SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Renewable Schools Energy Act of 
2006''.

SEC. 2. QUALIFIED RENEWABLE SCHOOL ENERGY BONDS.

    (a) In General.--Subchapter U of chapter 1 of the Internal Revenue 
Code of 1986 (relating to incentives for education zones) is amended by 
redesignating section 1397F as section 1397G and by adding at the end 
of part IV of such subchapter the following new section:

``SEC. 1397F. QUALIFIED RENEWABLE SCHOOL ENERGY BONDS.

    ``(a) Allowance of Credit.--If a taxpayer holds a qualified 
renewable school energy bond on 1 or more credit allowance dates of the 
bond occurring 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.--
            ``(1) In general.--The amount of the credit determined 
        under this subsection with respect to any credit allowance date 
        for a qualified renewable school energy 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 qualified renewable school energy bond is the 
        product of--
                    ``(A) the credit rate determined by the Secretary 
                under paragraph (3) for the day on which such bond was 
                sold, multiplied by
                    ``(B) the outstanding face amount of the bond.
            ``(3) Determination.--For purposes of paragraph (2), with 
        respect to any qualified renewable school energy bond, the 
        Secretary shall determine daily or cause to be determined daily 
        a credit rate which shall apply to the first day on which there 
        is a binding, written contract for the sale or exchange of the 
        bond. The credit rate for any day is the credit rate which the 
        Secretary or the Secretary's designee estimates will permit the 
        issuance of qualified renewable school energy bonds with a 
        specified maturity or redemption date without discount and 
        without interest cost to the qualified issuer.
            ``(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 also 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 or matures.
    ``(c) Limitation Based on Amount of Tax.--The credit allowed under 
subsection (a) for any taxable year shall not exceed the excess of--
            ``(1) the sum of the regular tax liability (as defined in 
        section 26(b)) plus the tax imposed by section 55, over
            ``(2) the sum of the credits allowable under part IV of 
        subchapter A (other than subpart C thereof, relating to 
        refundable credits, subpart H thereof, section 1400N(l), and 
        this section).
    ``(d) Qualified Renewable School Energy Bond.--For purposes of this 
section--
            ``(1) In general.--The term `renewable school energy bond' 
        means any bond issued as part of an issue if--
                    ``(A) 95 percent or more of the proceeds of such 
                issue are to be used for a qualified purpose with 
                respect to a qualified school operated by an eligible 
                local education agency,
                    ``(B) the bond is issued by a State or local 
                government of an eligible State within the jurisdiction 
                of which such school is located,
                    ``(C) the issuer--
                            ``(i) designates such bond for purposes of 
                        this section, and
                            ``(ii) certifies that it has the written 
                        approval of the eligible local education agency 
                        for such bond issuance, and
                    ``(D) the term of each bond which is part of such 
                issue is 20 years.
            ``(2) Qualified school.--The term `qualified school' means 
        any public school or public school system administrative 
        building which is owned by or operated by an eligible local 
        education agency.
            ``(3) Eligible local education agency.--The term `eligible 
        local education agency' means any local educational agency as 
        defined in section 9101 of the Elementary and Secondary 
        Education Act of 1965.
            ``(4) Eligible state.--The term `eligible State' means, 
        with respect to any calendar year--
                    ``(A) one of the five States with the greatest 
                percentage population growth for the most recent 
                preceding year for which data is available as 
                determined by the Bureau of the Census, and
                    ``(B) the State with a total percentage population 
                growth greater than 9 percent but less than 13.9 
                percent and a total population under the age of 19 of 
                less than 300,000 as determined under the 2000 Census.
            ``(5) Qualified purpose.--The term `qualified purpose' 
        means, with respect to any qualified school, the purchase and 
        installation of renewable energy products.
    ``(e) Limitation on Amount of Bonds Designated.--
            ``(1) National limitation.--There is a national renewable 
        school energy bond limitation for each calendar year. Such 
        limitation is $50,000,000 for 2007, $100,000,000 for 2008, 
        $150,000,000 for 2009, and, except as provided in paragraph 
        (4), zero thereafter.
            ``(2) Allocation of limitation.--The national renewable 
        school energy bond limitation for a calendar year shall be 
        allocated by the Secretary--
                    ``(A) among the eligible States described in 
                subsection (d)(4)(A), 30 percent to the State with the 
                greatest percentage population growth, 20 percent to 
                each of second and third ranked States, and 10 percent 
                to each of the fourth and fifth ranked States, and
                    ``(B) to the State described in subsection 
                (d)(4)(B), 10 percent.
        The limitation amount allocated to an eligible State under the 
        preceding sentence shall be allocated by the State education 
        agency to qualified schools within such State.
            ``(3) Designation subject to limitation amount.--The 
        maximum aggregate face amount of bonds issued during any 
        calendar year which may be designated under subsection (d)(1) 
        with respect to any qualified school shall not exceed the 
        limitation amount allocated to such school under paragraph (2) 
        for such calendar year.
            ``(4) Carryover of unused limitation.--If for any calendar 
        year--
                    ``(A) the limitation amount for any eligible State, 
                exceeds
                    ``(B) the amount of bonds issued during such year 
                which are designated under subsection (d)(1) with 
                respect to qualified schools within such State,
        the limitation amount for such State for the following calendar 
        year shall be increased by the amount of such excess. Any 
        carryforward of a limitation amount may be carried only to the 
        first 2 years following the unused limitation year. For 
        purposes of the preceding sentence, a limitation amount shall 
        be treated as used on a first-in first-out basis.
    ``(f) Other Definitions.--For purposes of this section--
            ``(1) Bond.--The term `bond' includes any obligation.
            ``(2) State.--The term `State' includes the District of 
        Columbia and any possession of the United States.
    ``(g) 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)).
    ``(h) Credits May Be Stripped.--Under regulations prescribed by the 
Secretary--
            ``(1) In general.--There may be a separation (including at 
        issuance) of the ownership of a qualified renewable school 
        energy 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 which, on the credit allowance date, holds the 
        instrument evidencing the entitlement to the credit and not to 
        the holder of the bond.
            ``(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 renewable school energy bond as if it 
        were a stripped bond and to the credit under this section as if 
        it were a stripped coupon.
    ``(i) Credit Treated as Nonrefundable Bondholder Credit.--For 
purposes of this title, the credit allowed by this section shall be 
treated as a credit allowable under subpart H of part IV of subchapter 
A of this chapter.
    ``(j) Special Rules.--For purposes of this section, rules similar 
to the rules under paragraphs (3) and (4) of section 54(l) shall 
apply.''.
    (b) Conforming Amendments.--The table of sections for part V of 
such subchapter is amended by redesignating section 1397F as section 
1397G and by adding at the end of the table of sections for part IV of 
such subchapter the following new item:

``Sec. 1397F. Credit for holders of qualified renewable school energy 
                            bonds.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to bonds issued after December 31, 2006.
Renewable Schools Energy Act of 2006 - Amends the Internal Revenue Code to allow a tax credit for investment in qualified renewable school energy bonds. Defines "qualified renewable school energy bond" as a bond with a 20-year term, 95% of the proceeds of which are used for the purchase and installation of renewable energy products for public school and school district administrative buildings in states with a specified percentage of population growth.
A bill to amend the Internal Revenue Code of 1986 to allow public school districts to receive no interest loans for the purchase of renewable energy systems, and for other purposes.