II 110th CONGRESS 1st Session S. 2021 IN THE SENATE OF THE UNITED STATES September 6, 2007 Mr. Wyden (for himself, Mr. Thune, Mr. Coleman, Ms. Klobuchar, Mrs. Dole, Mr. Vitter, and Ms. Collins) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To provide $50,000,000,000 in new transportation infrastructure funding through bonding to empower States and local governments to complete significant infrastructure projects across all modes of transportation, including roads, bridges, rail and transit systems, ports, and inland waterways, and for other purposes.

1.

Short title; etc

(a)

Short title

This Act may be cited as the Build America Bonds Act of 2007. (b)

References to Internal Revenue Code of 1986

Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

2.

Findings and purpose

(a)

Findings

Congress finds the following: (1)Our Nation’s highways, transit systems, railroads, ports, and inland waterways drive our economy, enabling all industries to achieve growth and productivity that makes America strong and prosperous. (2)The establishment, maintenance, and improvement of the national transportation network is a national priority, for economic, environmental, energy, security, and other reasons. (3)The ability to move people and goods is critical to maintaining State, metropolitan, rural, and local economies. (4)The construction of infrastructure requires the skills of numerous occupations, including those in the contracting, engineering, planning and design, materials supply, manufacturing, distribution, and safety industries. (5)Investing in transportation infrastructure creates long-term capital assets for the Nation that will help the United States address its enormous infrastructure needs and improve its economic productivity. (6)Investment in transportation infrastructure creates jobs and spurs economic activity to put people back to work and stimulate the economy. (7)Every billion dollars in transportation investment has the potential to create up to 47,500 jobs. (8)Every dollar invested in the Nation’s transportation infrastructure yields at least $5.70 in economic benefits because of reduced delays, improved safety, and reduced vehicle operating costs. (9)Numerous experts have noted that the estimated cost to maintain and improve our Nation’s highways, bridges, and other critical transportation infrastructure significantly exceeds what is currently being provided by all levels of government. (b)

Purpose

The purpose of this Act is to provide financing for additional transportation infrastructure capital investments.

3.

Credit to holders of Build America bonds

(a)

In general

Subpart H of part IV of subchapter A of chapter 1 (relating to nonrefundable credit to holders of certain bonds) is amended by adding at the end the following new section:

54A.

Credit to holders of Build America bonds

(a)

Allowance of credit

If a taxpayer holds a Build America 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 Build 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 Build 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 (2), 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 sale of the issue) on outstanding long-term corporate debt obligations (determined in such manner as the Secretary prescribes). (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 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, section 1400N(l), and this section). (d)

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. (e)

Build America bond

For purposes of this section, the term Build America 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 expenditures incurred after the date of the enactment of this section for 1 or more qualified projects pursuant to an allocation of such proceeds to such project or projects by the Transportation Finance Corporation, (2)the bond is issued by the Transportation Finance Corporation and is in registered form (within the meaning of section 149(a)), (3)the Transportation Finance Corporation certifies that it meets the State contribution requirement of subsection (l) with respect to such project, as in effect on the date of issuance, (4)the Transportation Finance Corporation certifies that the State in which an approved qualified project is located meets the requirement described in subsection (m), (5)the face amount of such bond, when added to the face amount of all Build America bonds previously issued in the calendar year, does not exceed the Build America bond limitation for such year under subsection (g), (6)the term of each bond which is part of such issue does not exceed 30 years, (7)the payment of principal with respect to such bond is the obligation of the Transportation Finance Corporation, and (8)the issue meets the requirements of subsection (h). (f)

Qualified project

For purposes of this section, the term qualified project means the capital improvements to any transportation infrastructure project of any governmental unit or other person, including roads, bridges, rail and transit systems, ports, and inland waterways, proposed by 1 or more States and approved by the Transportation Finance Corporation, but does not include costs of operations or maintenance with respect to such project. (g)

Limitation on amount of bonds designated

(1)

National limitation

There is a Build America bond limitation for each calendar year. Such limitation is— (A)$5,000,000,000 for 2007, (B)$5,000,000,000 for 2008, (C)$10,000,000,000 for 2009, (D)$10,000,000,000 for 2010, (E)$10,000,000,000 for 2011, (F)$10,000,000,000 for 2012, and (G)except as provided in paragraph (4), zero thereafter. (2)

Minimum allocations to States

In making allocations for each calendar year under subsection (e)(1), the Transportation Finance Corporation shall ensure that the amount allocated for qualified projects located in each State for such calendar year is not less than 1 percent of the total amount allocated for such year. (3)

Carryover of unused issuance limitation

If for any calendar year the limitation amount imposed by paragraph (1) exceeds the amount of Build America bonds issued during such year, such excess shall be carried forward to one or more succeeding calendar years as an addition to the limitation imposed by paragraph (1) and until used by issuance of Build America bonds. (4)

Issuance of small denomination bonds

From the Build America bond limitation for each year, the Transportation Finance Corporation shall issue a limited quantity of Build America bonds in small denominations suitable for purchase as gifts by individual investors wishing to show their support for investing in America’s transportation infrastructure. (h)

Special rules relating to expenditures

(1)

In general

An issue shall be treated as meeting the requirements of this subsection if, as of the date of issuance, the Transportation Finance Corporation reasonably expects— (A)at least 95 percent of the proceeds of such issue are to be spent for 1 or more qualified projects within the 5-year period beginning on such date, (B)to incur a binding commitment with a State or third party to spend at least 10 percent of the proceeds of such issue, or to commence construction, with respect to such projects within the 12-month period beginning on such date, and (C)to proceed with due diligence to complete such projects and to spend the proceeds of such issue. (2)

Rules regarding continuing compliance after 5-year determination

To the extent that less than 95 percent of the proceeds of such issue are expended by the close of the 5-year period beginning on the date of issuance, the Transportation Finance Corporation shall redeem all of the nonqualified bonds within 90 days after the end of such period. For purposes of this paragraph, the amount of the nonqualified bonds required to be redeemed shall be determined in the same manner as under section 142. (3)

Reallocation

In the event the recipient of an allocation under subsection (g) after notice and a reasonable opportunity to take corrective action fails to demonstrate to the satisfaction of the Transportation Finance Corporation that its actions will allow the Transportation Finance Corporation to meet the requirements under this subsection, the Transportation Finance Corporation may redistribute the allocation meant for such recipient to other recipients. (i)

Special rules relating to arbitrage

A bond which is a part of an issue shall not be treated as a Build America bond unless, with respect to the issue of which such bond is a part, the Transportation Finance Corporation satisfies the arbitrage requirements of section 148 with respect to proceeds of the issue. (j)

Recapture of portion of credit where cessation of compliance

If any bond which when issued purported to be a Build America bond ceases to be such a bond, the Transportation Finance Corporation shall pay to the United States (at the time required by the Secretary) an amount equal to the sum of— (1)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 each succeeding calendar year ending with the calendar year in which such bond is redeemed by the Transportation Finance Corporation, and (2)interest at the underpayment rate under section 6621 on the amount determined under paragraph (1) for each calendar year for the period beginning on the first day of such calendar year. (k)

Build America Bonds Trust Account

(1)

In general

The following amounts shall be held in a Build America Bonds Trust Account by the Transportation Finance Corporation: (A)The proceeds from the sale of all bonds issued under this section. (B)The investment earnings on proceeds from the sale of such bonds. (C)The amount described in paragraph (2). (D)Any earnings on any amounts described in subparagraph (A), (B), or (C). (2)

Appropriation of revenues

There is hereby appropriated to the Build America Bonds Trust Account an amount equal to the lesser of— (A)the revenues resulting from the imposition of fees pursuant to section 13031 of the Consolidated Omnibus Budget Reconciliation Act of 1985 (19 U.S.C. 58c) for fiscal years beginning after September 31, 2007, or (B)$50,000,000,000. (3)

Use of funds

Amounts in the Build America Bonds Trust Account may be used only to pay costs of qualified projects, redeem Build America bonds, and fund the operations of the Transportation Finance Corporation, except that amounts withdrawn from the Build America Bonds Trust Account to pay costs of qualified projects may not exceed the proceeds from the sale of Build America bonds described in subsection (e)(1). (4)

Use of remaining funds in Build America bonds trust account

Upon the redemption of all Build America bonds issued under this section, any remaining amounts in the Build America Bonds Trust Account shall be available to the Transportation Finance Corporation to pay the costs of any qualified project. (5)

Applicability of Federal law

The requirements of any Federal law, including titles 23, 40, and 49 of the United States Code, which would otherwise apply to projects to which the United States is a party or to funds made available under such law and projects assisted with those funds shall apply to— (A)funds made available under the Build America Bonds Trust Account for similar qualified projects, including contributions required under subsection (l), and (B)similar qualified projects assisted by the Transportation Finance Corporation through the use of such funds. (6)

Investment

Subject to subsections (h) and (i), it shall be the duty of the Transportation Finance Corporation to invest in investment grade obligations such portion of the Build America Bonds Trust Account as is not, in the judgment of the Board of Directors of the Transportation Finance Corporation, required to meet current withdrawals. To the maximum extent practicable, investments should be made in securities that support infrastructure investment at the State and local level. (l)

State contribution requirements

(1)

In general

For purposes of subsection (e)(3), the State contribution requirement of this subsection is met with respect to any qualified project if the Transportation Finance Corporation has received from 1 or more States, not later than the date of issuance of the bond, written commitments for matching contributions of not less than 20 percent (or such smaller percentage as determined under title 23, United States Code, for such State) of the cost of the qualified project. (2)

State matching contributions may not include Federal funds

For purposes of this subsection, State matching contributions shall not be derived, directly or indirectly, from Federal funds, including any transfers from the Highway Trust Fund under section 9503. (m)

Utilization of updated construction technology for qualified projects

For purposes of subsection (e)(4), the requirement of this subsection is met if the appropriate State agency relating to the qualified project is utilizing updated construction technologies. (n)

Other definitions and special rules

For purposes of this section— (1)

Bond

The term bond includes any obligation. (2)

Transportation finance corporation

The term Transportation Finance Corporation means the corporation established under section 4(a) of the Build America Bonds Act of 2007. (3)

Partnership; S corporation; and other pass-thru entities

(A)

In general

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. (4)

Bonds held by regulated investment companies

If any Build 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. (5)

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 Build 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 Build America bond as if it were a stripped bond and to the credit under this section as if it were a stripped coupon. (6)

Credits may be transferred

Nothing in any law or rule of law shall be construed to limit the transferability of the credit or bond allowed by this section through sale and repurchase agreements. (7)

Reporting

The Transportation Finance Corporation shall submit reports similar to the reports required under section 149(e). (8)

Prohibition on use of highway trust fund

Notwithstanding any other provision of law, no funds derived from the Highway Trust Fund established under section 9503 shall be used to pay for credits under this section or for the administrative costs of the Transportation Finance Corporation.

. (b)

Reporting

Subsection (d) of section 6049 (relating to returns regarding payments of interest) is amended by adding at the end the following new paragraph: (9)

Reporting of credit on Build America bonds

(A)

In general

For purposes of subsection (a), the term interest includes amounts includible in gross income under section 54A(d) and such amounts shall be treated as paid on the credit allowance date (as defined in section 54A(b)(4)). (B)

Reporting to corporations, etc

Except as otherwise provided in regulations, in the case of any interest described in subparagraph (A), subsection (b)(4) shall be applied without regard to subparagraphs (A), (H), (I), (J), (K), and (L)(i) of such subsection. (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

Section 54(c)(2) is amended by inserting section 54A, after subpart C,. (d)

Clerical amendments

The table of sections for subpart H of part IV of subchapter A of chapter 1 is amended by adding at the end the following new item: Sec. 54A. Credit for holders of Build America bonds. . (e)

Effective date

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

4.

Transportation Finance Corporation

(a)

Recognition and status

Congress grants consent and recognition to the establishment by 2 or more State infrastructure banks (established under section 610 of title 23, United States Code) of a multistate organization to be known as the Transportation Finance Corporation (hereafter in this section referred to as the Corporation). Additional State infrastructure banks may join the Transportation Finance Corporation subsequent to its establishment. (b)

Functions of Corporation

The Corporation— (1)is authorized to issue Build America bonds for the financing of qualified projects as required under section 54A of the Internal Revenue Code of 1986, (2)is authorized to establish and operate the Build America Bonds Trust Account as required under section 54A(k) of such Code, (3)is authorized to act as a centralized entity to provide financing for qualified projects (as defined in section 54A(f) of such Code), (4)may— (A)leverage resources and stimulate public and private investment in transportation infrastructure, (B)encourage States to create additional opportunities for the financing of transportation infrastructure, (C)perform any other function the sole purpose of which is to carry out the financing of qualified projects through Build America bonds, and (5)not later than February 15 of each year shall submit a report to Congress describing the activities of the Corporation for the preceding year. (c)

Exemption from taxes

(1)

In general

The Corporation, including its franchise, capital, reserves, surplus, sinking funds, mortgages or other security holdings, and income, shall be exempt from all taxation now or hereafter imposed by the United States, by any territory, dependency, or possession thereof, or by any State, county, municipality, or local taxing authority, except that any real property of the Corporation shall be subject to State, territorial, county, municipal, or local taxation to the same extent according to its value as other real property is taxed. (2)

Financial obligations

Build America bonds or other obligations issued by the Corporation and the interest on or tax credits with respect to its bonds or other obligations shall not be subject to taxation by any State, county, municipality, or local taxing authority. (d)

Construction regarding recognition and status

(1)

In general

Nothing in this section shall be construed to establish the Corporation as a department, agency, or instrumentality of the United States Government, to establish the members of any governing board or the officers and employees of the Corporation, as officers or employees of the United States Government, or to subject the Corporation to the provisions of title 31, United States Code. (2)

United States not obligated

The deposit of Federal funds into the Build America Bonds Trust Account established under section 54A(k) of the Internal Revenue Code of 1986 shall not be construed as a commitment, guarantee, or obligation on the part of the United States to any third party, nor shall any third party have any right against the United States for payment solely by virtue of the contribution. Any security or debt-financing instrument issued by the Corporation shall expressly state that the security or instrument does not constitute a commitment, guarantee, or obligation of the United States.

5.

Additional revenues through extension of customs user fees

Section 13031(j)(3) of the Consolidated Omnibus Budget Reconciliation Act of 1985 (19 U.S.C. 58c(j)(3)(A)) is amended— (1)by striking October 14, 2014 in subparagraph (A) and inserting October 14, 2026, and (2)by striking September 30, 2014 in subparagraph (B) and inserting October 14, 2026.