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108TH CONGRESS

1ST SESSION H. R. 2341

To amend the Internal Revenue Code of 1986 to encourage a strong

community-based banking system.

IN THE HOUSE OF REPRESENTATIVES

JUNE 4, 2003

Mr. SESSIONS (for himself, Mr. POMEROY, Mr. SOUDER, Mr. SMITH of Texas,

Mr. PETERSON of Pennsylvania, Mr. PAUL, Mr. BONILLA, Mr.

NETHERCUTT, Mr. GONZALEZ, and Mr. EDWARDS) introduced the following bill; which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to encourage

a strong community-based banking system.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Community Savings

5 and Investment Act of 2003’’.

6 SEC. 2. INCOME TAX ON QUALIFIED COMMUNITY LENDERS.

7 (a) IN GENERAL.—Section 11 of the Internal Rev8 enue Code of 1986 (relating to tax imposed on corpora9 tions) is amended by redesignating subsection (d) as sub-
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1 section (e) and by inserting after subsection (c) the fol2 lowing new subsection:

3 ‘‘(d) QUALIFIED COMMUNITY LENDERS.—

4 ‘‘(1) IN GENERAL.—In the case of a qualified

5 community lender, in lieu of the amount of tax

6 under subsection (b) the amount of tax imposed by

7 subsection (a) for a taxable year shall be the sum

8 of—

9 ‘‘(A) 15 percent of so much of the taxable

10 income as exceeds $250,000 but does not ex11 ceed $1,000,000, and

12 ‘‘(B) the highest rate of tax imposed by

13 subsection (b) multiplied by so much of the tax14 able income as exceeds $1,000,000.

15 ‘‘(2) QUALIFIED COMMUNITY LENDER.—For

16 purposes of paragraph (1), the term ‘qualified com17 munity lender’ means a bank—

18 ‘‘(A) which achieved a rating of ‘satisfac19 tory record of meeting community credit needs’,

20 or better, at the most recent examination of

21 such bank under the Community Reinvestment

22 Act of 1977,

23 ‘‘(B) whose outstanding local community

24 loans at all times during the taxable year com-
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1 prised not less than 60 percent of the total out2 standing loans,

3 ‘‘(C) meets the ownership requirements of

4 paragraph (3), and

5 ‘‘(D) at all times during the taxable year

6 has total assets of not more than

7 $1,000,000,000.

8 ‘‘(3) OWNERSHIP REQUIREMENTS.—

9 ‘‘(A) IN GENERAL.—The ownership re10 quirements of this paragraph are met with re11 spect to any bank if—

12 ‘‘(i) no shares of, or other ownership

13 interests in, the bank are publicly traded,

14 or

15 ‘‘(ii) in the case of a bank the shares

16 of which or ownership interests in which

17 are publicly traded, the last known address

of the holders of at least 2 18 ⁄3 of all such

19 shares or interests, including persons for

20 whose benefit such shares or interests are

21 held by another, is in the home State of

22 the bank or a State contiguous to such

23 home State.
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1 ‘‘(B) HOME STATE DEFINED.—For pur2 poses of subparagraph (A), the term ‘home

3 State’ means—

4 ‘‘(i) with respect to a national bank or

5 Federal savings association, the State in

6 which the main office of the bank or sav7 ings association is located, and

8 ‘‘(ii) with respect to a State bank or

9 State savings association, the State by

10 which the bank or savings association is

11 chartered.

12 ‘‘(4) OTHER DEFINITIONS.—For purposes of

13 this subsection—

14 ‘‘(A) BANK.—The term ‘bank’—

15 ‘‘(i) has the meaning given to such

16 term in section 581, and

17 ‘‘(ii) includes any bank—

18 ‘‘(I) in which at least 80 percent

19 of the shares of, or other ownership

20 interests in the bank are owned by

21 other qualified community lenders,

22 and

23 ‘‘(II) the sole purpose of which is

24 to serve the banking needs of such

25 lenders.
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1 ‘‘(B) LOCAL COMMUNITY LOAN.—The term

2 ‘local community loan’ means—

3 ‘‘(i) any loan originated by a bank to

4 any person, other than a related person

5 with respect to the bank, who is a resident

6 of a community in which the bank is char7 tered or in which it operates an office at

8 which deposits are accepted, and

9 ‘‘(ii) any loan originated by a bank to

10 any person, other than a related person

11 with respect to the bank, who is engaged

12 in a trade or business in any such commu13 nity, to the extent that all or substantially

14 all of the proceeds of such loan are ex15 pended in connection with the trade or

16 business of such person in any such com17 munity.

18 ‘‘(C) RELATED PERSON.—The term ‘re19 lated person’ means, with respect to any bank,

20 any affiliate of the bank, any person who is a

21 director, officer, or principal shareholder of the

22 bank, and any member of the immediate family

23 of any such person.’’.

24 (b) S CORPORATION INCOME.—
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1 (1) IN GENERAL.—Section 1 of such Code (re2 lating to tax imposed) is amended by adding at the

3 end the following new subsection:

4 ‘‘(j) COMMUNITY LENDER INCOME FROM S COR5 PORATION.—

6 ‘‘(1) IN GENERAL.—If a taxpayer has commu7 nity lender income from a S corporation for any tax8 able year, the tax imposed by this section for such

9 taxable year shall be the sum of—

10 ‘‘(A) the tax computed at the rates and in

11 the same manner as if this subsection had not

12 been enacted on the greater of—

13 ‘‘(i) taxable income reduced by com14 munity lender income, or

15 ‘‘(ii) the lesser of—

16 ‘‘(I) the amount of taxable in17 come taxed at a rate below 28 per18 cent, or

19 ‘‘(II) taxable income reduced by

20 community lender income, and

21 ‘‘(B) a tax on community lender income

22 computed at—

23 ‘‘(i) a rate of zero on zero-rate com24 munity lender income,
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1 ‘‘(ii) a rate of 15 percent on 15 per2 cent community lender income, and

3 ‘‘(iii) the highest rate in effect under

4 this section with respect to the taxpayer on

5 the excess of community lender income on

6 which a tax is determined under clause (i)

7 or (ii).

8 ‘‘(2) COMMUNITY LENDER INCOME.—For pur9 poses of paragraph (1)—

10 ‘‘(A) IN GENERAL.—The term ‘qualified

11 community lender income’ means taxable in12 come (if any) of a qualified community lender

13 (as defined in section 11(d)(2)) that is an S

14 corporation, determined at the entity level.

15 ‘‘(B) ZERO-RATE COMMUNITY LENDER IN16 COME.—The term ‘zero-rate community lender

17 income’ means the taxpayer’s pro rata share of

18 so much of community lender income as does

19 not exceed $250,000.

20 ‘‘(C) 15 PERCENT COMMUNITY LENDER IN21 COME.—The term ‘15 percent community lend22 er income’ means the taxpayer’s pro rata share

23 of so much of community lender income as ex24 ceeds $250,000 but does not exceed

25 $1,000,000.
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1 ‘‘(D) SPECIAL RULES.—

2 ‘‘(i) For purposes of this paragraph,

3 the taxpayer’s pro rata share of commu4 nity lender income shall be determined

5 under part II of subchapter S.

6 ‘‘(ii) This subsection shall be applied

7 after the application of subsection (h).’’.

8 (c) EFFECTIVE DATE.—The amendments made by

9 this section shall apply to taxable years beginning after

10 December 31, 2003.

11 SEC. 3. EXCLUSION FROM INCOME TAXATION FOR INCOME

12 DERIVED FROM BANKING SERVICES WITHIN

13 DISTRESSED COMMUNITIES.

14 (a) FEDERAL TAXATION.—Part III of subchapter B

15 of chapter 1 of the Internal Revenue Code of 1986 (relat16 ing to items specifically excluded from gross income) is

17 amended by inserting after section 139 the following new

18 section:

19 ‘‘SEC. 139A. BANKING SERVICES WITHIN DISTRESSED COM20 MUNITIES.

21 ‘‘(a) IN GENERAL.—At the election of the taxpayer,

22 gross income shall not include distressed community bank23 ing income.

24 ‘‘(b) DISTRESSED COMMUNITY BANKING INCOME.—

25 For purposes of subsection (a), the term ‘distressed com-
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1 munity banking income’ means net income of a qualified

2 depository institution which is derived from the active con3 duct of a banking business in a distressed community.

4 ‘‘(c) QUALIFIED DEPOSITORY INSTITUTION.—An in5 stitution is a qualified depository institution if—

6 ‘‘(1) such institution is an insured depository

7 institution (as defined in section 3 of the Federal

8 Deposit Insurance Act (12 U.S.C. 1813)),

9 ‘‘(2) such institution is located in, or has a

10 branch located in, a qualified distressed community,

11 and

12 ‘‘(3) as of the last day of the taxable year, at

13 least 85 percent of its loans from its location within

14 the qualified distressed community are local commu15 nity loans (as defined in section 11(d)(4)(B)).

16 ‘‘(d) DISTRESSED COMMUNITY.—The term ‘dis17 tressed community’ has the meaning given the term ‘quali18 fied distressed community’ by section 233 of the Bank En19 terprise Act of 1991 (12 U.S.C. 1834a(b)).’’.

20 (b) CLERICAL AMENDMENT.—The table of sections

21 for part III of subchapter B of chapter 1 of such Code

22 is amended by inserting after the item relating to section

23 139 the following new item:

‘‘Sec. 139A. Banking services within distressed communities.’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 the date of the enactment of this Act.

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