renewable school energy 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 qualified renewable school energy 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 qualified renewable school energy bonds with a specified maturity or redemption date without discount and without interest cost to the qualified issuer. (4)

Credit allowance date

For purposes of this section, the term credit allowance date means— (A)March 15, (B)June 15, (C)September 15, and (D)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 part IV of subchapter A (other than subpart C thereof, relating to refundable credits, subpart H thereof, section 1400N(l), and this section). (d)

Qualified renewable school energy bond

For purposes of this section— (1)

In general

The term renewable school energy 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 school operated by an eligible local education agency, (B)the bond is issued by a State or local government of an eligible State within the jurisdiction of which such school is located, (C)the issuer— (i)designates such bond for purposes of this section, and (ii)certifies that it has the written approval of the eligible local education agency for such bond issuance, and (D)the term of each bond which is part of such issue is 20 years. (2)

Qualified school

The term qualified school means any public school or public school system administrative building which is owned by or operated by an eligible local education agency. (3)

Eligible local education agency

The term eligible local education agency means any local educational agency as defined in section 9101 of the Elementary and Secondary Education Act of 1965. (4)

Eligible state

The term eligible State means, with respect to any calendar year— (A)one of the five States with the greatest percentage population growth for the most recent preceding year for which data is available as determined by the Bureau of the Census, and (B)the State with a total percentage population growth greater than 9 percent but less than 13.9 percent and a total population under the age of 19 of less than 300,000 as determined under the 2000 Census. (5)

Qualified purpose

The term qualified purpose means, with respect to any qualified school, the purchase and installation of renewable energy products. (e)

Limitation on amount of bonds designated

(1)

National limitation

There is a national renewable school energy bond limitation for each calendar year. Such limitation is $50,000,000 for 2008, $100,000,000 for 2009, $150,000,000 for 2010, and, except as provided in paragraph (4), zero thereafter. (2)

Allocation of limitation

The national renewable school energy bond limitation for a calendar year shall be allocated by the Secretary— (A)among the eligible States described in subsection (d)(4)(A), 30 percent to the State with the greatest percentage population growth, 20 percent to each of second and third ranked States, and 10 percent to each of the fourth and fifth ranked States, and (B)to the State described in subsection (d)(4)(B), 10 percent.

The limitation amount allocated to an eligible State under the preceding sentence shall be allocated by the State education agency to qualified schools within such State.

(3)

Designation subject to limitation amount

The maximum aggregate face amount of bonds issued during any calendar year which may be designated under subsection (d)(1) with respect to any qualified school shall not exceed the limitation amount allocated to such school under paragraph (2) for such calendar year. (4)

Carryover of unused limitation

If for any calendar year— (A)the limitation amount for any eligible State, exceeds (B)the amount of bonds issued during such year which are designated under subsection (d)(1) with respect to qualified schools within such State,

the limitation amount for such State for the following calendar year shall be increased by the amount of such excess. Any carryforward of a limitation amount may be carried only to the first 2 years following the unused limitation year. For purposes of the preceding sentence, a limitation amount shall be treated as used on a first-in first-out basis.

(f)

Other definitions

For purposes of this section— (1)

Bond

The term bond includes any obligation. (2)

State

The term State includes the District of Columbia and any possession of the United States. (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 (c)). (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 renewable school energy 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 which, 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 renewable school energy bond as if it were a stripped bond and to the credit under this section as if it were a stripped coupon. (i)

Credit treated as nonrefundable bondholder credit

For purposes of this title, the credit allowed by this section shall be treated as a credit allowable under subpart H of part IV of subchapter A of this chapter. (j)

Special rules

For purposes of this section, rules similar to the rules under paragraphs (3) and (4) of section 54(l) shall apply.

(b)

Conforming amendments

The table of sections for part V of such subchapter is amended by redesignating section 1397F as section 1397G and by adding at the end of the table of sections for part IV of such subchapter the following new item:

Sec. 1397F. Credit for holders of qualified renewable school energy bonds.

(c)

Effective date

The amendments made by this section shall apply to bonds issued after December 31, 2007.