School infrastructure bonds

(a) In general The Internal Revenue Code of 1986 is amended by inserting after subpart I (as revived by section 201) of part IV of subchapter A of chapter 1 the following new subpart: J School infrastructure bonds Sec. 54BB. School infrastructure bonds. 54BB. School infrastructure bonds (a) In general If a taxpayer holds a school infrastructure 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 school infrastructure bond is 100 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 of the taxpayer (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) School infrastructure bond (1) In general For purposes of this section, the term school infrastructure bond means any bond issued as part of an issue if— (A) 100 percent of the available project proceeds of such issue are to be used for the purposes described in section 301 of the Rebuild America’s Schools Act of 2026, (B) the interest on such obligation would (but for this section) be excludable from gross income under section 103, (C) the issue meets the requirements of paragraph (3), and (D) the issuer designates such bond for purposes of this section. (2) Applicable rules For purposes of applying paragraph (1)— (A) for purposes of section 149(b), a school infrastructure bond shall not be treated as federally guaranteed by reason of the credit allowed under section 6431(a), (B) for purposes of section 148, the yield on a school infrastructure bond shall be determined without regard to the credit allowed under subsection (a), and (C) a bond shall not be treated as a school infrastructure 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. (3) 6-year expenditure period (A) In general An issue shall be treated as meeting the requirements of this paragraph if, as of the date of issuance, the issuer reasonably expects 100 percent of the available project proceeds to be spent for purposes described in section 301 of the Rebuild America’s Schools Act of 2026 within the 6-year period beginning on such date of issuance. (B) Failure to spend required amount of bond proceeds within 6 years To the extent that less than 100 percent of the available project proceeds of the issue are expended at the close of the period described in subparagraph (A) with respect to such issue, the issuer 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. (e) Limitation on amount of bonds designated The maximum aggregate face amount of bonds issued during any calendar year which may be designated under subsection (d)(1)(D) by any issuer shall not exceed the limitation amount allocated under subsection (g) for such calendar year to such issuer. (f) National limitation on amount of bonds designated The national qualified school infrastructure bond limitation for each calendar year is— (1) $10,000,000,000 for 2027, (2) $10,000,000,000 for 2028, and (3) $10,000,000,000 for 2029. (g) Allocation of limitation (1) Allocations (A) States After application of subparagraph (B) and paragraph (3)(A), the limitation applicable under subsection (f) for a calendar year shall be allocated by the Secretary among the States in proportion to the respective amounts received by all local educational agencies in each State under part A of title I of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6311 et seq.) for the previous fiscal year relative to the total such amount received by all local educational agencies for the most recent fiscal year ending before such calendar year. (B) Certain possessions One-half of 1 percent of the amount of the limitation applicable under subsection (f) for a calendar year shall be allocated by the Secretary to possessions of the United States other than Puerto Rico for such calendar year. (2) Allocations to schools The limitation amount allocated to a State or possession under paragraph (1) shall be allocated by the State educational agency (or such other agency as is authorized under State law to make such allocation) to issuers within such State or possession in accordance with the priorities described in subsections (c) and (d) of section 103 of the Rebuild America’s Schools Act of 2026 and the eligibility requirements described in section 103(b) of such Act, except that paragraph (1)(C) of such section shall not apply to the determination of eligibility for such allocation. (3) Allocations for Indian schools (A) In general One-half of 1 percent of the amount of the limitation applicable under subsection (f) for any calendar year shall be allocated by the Secretary to the Secretary of the Interior for schools funded by the Bureau of Indian Affairs for such calendar year. (B) Allocation to schools The limitation amount allocated to the Secretary of the Interior under paragraph (1) shall be allocated by such Secretary to issuers or schools funded as described in paragraph (2). In the case of amounts allocated under the preceding sentence, Indian tribal governments shall be treated as qualified issuers for purposes of this subchapter. (4) Digital learning Up to 10 percent of the limitation amount allocated under paragraph (1) or (3)(A) may be allocated by the State to issuers within such State (in the case of an amount allocated under paragraph (1)) or by the Secretary of the Interior to issuers or schools funded by the Bureau of Indian Affairs (in the case of an amount allocated under paragraph (3)(A)) to carry out activities to improve digital learning in accordance with section 301(b) of the Rebuild America’s Schools Act of 2026. (h) Interest Payment Date For purposes of this section, the term interest payment date means any date on which the holder of record of the school infrastructure bond is entitled to a payment of interest under such bond. (i) Special Rules (1) Interest on school infrastructure bonds includible in gross income for federal income tax purposes For purposes of this title, interest on any school infrastructure 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).. (b) Credit allowed to issuer Section 6431(f)(3)(A) of such Code, as revived by section 201(b)(1), is amended by striking means any qualified tax credit bond and all that follows through the end of subparagraph (A) and inserting means any bond if— (A) such bond is— (i) a qualified tax credit bond which is a qualified zone academy bond (as defined in section 54E) determined without regard to any allocation relating to the national zone academy bond limitation for years after 2010 or any carryforward of any such allocation, or (ii) any school infrastructure bond (as defined in section 54BB), and. (c) Application of certain labor standards Subchapter IV of chapter 31 of title 40, United States Code, shall apply to projects financed with the proceeds of any qualified zone academy bond (as defined in section 54E of the Internal Revenue Code of 1986) issued after the date of the enactment of this Act. (d) Conforming amendments (1) Section 6401(b)(1) of the Internal Revenue Code of 1986, as amended by section 201(a), is amended by striking and I and inserting I, and J. (2) The table of subparts for part IV of subchapter A of chapter 1 of such Code, as amended by section 201(a), is amended by adding at the end the following: Subpart J—School infrastructure bonds. (e) Effective Date The amendments made by this section shall apply to obligations issued after December 31, 2026.