American Recovery and Reinvestment Act of 2009/Division B/Title I/Subtitle F

by United States Congress

Subtitle F—Infrastructure Financing Tools

PART I—IMPROVED MARKETABILITY FOR TAX-EXEMPT BONDS

SEC. 1501. DE MINIMIS SAFE HARBOR EXCEPTION FOR TAX-EXEMPT INTEREST EXPENSE OF FINANCIAL INSTITUTIONS.

(a) In General.—

Subsection (b) of section 265 is amended by adding at the end the following new paragraph:

"(7) De minimis exception for bonds issued during 2009 or 2010.—

"(A) In general.—In applying paragraph (2)(A), there shall not be taken into account tax-exempt obligations issued during 2009 or 2010.

"(B) Limitation.—The amount of tax-exempt obligations not taken into account by reason of subparagraph (A) shall not exceed 2 percent of the amount determined under paragraph (2)(B).

"(C) Refundings.—For purposes of this paragraph, a refunding bond (whether a current or advance refunding) shall be treated as issued on the date of the issuance of the refunded bond (or in the case of a series of refundings, the original bond).".

(b) Treatment as Financial Institution Preference Item.—

Clause (iv) of section 291(e)(1)(B) is amended by adding at the end the following: "That portion of any obligation not taken into account under paragraph (2)(A) of section 265(b) by reason of paragraph (7) of such section shall be treated for purposes of this section as having been acquired on August 7, 1986.".

(c) Effective Date.—

The amendments made by this section shall apply to obligations issued after December 31, 2008.

SEC. 1502. MODIFICATION OF SMALL ISSUER EXCEPTION TO TAX-EXEMPT INTEREST EXPENSE ALLOCATION RULES FOR FINANCIAL INSTITUTIONS.

(a) In General.—

Paragraph (3) of section 265(b) (relating to exception for certain tax-exempt obligations) is amended by adding at the end the following new subparagraph:

"(G) Special rules for obligations issued during 2009 and 2010.—

"(i) Increase in limitation.—In the case of obligations issued during 2009 or 2010, subparagraphs (C)(i), (D)(i), and (D)(iii)(II) shall each be applied by substituting `$30,000,000' for `$10,000,000'.

"(ii) Qualified 501(c)(3) bonds treated as issued by exempt organization.—In the case of a qualified 501(c)(3) bond (as defined in section 145) issued during 2009 or 2010, this paragraph shall be applied by treating the 501(c)(3) organization for whose benefit such bond was issued as the issuer.

"(iii) Special rule for qualified financings.—In the case of a qualified financing issue issued during 2009 or 2010—

"(I) subparagraph (F) shall not apply, and

"(II) any obligation issued as a part of such issue shall be treated as a qualified tax-exempt obligation if the requirements of this paragraph are met with respect to each qualified portion of the issue (determined by treating each qualified portion as a separate issue which is issued by the qualified borrower with respect to which such portion relates).

"(iv) Qualified financing issue.—For purposes of this subparagraph, the term `qualified financing issue' means any composite, pooled, or other conduit financing issue the proceeds of which are used directly or indirectly to make or finance loans to 1 or more ultimate borrowers each of whom is a qualified borrower.

"(v) Qualified portion.—For purposes of this subparagraph, the term `qualified portion' means that portion of the proceeds which are used with respect to each qualified borrower under the issue.

"(vi) Qualified borrower.—For purposes of this subparagraph, the term `qualified borrower' means a borrower which is a State or political subdivision thereof or an organization described in section 501(c)(3) and exempt from taxation under section 501(a).".

(b) Effective Date.—

The amendment made by this section shall apply to obligations issued after December 31, 2008.

SEC. 1503. TEMPORARY MODIFICATION OF ALTERNATIVE MINIMUM TAX LIMITATIONS ON TAX-EXEMPT BONDS.

(a) Interest on Private Activity Bonds Issued During 2009 and 2010 Not Treated as Tax Preference Item.—

Subparagraph (C) of section 57(a)(5) is amended by adding at the end a new clause:

"(vi) Exception for bonds issued in 2009 and 2010.—

"(I) In general.—For purposes of clause (i), the term `private activity bond' shall not include any bond issued after December 31, 2008, and before January 1, 2011.

"(II) Treatment of refunding bonds.—For purposes of subclause (I), a refunding bond (whether a current or advance refunding) shall be treated as issued on the date of the issuance of the refunded bond (or in the case of a series of refundings, the original bond).

"(III) Exception for certain refunding bonds.— Subclause (II) shall not apply to any refunding bond which is issued to refund any bond which was issued after December 31, 2003, and before January 1, 2009.".

(b) No Adjustment to Adjusted Current Earnings for Interest on Tax-Exempt Bonds Issued During 2009 and 2010.—

Subparagraph (B) of section 56(g)(4) is amended by adding at the end the following new clause:

"(iv) Tax exempt interest on bonds issued in 2009 and 2010.—

"(I) In general.—Clause (i) shall not apply in the case of any interest on a bond issued after December 31, 2008, and before January 1, 2011.

"(II) Treatment of refunding bonds.—For purposes of subclause (I), a refunding bond (whether a current or advance refunding) shall be treated as issued on the date of the issuance of the refunded bond (or in the case of a series of refundings, the original bond).

"(III) Exception for certain refunding bonds.—

"Subclause (II) shall not apply to any refunding bond which is issued to refund any bond which was issued after December 31, 2003, and before January 1, 2009.".

(c) Effective Date.—

The amendments made by this section shall apply to obligations issued after December 31, 2008.

SEC. 1504. MODIFICATION TO HIGH SPEED INTERCITY RAIL FACILITY BONDS.

(a) In General.—

Paragraph (1) of section 142(i) is amended by striking "operate at speeds in excess of" and inserting "be capable of attaining a maximum speed in excess of".

(b) Effective Date.—

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

PART II—DELAY IN APPLICATION OF WITHHOLDING TAX ON GOVERNMENT CONTRACTORS

SEC. 1511. DELAY IN APPLICATION OF WITHHOLDING TAX ON GOVERNMENT CONTRACTORS.

Subsection (b) of section 511 of the Tax Increase Prevention and Reconciliation Act of 2005 is amended by striking "December 31, 2010" and inserting "December 31, 2011".

PART III—TAX CREDIT BONDS FOR SCHOOLS

SEC. 1521. QUALIFIED SCHOOL CONSTRUCTION BONDS.

(a) In General.—

Subpart I of part IV of subchapter A of chapter 1 is amended by adding at the end the following new section:

"SEC. 54F. QUALIFIED SCHOOL CONSTRUCTION BONDS.

"(a) Qualified School Construction Bond.—For purposes of this subchapter, the term `qualified school construction bond' means any bond issued as part of an issue if—

"(1) 100 percent of the available project proceeds of such issue are to be used for the construction, rehabilitation, or repair of a public school facility or for the acquisition of land on which such a facility is to be constructed with part of the proceeds of such issue,

"(2) the bond is issued by a State or local government within the jurisdiction of which such school is located, and

"(3) the issuer designates such bond for purposes of this section.

"(b) Limitation on Amount of Bonds Designated.—The maximum aggregate face amount of bonds issued during any calendar year which may be designated under subsection (a) by any issuer shall not exceed the limitation amount allocated under subsection (d) for such calendar year to such issuer.

"(c) National Limitation on Amount of Bonds Designated.—There is a national qualified school construction bond limitation for each calendar year. Such limitation is—

"(1) $11,000,000,000 for 2009,

"(2) $11,000,000,000 for 2010, and

"(3) except as provided in subsection (e), zero after 2010.

"(d) Allocation of Limitation.—

"(1) Allocation among states.—Except as provided in paragraph (2)(C), the limitation applicable under subsection (c) for any calendar year shall be allocated by the Secretary among the States in proportion to the respective amounts each such State is eligible to receive under section 1124 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6333) for the most recent fiscal year ending before such calendar year. The limitation amount allocated to a State under the preceding sentence shall be allocated by the State to issuers within such State.

"(2) 40 percent of limitation allocated among largest school districts.—

"(A) In general.—40 percent of the limitation applicable under subsection (c) for any calendar year shall be allocated under subparagraph (B) by the Secretary among local educational agencies which are large local educational agencies for such year.

"(B) Allocation formula.—The amount to be allocated under subparagraph (A) for any calendar year shall be allocated among large local educational agencies in proportion to the respective amounts each such agency received under section 1124 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6333) for the most recent fiscal year ending before such calendar year.

"(C) Reduction in state allocation.—The allocation to any State under paragraph (1) shall be reduced by the aggregate amount of the allocations under this paragraph to large local educational agencies within such State.

"(D) Allocation of unused limitation to state.—The amount allocated under this paragraph to a large local educational agency for any calendar year may be reallocated by such agency to the State in which such agency is located for such calendar year. Any amount reallocated to a State under the preceding sentence may be allocated as provided in paragraph (1).

"(E) Large local educational agency.—For purposes of this paragraph, the term `large local educational agency' means, with respect to a calendar year, any local educational agency if such agency is—

"(i) among the 100 local educational agencies with the largest numbers of children aged 5 through 17 from families living below the poverty level, as determined by the Secretary using the most recent data available from the Department of Commerce that are satisfactory to the Secretary, or

"(ii) 1 of not more than 25 local educational agencies (other than those described in clause (i)) that the Secretary of Education determines (based on the most recent data available satisfactory to the Secretary) are in particular need of assistance, based on a low level of resources for school construction, a high level of enrollment growth, or such other factors as the Secretary deems appropriate.

"(3) Allocations to certain possessions.—The amount to be allocated under paragraph (1) to any possession of the United States other than Puerto Rico shall be the amount which would have been allocated if all allocations under paragraph (1) were made on the basis of respective populations of individuals below the poverty line (as defined by the Office of Management and Budget). In making other allocations, the amount to be allocated under paragraph (1) shall be reduced by the aggregate amount allocated under this paragraph to possessions of the United States.

"(4) Allocations for indian schools.—In addition to the amounts otherwise allocated under this subsection, $200,000,000 for calendar year 2009, and $200,000,000 for calendar year 2010, shall be allocated by the Secretary of the Interior for purposes of the construction, rehabilitation, and repair of schools funded by the Bureau of Indian Affairs. In the case of amounts allocated under the preceding sentence, Indian tribal governments (as defined in section 7701(a)(40)) shall be treated as qualified issuers for purposes of this subchapter.

"(e) Carryover of Unused Limitation.—If for any calendar year—

"(1) the amount allocated under subsection (d) to any State, exceeds

"(2) the amount of bonds issued during such year which are designated under subsection (a) pursuant to such allocation, the limitation amount under such subsection for such State for the following calendar year shall be increased by the amount of such excess. A similar rule shall apply to the amounts allocated under subsection (d)(4).".

(b) Conforming Amendments.—

(1) Paragraph (1) of section 54A(d) is amended by striking "or" at the end of subparagraph (C), by inserting "or" at the end of subparagraph (D), and by inserting after subparagraph (D) the following new subparagraph:

"(E) a qualified school construction bond,".

(2) Subparagraph (C) of section 54A(d)(2) is amended by striking "and" at the end of clause (iii), by striking the period at the end of clause (iv) and inserting ", and", and by adding at the end the following new clause:

"(v) in the case of a qualified school construction bond, a purpose specified in section 54F(a)(1).".

(3) The table of sections for subpart I of part IV of subchapter A of chapter 1 is amended by adding at the end the following new item:

"Sec. 54F. Qualified school construction bonds.".

(c) Effective Date.—

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

SEC. 1522. EXTENSION AND EXPANSION OF QUALIFIED ZONE ACADEMY BONDS.

(a) In General.—Section 54E(c)(1) is amended by striking "and 2009" and inserting "and $1,400,000,000 for 2009 and 2010".

(b) Effective Date.—The amendment made by this section shall apply to obligations issued after December 31, 2008.

PART IV—BUILD AMERICA BONDS

SEC. 1531. BUILD AMERICA BONDS.

(a) In General.—

Part IV of subchapter A of chapter 1 is amended by adding at the end the following new subpart:

"Subpart J—Build America Bonds

"Sec. 54AA. Build America bonds.

"SEC. 54AA. BUILD AMERICA BONDS.

"(a) In General.—If a taxpayer holds a build America bond on one or more interest payment dates of the bond 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.—The amount of the credit determined under this subsection with respect to any interest payment date for a build America bond is 35 percent of the amount of interest payable by the issuer with respect to such date .

"(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 this part (other than subpart C and this subpart).

"(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 (determined before the application of paragraph (1) for such succeeding taxable year).

"(d) Build America Bond.—

"(1) In general.—For purposes of this section, the term `build America bond' means any obligation (other than a private activity bond) if—

"(A) the interest on such obligation would (but for this section) be excludable from gross income under section 103,

"(B) such obligation is issued before January 1, 2011, and

"(C) the issuer makes an irrevocable election to have this section apply.

"(2) Applicable rules.—For purposes of applying paragraph (1)—

"(A) for purposes of section 149(b), a build America bond shall not be treated as federally guaranteed by reason of the credit allowed under subsection (a) or section 6431,

"(B) for purposes of section 148, the yield on a build America bond shall be determined without regard to the credit allowed under subsection (a), and

"(C) a bond shall not be treated as a build America bond if the issue price has more than a de minimis amount (determined under rules similar to the rules of section 1273(a)(3)) of premium over the stated principal amount of the bond.

"(e) Interest Payment Date.—For purposes of this section, the term `interest payment date' means any date on which the holder of record of the build America bond is entitled to a payment of interest under such bond.

"(f) Special Rules.—

"(1) Interest on build america bonds includible in gross income for federal income tax purposes.—For purposes of this title, interest on any build America bond shall be includible in gross income.

"(2) Application of certain rules.—Rules similar to the rules of subsections (f), (g), (h), and (i) of section 54A shall apply for purposes of the credit allowed under subsection (a).

"(g) Special Rule for Qualified Bonds Issued Before 2011.—In the case of a qualified bond issued before January 1, 2011—

"(1) Issuer allowed refundable credit.—In lieu of any credit allowed under this section with respect to such bond, the issuer of such bond shall be allowed a credit as provided in section 6431.

"(2) Qualified bond.—For purposes of this subsection, the term `qualified bond' means any build America bond issued as part of an issue if—

"(A) 100 percent of the excess of—

"(i) the available project proceeds (as defined in section 54A) of such issue, over

"(ii) the amounts in a reasonably required reserve (within the meaning of section 150(a)(3)) with respect to such issue, are to be used for capital expenditures, and

"(B) the issuer makes an irrevocable election to have this subsection apply.

"(h) Regulations.—The Secretary may prescribe such regulations and other guidance as may be necessary or appropriate to carry out this section and section 6431.".

(b) Credit for Qualified Bonds Issued Before 2011.—

Subchapter B of chapter 65 is amended by adding at the end the following new section:

"SEC. 6431. CREDIT FOR QUALIFIED BONDS ALLOWED TO ISSUER.

"(a) In General.—In the case of a qualified bond issued before January 1, 2011, the issuer of such bond shall be allowed a credit with respect to each interest payment under such bond which shall be payable by the Secretary as provided in subsection (b).

"(b) Payment of Credit.—The Secretary shall pay (contemporaneously with each interest payment date under such bond) to the issuer of such bond (or to any person who makes such interest payments on behalf of the issuer) 35 percent of the interest payable under such bond on such date.

"(c) Application of Arbitrage Rules.—For purposes of section 148, the yield on a qualified bond shall be reduced by the credit allowed under this section.

"(d) Interest Payment Date.—For purposes of this subsection, the term `interest payment date' means each date on which interest is payable by the issuer under the terms of the bond.

"(e) Qualified Bond.—For purposes of this subsection, the term `qualified bond' has the meaning given such term in section 54AA(g).".

(c) Conforming Amendments.—

(1) Section 1324(b)(2) of title 31, United States Code, is amended by striking "or 6428" and inserting "6428, or 6431,".

(2) Section 54A(c)(1)(B) is amended by striking "subpart C" and inserting "subparts C and J".

(3) Sections 54(c)(2), 1397E(c)(2), and 1400N(l)(3)(B) are each amended by striking "and I" and inserting ", I, and J".

(4) Section 6211(b)(4)(A) is amended by striking "and 6428" and inserting "6428, and 6431".

(5) Section 6401(b)(1) is amended by striking "and I" and inserting "I, and J".

(6) The table of subparts for part IV of subchapter A of chapter 1 is amended by adding at the end the following new item:

"subpart j. build america bonds.".

(7) The table of section for subchapter B of chapter 65 is amended by adding at the end the following new item:

"Sec. 6431. Credit for qualified bonds allowed to issuer.".

(d) Transitional Coordination With State Law.—

Except as otherwise provided by a State after the date of the enactment of this Act, the interest on any build America bond (as defined in section 54AA of the Internal Revenue Code of 1986, as added by this section) and the amount of any credit determined under such section with respect to such bond shall be treated for purposes of the income tax laws of such State as being exempt from Federal income tax.

(e) Effective Date.—

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

PART V—REGULATED INVESTMENT COMPANIES ALLOWED TO PASS-THRU TAX CREDIT BOND CREDITS

SEC. 1541. REGULATED INVESTMENT COMPANIES ALLOWED TO PASS-THRU TAX CREDIT BOND CREDITS.

(a) In General.—Part I of subchapter M of chapter 1 is amended by inserting after section 853 the following new section:

"SEC. 853A. CREDITS FROM TAX CREDIT BONDS ALLOWED TO SHAREHOLDERS.

"(a) General Rule.—A regulated investment company—

"(1) which holds (directly or indirectly) one or more tax credit bonds on one or more applicable dates during the taxable year, and

"(2) which meets the requirements of section 852(a) for the taxable year, may elect the application of this section with respect to credits allowable to the investment company during such taxable year with respect to such bonds.

"(b) Effect of Election.—If the election provided in subsection (a) is in effect for any taxable year—

"(1) the regulated investment company shall not be allowed any credits to which subsection (a) applies for such taxable year,

"(2) the regulated investment company shall—

"(A) include in gross income (as interest) for such taxable year an amount equal to the amount that such investment company would have included in gross income with respect to such credits if this section did not apply, and

"(B) increase the amount of the dividends paid deduction for such taxable year by the amount of such income, and

"(3) each shareholder of such investment company shall—

"(A) include in gross income an amount equal to such shareholder's proportionate share of the interest income attributable to such credits, and

"(B) be allowed the shareholder's proportionate share of such credits against the tax imposed by this chapter.

"(c) Notice to Shareholders.—For purposes of subsection (b)(3), the shareholder's proportionate share of—

"(1) credits described in subsection (a), and

"(2) gross income in respect of such credits, shall not exceed the amounts so designated by the regulated investment company in a written notice mailed to its shareholders not later than 60 days after the close of its taxable year.

"(d) Manner of Making Election and Notifying Shareholders.—The election provided in subsection (a) and the notice to shareholders required by subsection (c) shall be made in such manner as the Secretary may prescribe.

"(e) Definitions and Special Rules.—

"(1) Definitions.—For purposes of this subsection—

"(A) Tax credit bond.—The term `tax credit bond' means—

"(i) a qualified tax credit bond (as defined in section 54A(d)),

"(ii) a build America bond (as defined in section 54AA(d)), and

"(iii) any bond for which a credit is allowable under subpart H of part IV of subchapter A of this chapter.

"(B) Applicable date.—The term `applicable date' means—

"(i) in the case of a qualified tax credit bond or a bond described in subparagraph (A)(iii), any credit allowance date (as defined in section 54A(e)(1)), and

"(ii) in the case of a build America bond (as defined in section 54AA(d)), any interest payment date (as defined in section 54AA(e)).

"(2) Stripped tax credit bonds.—If the ownership of a tax credit bond is separated from the credit with respect to such bond, subsection (a) shall be applied by reference to the instruments evidencing the entitlement to the credit rather than the tax credit bond.

"(f) Regulations, etc.—The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including methods for determining a shareholder's proportionate share of credits.".

(b) Conforming Amendments.—

(1) Section 54(l) is amended by striking paragraph (4) and by redesignating paragraphs (5) and (6) as paragraphs (4) and (5), respectively.

(2) Section 54A(h) is amended to read as follows:

"(h) Bonds Held by Real Estate Investment Trusts.—If any qualified tax credit bond is held by a real estate investment trust, the credit determined under subsection (a) shall be allowed to beneficiaries of such trust (and any gross income included under subsection (f) with respect to such credit shall be distributed to such beneficiaries) under procedures prescribed by the Secretary.".

(3) The table of sections for part I of subchapter M of chapter 1 is amended by inserting after the item relating to section 853 the following new item:

"Sec. 853A. Credits from tax credit bonds allowed to shareholders.".

(c) Effective Date.—The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.