Indian School Construction Act

Indian School Construction Act - Directs the Secretary of the Interior to establish a pilot program under which eligible Indian tribes have the authority to issue tribal school modernization bonds to provide funding for the construction, rehabilitation, or repair of tribal schools, including advance planning and design.

Permits a tribe to use amounts received through the issuance of a bond to enter into and make payments under contracts: (1) for the design and engineering of the school; and (2) with financial advisors, underwriters, attorneys, trustees, and other professionals who would be able to provide assistance to the tribe in issuing bonds.

Makes any tribal school modernization bond issued by a tribe subject to a trust agreement.

Authorizes the Secretary to deposit not more than $30 million each fiscal year into a tribal school modernization escrow account beginning in FY 2002 from amounts made available for school replacement under the construction account of the Bureau of Indian Affairs. Requires the Secretary to use any amounts deposited to make payments to trustees or for advance planning and design.

Declares that no bond shall be an obligation of, nor shall payment of the principal be guaranteed by, the United States, the tribes, or their schools. Provides that any amounts earned through the investment of funds under the control of a trustee shall not be subject to Federal income tax. Amends the Internal Revenue Code to allow a tax credit to individuals who hold such bonds. Permits a separation (including at issuance) of the ownership of such a bond and the entitlement to the credit with respect to such bond.