EXTENSION AND MODIFICATION OF QUALIFIED ZONE ACADEMY BONDS.

SEC. 107. EXTENSION AND MODIFICATION OF QUALIFIED ZONE ACADEMY BONDS.(a) In General.—Paragraph (1) of section 1397E(e) is amended by striking “and 2005” and inserting “2005, 2006, and 2007”.(b) Special Rules Relating to Expenditures, Arbitrage, and Reporting.—(1) In general.—Section 1397E is amended—(A) in subsection (d)(1), by striking “and” at the end of subparagraph (C)(iii), by striking the period at the end of subparagraph (D) and inserting “, and”, and by adding at the end the following new subparagraph:“(E) the issue meets the requirements of subsections (f), (g), and (h).”, and(B) by redesignating subsections (f), (g), (h), and (i) as subsections (i), (j), (k), and (l), respectively, and by inserting after subsection (e) the following new subsections:“(f) Special Rules Relating to Expenditures.—“(1) In general.—An issue shall be treated as meeting the requirements of this subsection if, as of the date of issuance, the issuer reasonably expects—“(A) at least 95 percent of the proceeds from the sale of the issue are to be spent for 1 or more qualified purposes with respect to qualified zone academies within the 5-year period beginning on the date of issuance of the qualified zone academy bond,“(B) a binding commitment with a third party to spend at least 10 percent of the proceeds from the sale of the issue will be incurred within the 6-month period beginning on the date of issuance of the qualified zone academy bond, and“(C) such purposes will be completed with due diligence and the proceeds from the sale of the issue will be spent with due diligence.“(2) Extension of period.—Upon submission of a request prior to the expiration of the period described in paragraph (1)(A), the Secretary may extend such period if the issuer establishes that the failure to satisfy the 5-year requirement is due to reasonable cause and the related purposes will continue to proceed with due diligence.“(3) Failure to spend required amount of bond proceeds within 5 years.—To the extent that less than 95 percent of the proceeds of such issue are expended by the close of the 5-year period beginning on the date of issuance (or if 120 STAT. 2939 an extension has been obtained under paragraph (2), by the close of the extended period), the issuer shall redeem all of the nonqualified bonds within 90 days after the end of such period. For purposes of this paragraph, the amount of the nonqualified bonds required to be redeemed shall be determined in the same manner as under section 142.“(g) Special Rules Relating to Arbitrage.—An issue shall be treated as meeting the requirements of this subsection if the issuer satisfies the arbitrage requirements of section 148 with respect to proceeds of the issue.“(h) Reporting.—Issuers of qualified academy zone bonds shall submit reports similar to the reports required under section 149(e).”.(2) Conforming amendments.—Sections 54(l)(3)(B) and 1400N(l)(7)(B)(ii) are each amended by striking “section 1397E(i)” and inserting “section 1397E(l)”.(c) Effective Dates.—(1) Extension.—The amendment made by subsection (a) shall apply to obligations issued after December 31, 2005.(2) Special rules.—The amendments made by subsection (b) shall apply to obligations issued after the date of the enactment of this Act pursuant to allocations of the national zone academy bond limitation for calendar years after 2005.