To provide $30,000,000,000 in new transportation infrastructure funding in addition to TEA-21 levels through bonding to empower States and local governments to complete significant long-term capital improvement projects for highways, public transportation systems, and rail systems, and for other purposes.

February 17, 2005

Mr. TALENT (for himself, Mr. WYDEN, Mr. ALLEN, Mr. COLEMAN, Ms. COLLINS, Mr. CORZINE, Mr. DAYTON, Mrs. DOLE, Mr. GRAHAM, and Mr. VITTER) introduced the following bill; which was read twice and referred to the Committee on Finance

To provide $30,000,000,000 in new transportation infrastructure funding in addition to TEA-21 levels through bonding to empower States and local governments to complete significant long-term capital improvement projects for highways, public transportation systems, and rail systems, 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 2005'.

(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 AND PURPOSE.

(a) Findings- Congress finds the following:

(1) Our Nation's highways, public transportation systems, and rail systems 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.

(9) The proposed increases to the Transportation Equity Act for the 21st Century (TEA-21) will not be sufficient to compensate for the Nation's transportation infrastructure deficit.

(b) Purpose- The purpose of this Act is to provide financing for long-term infrastructure capital investments that are not currently being met by existing transportation and infrastructure investment programs, including mega-projects, projects of national significance, multistate transportation corridors, intermodal transportation facilities, and transportation and security improvements to highways, public transportation systems, and rail systems.

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.

`(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) the net spendable 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 Transportation Finance Corporation, is in registered form, and meets the Build America bond limitation requirements under subsection (g),

`(3) the Transportation Finance 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 Transportation Finance 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 (g)(6), 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 Transportation Finance Corporation, and

`(7) with respect to bonds described in paragraph (1)(A), the issue meets the requirements of subsection (h) (relating to arbitrage).

`(f) Qualified Project- For purposes of this section--

`(1) IN GENERAL- The term `qualified project' means any--

`(A) qualified highway project, and

`(B) qualified public transportation project,

proposed by 1 or more States and approved by the Transportation Finance Corporation.

`(2) QUALIFIED HIGHWAY PROJECT-

`(A) IN GENERAL- The term `qualified highway project' means any--

`(i) project of regional or national significance,

`(ii) multistate corridor program,

`(iii) border planning, operations, technology, and capacity improvement program, and

`(iv) freight intermodal connector project.

`(B) PROJECTS OF REGIONAL AND NATIONAL SIGNIFICANCE-

`(i) IN GENERAL- The term `project of regional or national significance' means the eligible project costs of any surface transportation project which is eligible for Federal assistance under title 23, United States Code, including any freight rail project and activity eligible under such title, if such eligible project costs are reasonably anticipated to equal or exceed the lesser of--

`(I) $100,000,000, or

`(II) 50 percent of the amount of Federal highway assistance funds apportioned for the most recently completed fiscal year to the State in which the project is located.

`(ii) ELIGIBLE PROJECT COSTS- The term `eligible project costs' means the costs of--

`(I) development phase activities, including planning, feasibility analysis, revenue forecasting, environmental review, preliminary engineering and design work, and other preconstruction activities, and

`(II) construction, reconstruction, rehabilitation, and acquisition of real property (including land related to the project and improvements to land), environmental mitigation, construction contingencies, acquisition of equipment, and operational improvements.

`(iii) CRITERIA FOR APPROVAL- The Transportation Finance Corporation may approve a project of regional or national significance only if the Corporation determines that the project is based on the results of preliminary engineering, and is justified based on the project's ability--

`(I) to generate national or regional economic benefits, including creating jobs, expanding business opportunities, and impacting the gross domestic product,

`(II) to reduce congestion, including impacts in the State, region, and Nation,

`(III) to improve transportation safety, including reducing transportation accidents, injuries, and fatalities, and

`(IV) to otherwise enhance the national transportation system.

`(C) MULTISTATE CORRIDOR PROGRAM-

`(i) IN GENERAL- The term `multistate corridor program' means any program for multistate highway and multimodal planning studies and construction.

`(ii) CRITERIA FOR APPROVAL- The Transportation Finance Corporation shall consider in approving any multistate corridor program--

`(I) the existence and significance of signed and binding multijurisdictional agreements,

`(II) prospects for early completion of the program, or

`(III) whether the projects under such program to be studied or constructed are located on corridors identified by section 1105(c) of the Intermodal Surface Transportation Efficiency Act of 1991 (Public Law 102-240; 105 Stat. 2032).

`(D) BORDER PLANNING, OPERATIONS, TECHNOLOGY, AND CAPACITY IMPROVEMENT PROGRAM-

`(i) IN GENERAL- The term `border planning, operations, technology, and capacity improvement program' means any program which includes 1 or more eligible activities to support coordination and improvement in bi-national transportation planning, operations, efficiency, information exchange, safety, and security at the international borders of the United States with Canada and Mexico.

`(ii) ELIGIBLE ACTIVITIES- For purposes of this subparagraph, the term `eligible activities' means--

`(I) highway and multimodal planning or environmental studies,

`(II) cross-border port of entry and safety inspection improvements, including operational enhancements and technology applications,

`(III) technology and information exchange activities, and

`(IV) right-of-way acquisition, design, and construction, as needed to implement the enhancements or applications described in subclauses (II) and (III), to decrease air pollution emissions from vehicles or inspection facilities at border crossings, or to increase highway capacity at or near international borders.

`(E) FREIGHT INTERMODAL CONNECTOR PROJECT-

`(i) IN GENERAL- The term `freight intermodal connector project' means any project for the construction of and improvements to publicly owned freight intermodal connectors to the National Highway System, the provision of access to such connectors, and operational improvements for such connectors (including capital investment for intelligent transportation systems), except that a project located within the boundaries of an intermodal freight facility shall only include highway infrastructure modifications necessary to facilitate direct intermodal access between the connector and the facility.

`(ii) CRITERIA FOR APPROVAL- The Transportation Finance Corporation shall consider in approving any freight intermodal connector project the criteria set forth in the report of the Department of Transportation to Congress entitled `Pulling Together: The NHS and its Connections to Major Intermodal Terminals'.

`(iii) FREIGHT INTERMODAL CONNECTOR- The term `freight intermodal connector' means the roadway that connects to an intermodal freight facility that carries or will carry intermodal traffic.

`(iv) INTERMODAL FREIGHT FACILITY- The term `intermodal freight facility' means a port, airport, truck-rail terminal, and pipeline-truck terminal.

`(3) QUALIFIED PUBLIC TRANSPORTATION PROJECT- The term `qualified public transportation project' means a project for public transportation facilities or other facilities which are eligible for assistance under title 49, United States Code, including intercity passenger rail.

`(g) Limitation on Amount of Bonds Designated; Allocation of Bond Proceeds-

`(1) NATIONAL LIMITATION- There is a Build America bond limitation for each calendar year. Such limitation is--

`(A) with respect to bonds described in subsection (e)(1)(A)--

`(i) $5,500,000,000 for 2005,

`(ii) $8,000,000,000 for 2006,

`(iii) $8,000,000,000 for 2007,

`(iv) $3,000,000,000 for 2008,

`(v) $3,000,000,000 for 2009,

`(vi) $2,500,000,000 for 2010, and

`(vii) except as provided in paragraph (4), zero thereafter, plus

`(B) with respect to bonds described in subsection (e)(1)(B), such amount each calendar year as determined necessary by the Transportation Finance Corporation to provide funds in the Build America Trust Account for the repayment of Build America bonds at maturity, except that the aggregate amount of such bonds for all calendar years shall not exceed $9,000,000,000,000.

`(2) ALLOCATION OF BONDS FOR HIGHWAY AND PUBLIC TRANSPORTATION PURPOSES- Except with respect to qualified projects described in subsection (j)(3), and subject to paragraph (3)--

`(A) QUALIFIED HIGHWAY PROJECTS- From Build America bonds issued under the annual limitation in paragraph (1)(A), the Transportation Finance Corporation shall allocate 80 percent of the net spendable proceeds to the States for qualified highway projects designated by law from recommendations submitted to Congress identifying various projects approved as meeting the criteria required for each such project by the Transportation Finance Corporation.

`(B) QUALIFIED PUBLIC TRANSPORTATION PROJECTS- From Build America bonds issued under the annual limitation in paragraph (1)(A), the Transportation Finance Corporation shall allocate 20 percent of the net spendable proceeds to the States for qualified public transportation projects designated by law from recommendations submitted to Congress identifying various projects approved as meeting the criteria required for each such project by the Transportation Finance Corporation.

`(3) MINIMUM ALLOCATIONS TO STATES- In making allocations for each calendar year under paragraph (2), the Transportation Finance Corporation shall ensure that the amount allocated for qualified projects located in each State for such calendar year is not less than 1/2 percent of the total amount allocated for such year.

`(4) CARRYOVER OF UNUSED ISSUANCE LIMITATION- If for any calendar year the limitation amount imposed by paragraph (1) exceeds the amount of Build America bonds issued during such year, such excess shall be carried forward to one or more succeeding calendar years as an addition to the limitation imposed by paragraph (1) and until used by issuance of Build America bonds.

`(5) ISSUANCE OF SMALL DENOMINATION BONDS- From the Build America bond limitation for each year, the Transportation Finance 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.

`(h) 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 Transportation Finance Corporation reasonably expects--

`(A) to spend at least 85 percent of the net spendable proceeds from the sale of the issue for 1 or more qualified projects within the 5-year period beginning on such date,

`(B) to incur a binding commitment with a third party to spend at least 10 percent of the net spendable proceeds from the sale of the issue, or to commence construction, with respect to such projects within the 12-month period beginning on such date, and

`(C) to proceed with due diligence to complete such projects and to spend the net spendable proceeds from the sale of the issue.

`(2) SPENT PROCEEDS- Net spendable proceeds are considered spent by the Transportation Finance Corporation when a sponsor of a qualified project obtains a reimbursement from the Transportation Finance Corporation for eligible project costs.

`(3) RULES REGARDING CONTINUING COMPLIANCE AFTER 5-YEAR DETERMINATION- If at least 85 percent of the net spendable proceeds from the sale of the issue is not expended for 1 or more qualified projects within the 5-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 the Transportation Finance Corporation uses all unspent net spendable proceeds from the sale of the issue to redeem bonds of the issue within 90 days after the end of such 5-year period.

`(4) REALLOCATION- In the event the recipient of an allocation under subsection (g) fails to demonstrate to the satisfaction of the Transportation Finance Corporation that its actions will allow the Transportation Finance Corporation to meet the requirements under this subsection, the Transportation Finance Corporation may redistribute the allocation meant for such recipient to other recipients.

`(i) 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 Transportation Finance 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 Transportation Finance 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.

`(j) Build America Trust Account-

`(1) IN GENERAL- The following amounts shall be held in a Build America Trust Account by the Transportation Finance 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 Transportation Finance 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 Transportation Finance Corporation to pay the costs of any qualified project.

`(4) COSTS OF QUALIFIED PROJECTS- For purposes of this section, the costs of qualified projects which may be funded by amounts in the Build America Trust Account may only relate to capital investments in depreciable assets and may not include any costs relating to operations, maintenance, or rolling stock.

`(5) APPLICABILITY OF FEDERAL LAW- The requirements of any Federal law, including titles 23, 40, and 49 of the United States Code, which would otherwise apply to projects to which the United States is a party or to funds made available under such law and projects assisted with those funds shall apply to--

`(A) funds made available under the Build America Trust Account for similar qualified projects, including contributions required under subsection (k), and

`(B) similar qualified projects assisted by the Transportation Finance Corporation through the use of such funds.

`(6) INVESTMENT- It shall be the duty of the Transportation Finance Corporation to invest in investment grade obligations such portion of the Build America Trust Account as is not, in the judgment of the Board of Directors of the Transportation Finance Corporation, required to meet current withdrawals. To the maximum extent practicable, investments should be made in securities that support transportation investment at the State and local level.

`(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 Transportation Finance 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 (or such smaller percentage as determined under title 23, United States Code, for such State) 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) ADMINISTRATIVE COSTS- The term `administrative costs' shall only include costs of issuance of Build America bonds and operation costs of the Transportation Corporation.

`(2) BOND- The term `bond' includes any obligation.

`(3) NET SPENDABLE PROCEEDS- The term `net spendable proceeds' means the proceeds from the sale of any Build America bond issued under this section reduced by not more than 5 percent of such proceeds for administrative costs.

`(4) STATE- The term `State' shall have the meaning given such term by section 101 of title 23, United States Code.

`(5) TREATMENT OF CHANGES IN USE- For purposes of subsection (e)(1)(A), the net spendable proceeds from the sale of an issue shall not be treated as used for a qualified project to the extent that the Transportation Finance 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 which 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.

`(6) 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).

`(7) 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.

`(8) 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.

`(9) CREDITS MAY BE TRANSFERRED- Nothing in any law or rule of law shall be construed to limit the transferability of the credit or bond allowed by this section through sale and repurchase agreements.

`(10) REPORTING- The Transportation Finance Corporation shall submit reports similar to the reports required under section 149(e).

`(11) PROHIBITION ON USE OF HIGHWAY TRUST FUND- Notwithstanding any other provision of law, no funds derived from the Highway Trust Fund established under section 9503 shall be used to pay costs associated with the Build America bonds issued under this section.'.

(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. TRANSPORTATION FINANCE CORPORATION.

(a) Establishment and Status- There is established a body corporate to be known as the `Transportation Finance 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 and operate the Build America Trust Account as required under section 54(j) of such Code,

(3) act as a centralized entity to provide financing for qualified projects,

(4) leverage resources and stimulate public and private investment in transportation infrastructure,

(5) encourage States to create additional opportunities for the financing of transportation infrastructure and to provide technical assistance to States, if needed,

(6) perform any other function the sole purpose of which is to carry out the financing of qualified projects through Build America bonds, and

(7) 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; 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) AUDITS-

(A) AUDITS BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS-

(i) IN GENERAL- The Corporation's financial statements shall be audited annually in accordance with generally accepted auditing standards by independent certified public accountants that are certified by a regulatory authority of a State or other political subdivision of the United States. The audits shall be conducted at the place or places where the accounts of the Corporation are normally kept. All books, accounts, financial records, reports, files, and all other papers, things, or property belonging to or in use by the Corporation and necessary to facilitate the audit shall be made available to the person or persons conducting the audits, and full facilities for verifying transactions with the balances or securities held by depositories, fiscal agents, and custodians shall be afforded to such person or persons.

(ii) REPORTING REQUIREMENTS- The report of each annual audit described in clause (i) shall be included in the annual report required by subsection (c)(8).

(B) RECORD KEEPING REQUIREMENTS- The Corporation shall ensure that each recipient of assistance from the Corporation keeps--

(i) separate accounts with respect to such assistance,

(ii) such records as may be reasonably necessary to fully disclose--

(I) the amount and the disposition by such recipient of the proceeds of such assistance,

(II) the total cost of the project or undertaking in connection with which such assistance is given or used, and the extent to which such costs are for a qualified project, and

(III) the amount and nature of that portion of the cost of the project or undertaking supplied by other sources, and

(iii) such other records as will facilitate an effective audit.

(C) AUDIT AND EXAMINATION OF BOOKS- The Corporation shall ensure that the Corporation, or any of the Corporation's duly authorized representatives, shall have access for the purpose of audit and examination to any books, documents, papers, and records of any recipient of assistance from the Corporation that are pertinent to such assistance.

(f) Exemption From Taxes-

(1) IN GENERAL- The Corporation, including its franchise, capital, reserves, surplus, sinking funds, mortgages or other security holdings, and income, shall be exempt from all taxation now or hereafter imposed by the United States, by any territory, dependency, or possession thereof, or by any State, county, municipality, or local taxing authority, except that any real property of the Corporation shall be subject to State, territorial, county, municipal, or local taxation to the same extent according to its value as other real property is taxed.

(2) FINANCIAL OBLIGATIONS- Build America bonds or other obligations issued by the Corporation and the interest on or tax credits with respect to its bonds or other obligations shall not be subject to taxation by any State, county, municipality, or local taxing authority.

(g) Assistance for Transportation Purposes-

(1) IN GENERAL- In order to carry out the corporate functions described in subsection (c), the Corporation shall be eligible to receive discretionary grants, contracts, gifts, contributions, or technical assistance from any Federal department or agency, to the extent permitted by law.

(2) AGREEMENT- In order to receive any assistance described in this subsection, the Corporation shall enter into an agreement with the Federal department or agency providing such assistance, under which the Corporation agrees--

(A) to use such assistance to provide funding and technical assistance only for activities which the Board of Directors of the Corporation determines are consistent with the corporate functions described in subsection (c), and

(B) to review the activities of State transportation agencies and other entities receiving assistance from the Corporation to assure that the corporate functions described in subsection (c) are carried out.

(3) CONSTRUCTION- Nothing in this section shall be construed to establish the Corporation as a department, agency, or instrumentality of the United States Government, or to establish the members of the Board of Directors of the Corporation, or the officers and employees of the Corporation, as officers or employees of the United States Government.

(h) 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 15 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- Eleven members of the Board shall be appointed from private life.

(D) FEDERAL OFFICERS AND EMPLOYEES- Four 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 8 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, 5 shall be appointed for terms of 1 year and 5 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.

END