Short title

This Act may be cited as the

Indian School Construction Act

Definitions

In this Act: (1)

Bureau

The term Bureau means the Bureau of Indian Affairs. (2)

Indian

The term Indian means any individual who is a member of an Indian tribe. (3)

Indian tribe

(A)

In general

The term Indian tribe has the meaning given the term Indian tribal government in section 7701(a)(40) of the Internal Revenue Code of 1986 (as modified by section 7871(d) of that Code). (B)

Inclusion

The term Indian tribe includes any consortium of Indian tribes approved by the Secretary. (4)

Secretary

The term Secretary means the Secretary of the Interior. (5)

Tribal school

The term tribal school means an elementary school, secondary school, or dormitory that— (A)is operated by a tribal organization or the Bureau for the education of Indian children; and (B)receives financial assistance for the operation of the school or dormitory under an appropriation for the Bureau under a contract, grant, or agreement, or for a Bureau-operated school, under— (i)section 102, 103(a), or 208 of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450f, 450h(a), and 458d); or (ii)the Tribally Controlled Schools Act of 1988 (25 U.S.C. 2501 et seq.).

Issuance of bonds

(a)

In general

The Secretary shall establish a pilot program under which the Secretary shall provide to eligible Indian tribes the authority to issue qualified tribal school modernization bonds to provide funds for the construction, rehabilitation, and repair of tribal schools, including advance planning and design of tribal schools. (b)

Eligibility

(1)

In general

To be eligible to issue a qualified tribal school modernization bond under the program under subsection (a), an Indian tribe shall— (A)prepare and submit to the Secretary a plan of construction that meets the requirements of paragraph (2); (B)provide for quarterly and final inspection by the Bureau of each project to be funded by the bond; and (C)ensure that the facilities to be funded by the bond will be used primarily for elementary and secondary educational purposes for the period during which the bond remains outstanding. (2)

Plan of construction

The requirements referred to in paragraph (1)(A) are that the plan shall— (A)contain a description of the construction to be carried out using funds provided under a qualified tribal school modernization bond; (B)demonstrate that a comprehensive survey has been carried out regarding the construction needs of the applicable tribal school; (C)contain assurances that funding under the bond will be used only for the activities described in the plan; (D)contain a response to the evaluation criteria contained in the document entitled Instructions and Application for Replacement School Construction, Revision 6 and dated February 6, 1999; and (E)contain any other reasonable and related information that the Secretary determines to be appropriate. (3)

Priority

In determining whether an Indian tribe is eligible to participate in the program under this section, the Secretary shall give priority to Indian tribes that, as demonstrated by the plans of construction of the Indian tribes, will fund projects— (A)described in the list of the Bureau entitled Education Facilities Replacement Construction Priorities List as of FY 2004 (69 Fed. Reg. 13870) (or successor regulations); or (B)that meet the criteria for ranking schools described in the document entitled Instructions and Application for Replacement School Construction, Revision 6 and dated February 6, 1999. (4)

Advance planning and design funding

(A)

In general

An Indian tribe may propose in the plan of construction of the Indian tribe to receive advance planning and design funding from the tribal school modernization escrow account established under subsection (f)(2). (B)

Conditions

As a condition of receiving advance planning and design funds under subparagraph (A), an Indian tribe shall agree— (i)to issue qualified tribal school modernization bonds after the receipt of the funds; and (ii)to deposit into the escrow account or a fund managed by a trustee under subsection (d)(3) an amount equal to the amount of funds received from the escrow account. (c)

Permissible activities

In addition to the use described in subsection (a), an Indian tribe may use amounts received through the issuance of a qualified tribal school modernization bond— (1)to enter into, and make payments under, contracts with licensed and bonded architects, engineers, and construction firms— (A)to determine the needs of a tribal school; and (B)for the design and engineering of a tribal school; (2)to enter into, and make payments under, contracts with financial advisors, underwriters, attorneys, trustees, and other professionals to provide assistance to the Indian tribe in issuing the bonds; and (3)to carry out other such activities as the Secretary determines to be appropriate. (d)

Bond trustee

(1)

In general

Notwithstanding any other provision of law, any qualified tribal school modernization bond issued by an Indian tribe under this section shall be subject to a trust agreement between the Indian tribe and a trustee. (2)

Trustee

Any bank or trust company that meets the requirements established by the Secretary may serve as a trustee for purposes of paragraph (1). (3)

Content of trust agreement

A trust agreement entered into by an Indian tribe under this subsection shall specify that the trustee, with respect to any bond issued under this section, shall— (A)act as a repository for the proceeds of the bond; (B)make payments to bondholders; (C)receive, as a condition to the issuance of the bond, a transfer of funds from the tribal school modernization escrow account under subsection (f)(2), or from other funds furnished by or on behalf of the Indian tribe, in an amount that, together with interest earnings from the investment of the funds in obligations of or fully guaranteed by the United States, or from other investments under subsection (j), will be sufficient to pay timely and in full the entire principal amount of the bond on the stated maturity date of the bond; (D)invest the funds received in accordance with subparagraph (C); and (E)hold and invest the funds in a segregated fund or account under the agreement, to be used solely to pay the costs of activities described in subsection (c). (4)

Requirements for making direct payments

(A)

In general

Notwithstanding any other provision of law, the trustee shall make each payment described in paragraph (3)(E) in accordance with such requirements as the Indian tribe may prescribe in the trust agreement under paragraph (3). (B)

Payments to contractors

As a condition of making a payment to a contractor under paragraph (3)(E), the trustee shall require an inspection of the project of the contractor, to ensure the completion of the project, by— (i)a local financial institution; or (ii)an independent inspecting architect or engineer. (C)

Contracts

Each contract under paragraphs (1) and (2) of subsection (c) shall require, or be renegotiated to require, that each payment under the contract shall be made in accordance with this subsection. (e)

Payments of principal and interest

(1)

Principal

(A)

In general

No principal payment on any qualified tribal school modernization bond shall be required until the final, stated maturity of the bond. (B)

Maturity

(i)

In general

The final, stated maturity of a qualified tribal school modernization bond shall be not later than the date that is 15 years after the date of issuance of the bond. (ii)

Expiration

On expiration of a qualified tribal school modernization bond under clause (i), the entire outstanding principal under the bond shall become due and payable. (2)

Interest

In lieu of interest on a qualified tribal school modernization bond, there shall be provided a tax credit under section 1400U of the Internal Revenue Code of 1986. (f)

Bond guarantees

(1)

In general

Payment of the principal portion of a qualified tribal school modernization bond issued under this section shall be guaranteed solely by amounts deposited with each respective bond trustee as described in subsection (d)(3)(C). (2)

Escrow account

(A)

In general

The Secretary may deposit not more than $50,000,000 into a tribal school modernization escrow account. (B)

Additional amounts

(i)

In general

The Secretary may accept for transfer into the tribal school modernization escrow account amounts from, as the Secretary determines to be appropriate— (I)other Federal departments and agencies (such as amounts made available for facility improvement and repairs); (II)non-Federal public or private sources. (ii)

Treatment

Amounts transferred into the escrow account pursuant to clause (i) shall not reduce the amount eligible to be deposited into the account under subparagraph (A). (C)

Investment of certain funds

Amounts made available to carry out any project included on the list of the Bureau entitled Education Facilities Replacement Construction Priorities List as of FY 2004 (or successor regulations) (69 Fed. Reg. 13870) shall— (i)be invested in accordance with subsection (j); and (ii)at the discretion of the Secretary— (I)be used to pay any increase in project costs or other facility costs of the project for which the amounts are made available; or (II)be deposited into the tribal school modernization escrow account. (g)

Limitations

(1)

Obligation to repay

(A)

In general

Notwithstanding any other provision of law, the principal amount of any qualified tribal school modernization bond issued under this section shall be repaid only to the extent of any escrowed funds provided under subsection (d)(3)(C). (B)

Treatment

No qualified tribal school modernization bond issued by an Indian tribe shall be an obligation of, and no payment of the principal of such a bond shall be guaranteed by, the United States, an Indian tribe, or a tribal school. (2)

Land and facilities

No land or facility purchased or improved using amounts provided under a qualified tribal school modernization bond issued under this section shall be mortgaged or used as collateral for the bond. (h)

Sale of bonds

A qualified tribal school modernization bond may be sold at a purchase price equal to, in excess of, or at a discount from the par amount of the bond. (i)

Treatment of trust agreement earnings

Amounts earned through the investment of funds under the control of a trustee under a trust agreement described in subsection (d) shall not be subject to Federal income tax. (j)

Investment of sinking funds

Any sinking fund established for the purpose of the payment of principal on a qualified tribal school modernization bond shall be invested in— (1)obligations issued or guaranteed by the United States; or (2)such other assets as the Secretary of the Treasury may allow, by regulation.

Expansion of incentives for tribal schools

Chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subchapter:

Tribal school modernization provisions

Sec. 1400U. Credit to holders of qualified tribal school modernization bonds.

1400U.

Credit to holders of qualified tribal school modernization bonds

(a)

Allowance of credit

In the case of a taxpayer who holds a qualified tribal 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 tribal 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 tribal 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 date of sale of the issue) on outstanding long-term corporate obligations of similar ratings (as determined 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 tribal school modernization bond; other definitions

For purposes of this section— (1)

Qualified tribal school modernization bond

(A)

In general

The term qualified tribal school modernization bond means, subject to subparagraph (B), any bond issued as part of an issue under section 2(c) of the Indian School Construction Act, as in effect on the date of enactment of this section, if— (i)95 percent or more of the proceeds of such issue are to be used for the construction, rehabilitation, or repair of a school facility funded by the Bureau of Indian Affairs of the Department of the Interior or for the acquisition of land on which such a facility is to be constructed with part of the proceeds of such issue, (ii)the bond is issued by an Indian tribe, (iii)the issuer designates such bond for purposes of this section, and (iv)the term of each bond which is part of such issue does not exceed 15 years. (B)

National limitation on amount of bonds designated

(i)

National limitation

There is a national qualified tribal school modernization bond limitation for each calendar year. Such limitation is— (I)$200,000,000 for 2009, (II)$200,000,000 for 2010, and (III)$200,000,000 for 2011. (ii)

Allocation of limitation

The national qualified tribal school modernization bond limitation shall be allocated to Indian tribes by the Secretary of the Interior subject to the provisions of section 2 of the Indian School Construction Act, as in effect on the date of enactment of this section. (iii)

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 Indian tribe shall not exceed the limitation amount allocated to such government under clause (ii) for such calendar year. (iv)

Carryover of unused limitation

If for any calendar year— (I)the limitation amount under this subparagraph, exceeds (II)the amount of qualified tribal school modernization bonds issued during such year, the limitation amount under this subparagraph for the following calendar year shall be increased by the amount of such excess. The preceding sentence shall not apply if such following calendar year is after 2012. (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.

(3)

Bond

The term bond includes any obligation. (4)

Indian tribe

The term Indian tribe has the meaning given the term Indian tribal government by section 7701(a)(40), including the application of section 7871(d). Such term includes any consortium of Indian tribes approved by the Secretary of the Interior. (e)

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. (f)

Bonds held by regulated investment companies

If any qualified tribal 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. (g)

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 tribal 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 tribal school modernization bond as if it were a stripped bond and to the credit under this section as if it were a stripped coupon. (h)

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 tribal school modernization bonds on a credit allowance date shall be treated as if it were a payment of estimated tax made by the taxpayer on such date. (i)

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. (j)

Credit treated as allowed under part IV of subchapter A

For purposes of subtitle F, the credit allowed by this section shall be treated as a credit allowable under part IV of subchapter A of this chapter. (k)

Reporting

Issuers of qualified tribal school modernization bonds shall submit reports similar to the reports required under section 149(e).

Additional provisions

(a)

Sovereign immunity

Nothing in this Act or an amendment made by this Act impacts, limits, or otherwise affects the sovereign immunity of the United States or any State or Indian tribal government. (b)

Application

This Act and the amendments made by this Act shall take effect on the date of enactment of this Act with respect to bonds issued after December 31, 2006, regardless of the status of regulations promulgated pursuant to this Act or an amendment made by this Act.