S.Amdt. 1627

1. Adds TITLE VI--RAIL INFRASTRUCTURE BONDS at the end of the bill

   Adds a title

   In S. 1516 · Introduced in Senate

   "26106. Rail infrastructure bonds.". <all>D23/

   Inserted: TITLE VI--RAIL INFRASTRUCTURE BONDS

   Inserted: SEC. 601. SHORT TITLE.

   Inserted: This title may be cited as the "Passenger Rail Investment and Improvement Financing Act of 2005".

   Inserted: SEC. 602. TAX CREDIT TO HOLDERS OF QUALIFIED RAIL INFRASTRUCTURE BONDS.

   Inserted: (a) In General.--Part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to credits against tax) is amended by adding at the end the following new subpart:

   Inserted: "Subpart H--Nonrefundable Credit for Holders of Qualified Rail Infrastructure Bonds

   Inserted: "Sec. 54. Credit to holders of qualified rail infrastructure bonds.

   Inserted: "SEC. 54. CREDIT TO HOLDERS OF QUALIFIED RAIL INFRASTRUCTURE BONDS.

   Inserted: "(a) Allowance of Credit.--In the case of a taxpayer who holds a qualified rail infrastructure 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.

   Inserted: "(b) Amount of Credit.--

   Inserted: "(1) In general.--The amount of the credit determined under this subsection with respect to any credit allowance date for a qualified rail infrastructure bond is 25 percent of the annual credit determined with respect to such bond.

   Inserted: "(2) Annual credit.--The annual credit determined with respect to any qualified rail infrastructure bond is the product of--

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   Inserted: "(A) the applicable credit rate, multiplied by

   Inserted: "(B) the outstanding face amount of the bond.

   Inserted: "(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 under regulations prescribed by the Secretary).

   Inserted: "(4) Credit allowance date.--For purposes of this section, the term 'credit allowance date' means--

   Inserted: "(A) March 15,

   Inserted: "(B) June 15,

   Inserted: "(C) September 15, and

   Inserted: "(D) December 15 Such term includes the last day on which the bond is outstanding.

   Inserted: "(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.

   Inserted: "(c) Limitation Based on Amount of Tax.--

   Inserted: "(1) In general.--The credit allowed under subsection (a) for any taxable year shall not exceed the excess of--

   Inserted: "(A) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over

   Inserted: "(B) the sum of the credits allowable under this part (other than this subpart and subpart C).

   Inserted: "(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.

   Inserted: "(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.

   Inserted: "(e) Credits May Be Stripped.--Under regulations prescribed by the Secretary--

   Inserted: "(1) In general.--There may be a separation (including at issuance) of the ownership of a qualified rail infrastructure 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.

   Inserted: "(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 rail infrastructure bond as if it were a stripped bond and to the credit under this section as if it were a stripped coupon.

   Inserted: "(f) Qualified Rail Infrastructure Bond.--For purposes of this part, the term 'qualified rail infrastructure bond' means any bond issued as part of an issue if--

   Inserted: "(1) the issuer certifies that the Secretary of Transportation has designated the bond for purposes of this section under section 26106(a) of title 49, United States Code, as in effect on the date of the enactment of this section,

   Inserted: "(2) 95 percent or more of the proceeds from the sale of such issue are to be used for expenditures incurred after the date of the enactment of this section for any project described in section 26106(a)(2) of title 49, United States Code,

   Inserted: "(3) the term of each bond which is part of such issue does not exceed 20 years,

   Inserted: "(4) the payment of principal with respect to such bond is the obligation solely of the issuer, and

   Inserted: "(5) the issue meets the requirements of subsection (f) (relating to arbitrage).

   Inserted: "(g) Special Rules Relating to Arbitrage.--

   Inserted: "(1) In general.--Subject to paragraph (2), an issue shall be treated as meeting the requirements of this subsection if as of the date of issuance, the issuer reasonably expects--

   Inserted: "(A) to spend at least 95 percent of the proceeds from the sale of the issue for 1 or more qualified projects within the 3-year period beginning on such date,

   Inserted: "(B) to incur a binding commitment with a third party to spend at least 10 percent of the proceeds from the sale of the issue, or to commence construction, with respect to such projects within the 6-month period beginning on such date, and

   Inserted: "(C) to proceed with due diligence to complete such projects and to spend the proceeds from the sale of the issue.

   Inserted: "(2) Rules regarding continuing compliance after 3-year determination.--If at least 95 percent of the proceeds from the sale of the issue is not expended for 1 or more qualified projects within the 3-year period beginning on the date of issuance, but the requirements of paragraph (1) are otherwise met, an issue shall be treated as continuing to meet the requirements of this subsection if either--

   Inserted: "(A) the issuer uses all unspent proceeds from the sale of the issue to redeem bonds of the issue within 90 days after the end of such 3-year period, or

   Inserted: "(B) the following requirements are met:

   Inserted: "(i) The issuer spends at least 75 percent of the proceeds from the sale of the issue for 1 or more qualified projects within the 3-year period beginning on the date of issuance.

   Inserted: "(ii) Either--

   Inserted: "(I) the issuer spends at least 95 percent of the proceeds from the sale of the issue for 1 or more qualified projects within the 4-year period beginning on the date of issuance, or

   Inserted: "(II) the issuer pays to the Federal Government any earnings on the proceeds from the sale of the issue that accrue after the end of the 3-year period beginning on the date of issuance and uses all unspent proceeds from the sale of the issue to redeem bonds of the issue within 90 days after the end of the 4-year period beginning on the date of issuance.

   Inserted: "(h) Recapture of Portion of Credit Where Cessation of Compliance.--

   Inserted: "(1) In general.--If any bond which when issued purported to be a qualified rail infrastructure bond ceases to be such a qualified bond, the issuer shall pay to the United States (at the time required by the Secretary) an amount equal to the sum of--

   Inserted: "(A) 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 the 2 preceding calendar years, and

   Inserted: "(B) interest at the underpayment rate under section 6621 on the amount determined under subparagraph (A) for each calendar year for the period beginning on the first day of such calendar year.

   Inserted: "(2) Failure to pay.--If the issuer fails to timely pay the amount required by paragraph (1) with respect to such bond, the tax imposed by this chapter on each holder of any such bond which is part of such issue shall be increased (for the taxable year of the holder in which such cessation occurs) by the aggregate decrease in the credits allowed under this section to such holder for taxable years beginning in such 3 calendar years which would have resulted solely from denying any credit under this section with respect to such issue for such taxable years.

   Inserted: "(3) Special rules.--

   Inserted: "(A) Tax benefit rule.--The tax for the taxable year shall be increased under paragraph (2) only with respect to credits allowed by reason of this section which were used to reduce tax liability. In the case of credits not so used to reduce tax liability, the carryforwards under subsection (c) shall be appropriately adjusted.

   Inserted: "(B) No credits against tax.--Any increase in tax under paragraph (2) shall not be treated as a tax imposed by this chapter for purposes of determining--

   Inserted: "(i) the amount of any credit allowable under this part, or

   Inserted: "(ii) the amount of the tax imposed by section 55.

   Inserted: "(i) Other Definitions and Special Rules.--For purposes of this section--

   Inserted: "(1) Bond.--The term 'bond' includes any obligation.

   Inserted: "(2) Qualified project.--The term 'qualified project' means any project described in section 26106(a)(2) of title 49, United States Code.

   Inserted: "(3) Treatment of changes in use.--For purposes of subsection (e)(2), the proceeds from the sale of an issue shall not be treated as used for a qualified project to the extent that the issuer takes any action within its control which causes such proceeds not to be used for a qualified project. The Secretary shall prescribe regulations specifying remedial actions that may be taken (including conditions to taking such remedial actions) to prevent an action described in the preceding sentence from causing a bond to fail to be a qualified rail infrastructure bond.

   Inserted: "(4) Partnership; s corporation; and other pass-thru entities.--Under regulations prescribed by the Secretary, 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).

   Inserted: "(5) Bonds held by regulated investment companies.--If any qualified rail infrastructure 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.

   Inserted: "(6) Reporting.--Issuers of qualified rail infrastructure bonds shall submit reports similar to the reports required under section 149(e).".

   Inserted: (b) Amendments to Other Code Sections.--

   Inserted: (1) Reporting.--Subsection (d) of section 6049 of the Internal Revenue Code of 1986 (relating to returns regarding payments of interest) is amended by adding at the end the following new paragraph:

   Inserted: "(8) Reporting of credit on qualified rail infrastructure bonds.--

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

   Inserted: "(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.

   Inserted: "(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.".

   Inserted: (2) Treatment for estimated tax purposes.--

   Inserted: (A) Individual.--Section 6654 of such Code (relating to failure by individual to pay estimated income tax) is amended by redesignating subsection (m) as subsection (n) and by inserting after subsection (l) the following new subsection:

   Inserted: "(m) Special Rule for Holders of Qualified Rail Infrastructure Bonds.--For purposes of this section, the credit allowed by section 54 to a taxpayer by reason of holding a qualified rail infrastructure bond on a credit allowance date shall be treated as if it were a payment of estimated tax made by the taxpayer on such date.".

   Inserted: (B) Corporate.--Section 6655 of such Code (relating to failure by corporation to pay estimated income tax) is amended by adding at the end of subsection (g) the following new paragraph:

   Inserted: "(5) Special rule for holders of qualified rail infrastructure bonds.--For purposes of this section, the credit allowed by section 54 to a taxpayer by reason of holding a qualified rail infrastructure bond on a credit allowance date shall be treated as if it were a payment of estimated tax made by the taxpayer on such date.".

   Inserted: (c) Clerical Amendments.--

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

   Inserted: "Subpart H. Nonrefundable Credit for Holders of Qualified Rail Infrastructure Bonds".

   Inserted: (2) Section 6401(b)(1) is amended by striking "and G" and inserting "G, and H".

   Inserted: (d) Issuance of Regulations.--Not later than 6 months after the date of the enactment of this section, the Secretary of the Treasury shall issue regulations for carrying out this section and the amendments made by this section.

   Inserted: (e) Intercity Rail Facilities.--Section 142(i) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

   Inserted: "(4) Additional requirements.--A bond issued as part of an issue described in subsection (a)(11) shall not be considered an exempt facility bond unless the requirements of paragraphs (1) through (4) of section 26106(a) of title 49, United States Code, are met.".

   Inserted: (f) Effective Date.--The amendments made by this section shall apply to obligations issued after the date of the enactment of this Act.

   Original wording

   At the end of the bill, add the following:

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As printed