Build America Bonds Act of 2003
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Read twice and referred to the Committee on Finance. (text of measure as introduced: CR S6989-6991)
May 22, 2003
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Introduced in Senate
May 22, 2003
Read twice and referred to the Committee on Finance. (text of measure as introduced: CR S6989-6991)
May 22, 2003
Floor Debate
24 membersWhat members said about S. 1109 on the floor




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Floor Debate
24 membersWhat members said about S. 1109 on the floor
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Bill Text
Latest available legislative text
[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 1109 Introduced in Senate (IS)]
108th CONGRESS
1st Session
S. 1109
To provide $50,000,000,000 in new transportation infrastructure funding
through Federal bonding to empower States and local governments to
complete significant infrastructure projects across all modes of
transportation, including roads, rail, transit, aviation, and water,
and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
May 22, 2003
Mr. Talent (for himself and Mr. Wyden) introduced the following bill;
which was read twice and referred to the Committee on FinanceYY
_______________________________________________________________________
A BILL
To provide $50,000,000,000 in new transportation infrastructure funding
through Federal bonding to empower States and local governments to
complete significant infrastructure projects across all modes of
transportation, including roads, rail, transit, aviation, and water,
and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) Short Title.--This Act may be cited as the ``Build America
Bonds Act of 2003''.
(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.
SEC. 2. FINDINGS.
Congress finds the following:
(1) Our Nation's highways, transit systems, railroads,
airports, 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.
SEC. 3. CREDIT TO HOLDERS OF BUILD AMERICA BONDS.
(a) In General.--Part IV of subchapter A of chapter 1 (relating to
credits against tax) is amended by adding at the end the following new
subpart:
``Subpart H--Nonrefundable Credit for Holders of Build America Bonds
``Sec. 54. Credit to holders of Build
America bonds.
``SEC. 54. CREDIT TO HOLDERS OF BUILD AMERICA BONDS.
``(a) Allowance of Credit.--In the case of a taxpayer who holds a
Build America 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 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.
``(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 this subpart and subpart C).
``(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) 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 part, the term
`Build America bond' means any bond issued as part of an issue if--
``(1) 95 percent or more of the proceeds from the sale of
such issue are to be used--
``(A) for expenditures incurred after the date of
the enactment of this section for any qualified
project, or
``(B) for deposit in the Build America Trust
Account for repayment of Build America bonds at
maturity,
``(2) the bond is issued by the Build America Corporation,
is in registered form, and meets the Build America bond
limitation requirements under subsection (f),
``(3) the Build America Corporation certifies that it meets
the State contribution requirement of subsection (k) with
respect to such project, as in effect on the date of issuance,
``(4) the Build America Corporation certifies that the
State in which an approved qualified project is located meets
the requirement described in subsection (l),
``(5) except for bonds issued in accordance with subsection
(f)(4), the term of each bond which is part of such issue does
not exceed 30 years,
``(6) the payment of principal with respect to such bond is
the obligation of the Build America Corporation, and
``(7) the issue meets the requirements of subsection (g)
(relating to arbitrage).
``(f) Limitation on Amount of Bonds Designated.--
``(1) National limitation.--There is a Build America bond
limitation for each calendar year. Such limitation is--
``(A) for 2004--
``(i) with respect to bonds described in
subsection (e)(1)(A), $50,000,000,000, plus
``(ii) with respect to bonds described in
subsection (e)(1)(B), such amount (not to
exceed $15,000,000,000) as determined necessary
by the Build America Corporation to provide
funds in the Build America Trust Account for
the repayment of Build America bonds at
maturity, and
``(B) except as provided in paragraph (3), zero
thereafter.
``(2) Limitation allocated to qualified projects among
states.--
``(A) In general.--Subject to subparagraph (B), the
limitation applicable under paragraph (1)(A)(i) for any
calendar year shall be allocated by the Build America
Corporation for qualified projects among the States
under an allocation plan established by the Corporation
and submitted to Congress for consideration.
``(B) Minimum allocations to states.--In
establishing the allocation plan under subparagraph
(A), the Build America Corporation shall ensure that
the aggregate amount allocated for qualified projects
located in each State under such plan is not less than
$500,000,000.
``(3) Carryover of unused limitation.--If for any calendar
year--
``(A) the Build America bond limitation amount,
exceeds
``(B) the amount of bonds issued during such year
by the Build America Corporation,
the Build America bond limitation amount for the following
calendar year shall be increased by the amount of such excess.
Any carryforward of a Build America bond limitation amount may
be carried only to calendar year 2005 or 2006.
``(4) Issuance of small denomination bonds.--From the Build
America bond limitation for each year, the Build America
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 infrastructure.
``(g) Special Rules Relating to Arbitrage.--
``(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 Build America Corporation
reasonably expects--
``(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,
``(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
``(C) to proceed with due diligence to complete
such projects and to spend the proceeds from the sale
of the issue.
``(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--
``(A) the Build America Corporation 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
``(B) the following requirements are met:
``(i) The Build America Corporation 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.
``(ii) The Build America Corporation 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, 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.
``(h) Recapture of Portion of Credit Where Cessation of
Compliance.--
``(1) In general.--If any bond which when issued purported
to be a Build America bond ceases to be such a qualified bond,
the Build America Corporation shall pay to the United States
(at the time required by the Secretary) an amount equal to the
sum of--
``(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
``(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.
``(2) Failure to pay.--If the Build America Corporation
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.
``(3) Special rules.--
``(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 and carrybacks under section 39 shall be
appropriately adjusted.
``(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--
``(i) the amount of any credit allowable
under this part, or
``(ii) the amount of the tax imposed by
section 55.
``(i) Build America Trust Account.--
``(1) In general.--The following amounts shall be held in a
Build America Trust Account by the Build America Corporation:
``(A) The proceeds from the sale of all bonds
issued under this section.
``(B) The amount of any matching contributions with
respect to such bonds.
``(C) The investment earnings on proceeds from the
sale of such bonds.
``(D) Any earnings on any amounts described in
subparagraph (A), (B), or (C).
``(2) Use of funds.--Amounts in the Build America Trust
Account may be used only to pay costs of qualified projects,
redeem Build America bonds, and fund the operations of the
Build America Corporation, except that amounts withdrawn from
the Build America Trust Account to pay costs of qualified
projects may not exceed the aggregate proceeds from the sale of
Build America bonds described in subsection (e)(1)(A).
``(3) Use of remaining funds in build america trust
account.--Upon the redemption of all Build America bonds issued
under this section, any remaining amounts in the Build America
Trust Account shall be available to the Build America
Corporation for any qualified project.
``(j) Qualified Project.--For purposes of this section--
``(1) In general.--The term `qualified project' means the
financing of capital improvements for any transportation
infrastructure project of any governmental unit or other
person, including highways, transit systems, railroads,
airports, ports, and inland waterways, proposed by a State and
approved by the Build America Corporation.
``(2) Approval guidelines and criteria.--Not later than 60
days after the date of the enactment of this section, the Build
America Corporation shall consult with the appropriate
committees of Congress regarding the development of guidelines
and criteria for the approval by the Corporation of projects as
qualified projects for inclusion in the allocation plan
established under subsection (f)(2)(A) and shall submit such
guidelines and criteria to such committees. The guidelines and
criteria shall--
``(A) to the maximum extent, be consistent with
statutory provisions governing the approval of
transportation projects, as in effect on such date, and
``(B) require the Build America Corporation--
``(i) to base such approval on--
``(I) the results of alternatives
analysis and preliminary engineering,
and
``(II) a comprehensive review of
mobility improvements, environmental
benefits, cost effectiveness, and
operating efficiencies, and
``(ii) to give preference to--
``(I) projects supported by
evidence of stable and dependable
financing sources to construct,
maintain, and operate the
infrastructure,
``(II) projects expected to have a
significant impact on traffic
congestion, and
``(III) projects which promote
regional balance in infrastructure
investment.
``(k) 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 Build America
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 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.
``(l) 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 has updated its accepted construction technologies to
match a list prescribed by the Secretary of Transportation and in
effect on the date of the approval of the project as a qualified
project.
``(m) Other Definitions and Special Rules.--For purposes of this
section--
``(1) Bond.--The term `bond' includes any obligation.
``(2) Treatment of changes in use.--For purposes of
subsection (e)(1)(A), the proceeds from the sale of an issue
shall not be treated as used for a qualified project to the
extent that the Build America Corporation takes any action
within its control which causes such proceeds not to be used
for a qualified project. The Secretary shall specify 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 Build
America bond.
``(3) Partnership; s corporation; and other pass-thru
entities.--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).
``(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) Reporting.--The Build America Corporation shall
submit reports similar to the reports required under section
149(e).''.
(b) Amendments to Other Code Sections.--
(1) Reporting.--Subsection (d) of section 6049 (relating to
returns regarding payments of interest) is amended by adding at
the end the following new paragraph:
``(8) 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 54(d) and such amounts shall
be treated as paid on the credit allowance date (as
defined in section 54(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.''.
(2) Treatment for estimated tax purposes.--
(A) Individual.--Section 6654 (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:
``(m) Special Rule for Holders of Build America Bonds.--For
purposes of this section, the credit allowed by section 54 to a
taxpayer by reason of holding a Build America 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.''.
(B) Corporate.--Subsection (g) of section 6655
(relating to failure by corporation to pay estimated
income tax) is amended by adding at the end the
following new paragraph:
``(5) Special rule for holders of build america bonds.--For
purposes of this section, the credit allowed by section 54 to a
taxpayer by reason of holding a Build America 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.''.
(c) Clerical Amendments.--
(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:
``Subpart H. Nonrefundable Credit for
Holders of Build America
Bonds.''.
(2) Section 6401(b)(1) is amended by striking ``and G'' and
inserting ``G, and H''.
(d) Effective Date.--The amendments made by this section shall
apply to obligations issued after the date of the enactment of this
Act.
SEC. 4. BUILD AMERICA CORPORATION.
(a) Establishment and Status.--There is established a body
corporate to be known as the ``Build America Corporation'' (hereafter
in this section referred to as the ``Corporation''). The Corporation is
not a department, agency, or instrumentality of the United States
Government, and shall not be subject to title 31, United States Code.
(b) Principal Office; Application of Laws.--The principal office
and place of business of the Corporation shall be in the District of
Columbia, and, to the extent consistent with this section, the District
of Columbia Business Corporation Act (D.C. Code 29-301 et seq.) shall
apply.
(c) Functions of Corporation.--The Corporation shall--
(1) issue Build America bonds for the financing of
qualified projects as required under section 54 of the Internal
Revenue Code of 1986,
(2) establish an allocation plan as required under section
54(f)(2)(A) of such Code,
(3) establish and operate the Build America Trust Account
as required under section 54(i) of such Code,
(4) 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 submit a report
to Congress--
(A) describing the activities of the Corporation
for the preceding year, and
(B) specifying whether the amounts deposited and
expected to be deposited in the Build America Trust
Account are sufficient to fully repay at maturity the
principal of any outstanding Build America bonds issued
pursuant to such section 54.
(d) Powers of Corporation.--The Corporation--
(1) may sue and be sued, complain and defend, in its
corporate name, in any court of competent jurisdiction,
(2) may adopt, alter, and use a seal, which shall be
judicially noticed,
(3) may prescribe, amend, and repeal such rules and
regulations as may be necessary for carrying out the functions
of the Corporation,
(4) may make and perform such contracts and other
agreements with any individual, corporation, or other private
or public entity however designated and wherever situated, as
may be necessary for carrying out the functions of the
Corporation,
(5) may determine and prescribe the manner in which its
obligations shall be incurred and its expenses allowed and
paid,
(6) may, as necessary for carrying out the functions of the
Corporation, employ and fix the compensation of employees and
officers,
(7) may lease, purchase, or otherwise acquire, own, hold,
improve, use, or otherwise deal in and with such property
(real, personal, or mixed) or any interest therein, wherever
situated, as may be necessary for carrying out the functions of
the Corporation,
(8) may accept gifts or donations of services or of
property (real, personal, or mixed), tangible or intangible, in
furtherance of the purposes of this Act, and
(9) shall have such other powers as may be necessary and
incident to carrying out this Act.
(e) Nonprofit Entity; Restriction on Use of Moneys; Conflict of
Interests; Independent Audits.--
(1) Nonprofit entity.--The Corporation shall be a nonprofit
corporation and shall have no capital stock.
(2) Restriction.--No part of the Corporation's revenue,
earnings, or other income or property shall inure to the
benefit of any of its directors, officers, or employees, and
such revenue, earnings, or other income or property shall only
be used for carrying out the purposes of this Act.
(3) Conflict of interests.--No director, officer, or
employee of the Corporation shall in any manner, directly or
indirectly participate in the deliberation upon or the
determination of any question affecting his or her personal
interests or the interests of any corporation, partnership, or
organization in which he or she is directly or indirectly
interested.
(4) Independent audits.--An independent certified public
accountant shall audit the financial statements of the
Corporation each year. The audit shall be carried out at the
place at which the financial statements normally are kept and
under generally accepted auditing standards. A report of the
audit shall be available to the public and shall be included in
the report required under subsection (c)(5).
(f) Tax Exemption.--The Corporation, including its franchise and
income, is exempt from taxation imposed by the United States, by any
territory or possession of the United States, or by any State, county,
municipality, or local taxing authority.
(g) Management of Corporation.--
(1) Board of directors; membership; designation of
chairperson and vice chairperson; appointment considerations;
term; vacancies.--
(A) Board of directors.--The management of the
Corporation shall be vested in a board of directors
composed of 7 members appointed by the President, by
and with the advice and consent of the Senate.
(B) Chairperson and vice chairperson.--The
President shall designate 1 member of the Board to
serve as Chairperson of the Board and 1 member to serve
as Vice Chairperson of the Board.
(C) Individuals from private life.--Five members of
the Board shall be appointed from private life.
(D) Federal officers and employees.--Two members of
the Board shall be appointed from among officers and
employees of agencies of the United States concerned
with infrastructure development.
(E) Appointment considerations.--All members of the
Board shall be appointed on the basis of their
understanding of and sensitivity to infrastructure
development processes. Members of the Board shall be
appointed so that not more than 4 members of the Board
are members of any 1 political party.
(F) Terms.--Members of the Board shall be appointed
for terms of 3 years, except that of the members first
appointed, as designated by the President at the time
of their appointment, 2 shall be appointed for terms of
1 year and 2 shall be appointed for terms of 2 years.
(G) Vacancies.--A member of the Board appointed to
fill a vacancy occurring before the expiration of the
term for which that member's predecessor was appointed
shall be appointed only for the remainder of that term.
Upon the expiration of a member's term, the member
shall continue to serve until a successor is appointed
and is qualified.
(2) Compensation, actual, necessary, and transportation
expenses.--Members of the Board shall serve without additional
compensation, but may be reimbursed for actual and necessary
expenses not exceeding $100 per day, and for transportation
expenses, while engaged in their duties on behalf of the
Corporation.
(3) Quorum.--A majority of the Board shall constitute a
quorum.
(4) President of corporation.--The Board of Directors shall
appoint a president of the Corporation on such terms as the
Board may determine.
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