I 

108TH CONGRESS 

1ST SESSION H. R. 2972

To amend the Internal Revenue Code of 1986 to provide incentives for 

rural development, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 25, 2003

Mr. SHUSTER introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Education and the Workforce, for a period to be subsequently determined by 

the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL

To amend the Internal Revenue Code of 1986 to provide 

incentives for rural development, and for other purposes.

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 ‘‘Rural Economic 

5 Growth Act of 2003’’. 
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1 TITLE I—RURAL INVESTMENT 

2 TAX CREDIT 

3 SEC. 101. RURAL INVESTMENT TAX CREDIT. 

4 (a) IN GENERAL.—Subpart D of part IV of sub5 chapter A of chapter 1 of the Internal Revenue Code of 

6 1986 (relating to business related credits) is amended by 

7 adding at the end the following: 

8 ‘‘SEC. 42A. RURAL INVESTMENT CREDIT. 

9 ‘‘(a) IN GENERAL.—For purposes of section 38, the 

10 amount of the rural investment credit determined under 

11 this section for any taxable year in the credit period shall 

12 be an amount equal to the applicable percentage of the 

13 eligible basis of each qualified rural investment building. 

14 ‘‘(b) APPLICABLE PERCENTAGE; 50 PERCENT

15 PRESENT VALUE CREDIT FOR NEW BUILDINGS; 50 PER16 CENT PRESENT VALUE CREDIT FOR EXISTING BUILD17 INGS.—For purposes of this section—

18 ‘‘(1) IN GENERAL.—The term ‘applicable per19 centage’ means the appropriate percentage pre20 scribed by the Secretary for the earlier of—

21 ‘‘(A) the first month of the credit period 

22 with respect to a rural investment building, or 

23 ‘‘(B) at the election of the taxpayer, the 

24 month in which the taxpayer and the rural in25 vestment credit agency enter into an agreement 
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1 with respect to such building (which is binding 

2 on such agency, the taxpayer, and all successors 

3 in interest) as to the rural investment credit 

4 dollar amount to be allocated to such building. 

5 A month may be elected under subparagraph (B) 

6 only if the election is made not later than the 5th 

7 day after the close of such month. Such an election, 

8 once made, shall be irrevocable. 

9 ‘‘(2) METHOD OF PRESCRIBING PERCENT10 AGES.—The percentages prescribed by the Secretary 

11 for any month shall be percentages which will yield 

12 over a 10-year period amounts of credit under sub13 section (a) which have a present value equal to—

14 ‘‘(A) 50 percent of the eligible basis of a 

15 new building, and 

16 ‘‘(B) 50 percent of the eligible basis of an 

17 existing building. 

18 ‘‘(3) METHOD OF DISCOUNTING.—The present 

19 value under paragraph (2) shall be determined—

20 ‘‘(A) as of the last day of the 1st year of 

21 the 10-year period referred to in paragraph (2), 

22 ‘‘(B) by using a discount rate equal to 72 

23 percent of the average of the annual Federal 

24 mid-term rate and the annual Federal long25 term rate applicable under section 1274(d)(1) 
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1 to the month applicable under subparagraph 

2 (A) or (B) of paragraph (1) and compounded 

3 annually, and 

4 ‘‘(C) by assuming that the credit allowable 

5 under this section for any year is received on 

6 the last day of such year. 

7 ‘‘(c) ELIGIBLE BASIS; QUALIFIED RURAL INVEST8 MENT BUILDING.—For purposes of this section—

9 ‘‘(1) ELIGIBLE BASIS.—

10 ‘‘(A) IN GENERAL.—The eligible basis of 

11 any qualified rural investment building for any 

12 taxable year shall be determined under rules 

13 similar to the rules under section 42(d), except 

14 that—

15 ‘‘(i) the determination of the adjusted 

16 basis of any building shall be made as of 

17 the beginning of the credit period, and 

18 ‘‘(ii) such basis shall include develop19 ment costs properly attributable to such 

20 building. 

21 ‘‘(B) DEVELOPMENT COSTS.—For pur22 poses of subparagraph (A)(ii), the term ‘devel23 opment costs’ includes—

24 ‘‘(i) site preparation costs, 

25 ‘‘(ii) State and local impact fees, 
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1 ‘‘(iii) reasonable development costs, 

2 ‘‘(iv) professional fees related to basis 

3 items, 

4 ‘‘(v) construction financing costs re5 lated to basis items other than land, and 

6 ‘‘(vi) on-site and adjacent improve7 ments required by State and local govern8 ments. 

9 ‘‘(2) QUALIFIED RURAL INVESTMENT BUILD10 ING.—The term ‘qualified rural investment building’ 

11 means any building which is part of a qualified rural 

12 investment project at all times during the period—

13 ‘‘(A) beginning on the 1st day in the com14 pliance period on which such building is part of 

15 such an investment project, and 

16 ‘‘(B) ending on the last day of the compli17 ance period with respect to such building. 

18 ‘‘(d) REHABILITATION EXPENDITURES TREATED AS

19 SEPARATE NEW BUILDING.—Rehabilitation expenditures 

20 paid or incurred by the taxpayer with respect to any build21 ing shall be treated for purposes of this section as a sepa22 rate new building under the rules of section 42(e). 

23 ‘‘(e) DEFINITION AND SPECIAL RULES RELATING TO

24 CREDIT PERIOD.—
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1 ‘‘(1) CREDIT PERIOD DEFINED.—For purposes 

2 of this section, the term ‘credit period’ means, with 

3 respect to any building, the period of 10 taxable 

4 years beginning with the taxable year in which the 

5 building is first placed in service. 

6 ‘‘(2) SPECIAL RULE FOR 1ST YEAR OF CREDIT

7 PERIOD.—

8 ‘‘(A) IN GENERAL.—The credit allowable 

9 under subsection (a) with respect to any build10 ing for the 1st taxable year of the credit period 

11 shall be determined by multiplying such credit 

12 by the fraction—

13 ‘‘(i) the numerator of which is the 

14 number of full months of such year during 

15 which such building was in service, and 

16 ‘‘(ii) the denominator of which is 12. 

17 ‘‘(B) DISALLOWED 1ST YEAR CREDIT AL18 LOWED IN 11TH YEAR.—Any reduction by rea19 son of subparagraph (A) in the credit allowable 

20 (without regard to subparagraph (A)) for the 

21 1st taxable year of the credit period shall be al22 lowable under subsection (a) for the 1st taxable 

23 year following the credit period. 

24 ‘‘(3) CREDIT PERIOD FOR EXISTING BUILDINGS

25 NOT TO BEGIN BEFORE REHABILITATION CREDIT
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1 ALLOWED.—The credit period for an existing build2 ing shall not begin before the 1st taxable year of the 

3 credit period for rehabilitation expenditures with re4 spect to the building. 

5 ‘‘(f) QUALIFIED RURAL INVESTMENT PROJECT; 

6 QUALIFYING COUNTY.—For purposes of this section—

7 ‘‘(1) QUALIFIED RURAL INVESTMENT

8 PROJECT.—The term ‘qualified rural investment 

9 project’ means any investment project of 1 or more 

10 qualified rural investment buildings located in a 

11 qualifying county (and, if necessary to the project, 

12 any contiguous county) and selected by the State ac13 cording to its qualified rural investment plan. 

14 ‘‘(2) QUALIFYING COUNTY.—The term ‘quali15 fying county’ means any county which—

16 ‘‘(A) is outside a metropolitan statistical 

17 area (defined as such by the Office of Manage18 ment and Budget), and 

19 ‘‘(B) during the 20-year period ending 

20 with the calendar year preceding the date of the 

21 enactment of this section, has a net out-migra22 tion of inhabitants from the county of at least 

23 10 percent of the population of the county at 

24 the beginning of such period. 
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1 ‘‘(g) LIMITATION ON AGGREGATE CREDIT ALLOW2 ABLE WITH RESPECT TO INVESTMENT PROJECTS LO3 CATED IN A STATE.—

4 ‘‘(1) CREDIT MAY NOT EXCEED CREDIT

5 AMOUNT ALLOCATED TO BUILDING.—The amount of 

6 the credit determined under this section for any tax7 able year with respect to any building shall not ex8 ceed the rural investment credit dollar amount allo9 cated to such building under rules similar to the 

10 rules of section 42(h)(1). 

11 ‘‘(2) ALLOCATED CREDIT AMOUNT TO APPLY

12 TO ALL TAXABLE YEARS ENDING DURING OR AFTER

13 CREDIT ALLOCATION YEAR.—Any rural investment 

14 credit dollar amount allocated to any building for 

15 any calendar year—

16 ‘‘(A) shall apply to such building for all 

17 taxable years in the credit period ending during 

18 or after such calendar year, and 

19 ‘‘(B) shall reduce the aggregate rural in20 vestment credit dollar amount of the allocating 

21 agency only for such calendar year. 

22 ‘‘(3) RURAL INVESTMENT CREDIT DOLLAR

23 AMOUNT FOR AGENCIES.—

24 ‘‘(A) IN GENERAL.—The aggregate rural 

25 investment credit dollar amount which a rural 
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1 investment credit agency may allocate for any 

2 calendar year is the portion of the State rural 

3 investment credit ceiling allocated under this 

4 paragraph for such calendar year to such agen5 cy. 

6 ‘‘(B) STATE CEILING INITIALLY ALLO7 CATED TO STATE RURAL INVESTMENT CREDIT

8 AGENCIES.—Except as provided in subpara9 graphs (D) and (E), the State rural investment 

10 credit ceiling for each calendar year shall be al11 located to the rural investment credit agency of 

12 such State. If there is more than 1 rural invest13 ment credit agency of a State, all such agencies 

14 shall be treated as a single agency. 

15 ‘‘(C) STATE RURAL INVESTMENT CREDIT

16 CEILING.—The State rural investment credit 

17 ceiling applicable to any State and any calendar 

18 year shall be an amount equal to the sum of—

19 ‘‘(i) the unused State rural investment 

20 credit ceiling (if any) of such State for the 

21 preceding calendar year, 

22 ‘‘(ii) $1,000,000 for each qualifying 

23 county in the State, 
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1 ‘‘(iii) the amount of State rural in2 vestment credit ceiling returned in the cal3 endar year, plus 

4 ‘‘(iv) the amount (if any) allocated 

5 under subparagraph (D) to such State by 

6 the Secretary. 

7 For purposes of clause (i), the unused State 

8 rural investment credit ceiling for any calendar 

9 year is the excess (if any) of the sum of the 

10 amounts described in clauses (ii) through (iv) 

11 over the aggregate rural investment credit dol12 lar amount allocated for such year. For pur13 poses of clause (iii), the amount of State rural 

14 investment credit ceiling returned in the cal15 endar year equals the rural investment credit 

16 dollar amount previously allocated within the 

17 State to any investment project which fails to 

18 meet the 10 percent test under section 

19 42(h)(1)(E)(ii) on a date after the close of the 

20 calendar year in which the allocation was made 

21 or which does not become a qualified rural in22 vestment project within the period required by 

23 this section or the terms of the allocation or to 

24 any investment project with respect to which an 

25 allocation is canceled by mutual consent of the 
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1 rural investment credit agency and the alloca2 tion recipient. 

3 ‘‘(D) UNUSED RURAL INVESTMENT CREDIT

4 CARRYOVERS ALLOCATED AMONG CERTAIN

5 STATES.—

6 ‘‘(i) IN GENERAL.—The unused rural 

7 investment credit carryover of a State for 

8 any calendar year shall be assigned to the 

9 Secretary for allocation among qualified 

10 States for the succeeding calendar year. 

11 ‘‘(ii) UNUSED RURAL INVESTMENT

12 CREDIT CARRYOVER.—For purposes of this 

13 subparagraph, the unused rural investment 

14 credit carryover of a State for any calendar 

15 year is the excess (if any) of the unused 

16 State rural investment credit ceiling for 

17 such year (as defined in subparagraph 

18 (C)(i)) over the excess (if any) of—

19 ‘‘(I) the unused State rural in20 vestment credit ceiling for the year 

21 preceding such year, over 

22 ‘‘(II) the aggregate rural invest23 ment credit dollar amount allocated 

24 for such year. 
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1 ‘‘(iii) FORMULA FOR ALLOCATION OF

2 UNUSED RURAL INVESTMENT CREDIT

3 CARRYOVERS AMONG QUALIFIED

4 STATES.—The amount allocated under this 

5 subparagraph to a qualified State for any 

6 calendar year shall be the amount deter7 mined by the Secretary to bear the same 

8 ratio to the aggregate unused rural invest9 ment credit carryovers of all States for the 

10 preceding calendar year as such State’s 

11 population for the calendar year bears to 

12 the population of all qualified States for 

13 the calendar year. For purposes of the pre14 ceding sentence, population shall be deter15 mined in accordance with section 146(j). 

16 ‘‘(iv) QUALIFIED STATE.—For pur17 poses of this subparagraph, the term 

18 ‘qualified State’ means, with respect to a 

19 calendar year, any State—

20 ‘‘(I) which allocated its entire 

21 State rural investment credit ceiling 

22 for the preceding calendar year, and 

23 ‘‘(II) for which a request is made 

24 (not later than May 1 of the calendar 
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1 year) to receive an allocation under 

2 clause (iii). 

3 ‘‘(E) STATE MAY PROVIDE FOR DIF4 FERENT ALLOCATION.—Rules similar to the 

5 rules of section 146(e) (other than paragraph 

6 (2)(B) thereof) shall apply for purposes of this 

7 paragraph. 

8 ‘‘(F) POPULATION.—For purposes of this 

9 paragraph, population shall be determined in 

10 accordance with section 146(j). 

11 ‘‘(G) COST-OF-LIVING ADJUSTMENT.—

12 ‘‘(i) IN GENERAL.—In the case of a 

13 calendar year after 2003, the $1,000,000 

14 amount in subparagraph (C) shall be in15 creased by an amount equal to—

16 ‘‘(I) such dollar amount, multi17 plied by 

18 ‘‘(II) the cost-of-living adjust19 ment determined under section 1(f)(3) 

20 for such calendar year by substituting 

21 ‘calendar year 2002’ for ‘calendar 

22 year 1992’ in subparagraph (B) there23 of. 

24 ‘‘(ii) ROUNDING.—Any increase under 

25 clause (i) which is not a multiple of $5,000 
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1 shall be rounded to the next lowest mul2 tiple of $5,000. 

3 ‘‘(4) PORTION OF STATE CEILING SET-ASIDE

4 FOR CERTAIN INVESTMENT PROJECTS INVOLVING

5 QUALIFIED NONPROFIT ORGANIZATIONS.—

6 ‘‘(A) IN GENERAL.—At least 10 percent of 

7 the State rural investment credit ceiling for any 

8 State for any calendar year shall be allocated to 

9 qualified rural investment projects described in 

10 subparagraph (B). 

11 ‘‘(B) INVESTMENT PROJECTS INVOLVING

12 QUALIFIED NONPROFIT ORGANIZATIONS.—For 

13 purposes of subparagraph (A), a qualified rural 

14 investment project is described in this subpara15 graph if a qualified nonprofit organization is to 

16 materially participate (within the meaning of 

17 section 469(h)) in the development and oper18 ation of the investment project throughout the 

19 compliance period. 

20 ‘‘(C) QUALIFIED NONPROFIT ORGANIZA21 TION.—For purposes of this paragraph, the 

22 term ‘qualified nonprofit organization’ means 

23 any organization if—
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1 ‘‘(i) such organization is described in 

2 any paragraph of section 501(c) and is ex3 empt from tax under section 501(a), 

4 ‘‘(ii) such organization is determined 

5 by the State rural investment credit agency 

6 not to be affiliated with or controlled by a 

7 for-profit organization; and 

8 ‘‘(iii) 1 of the exempt purposes of 

9 such organization includes the fostering of 

10 rural investment. 

11 ‘‘(D) TREATMENT OF CERTAIN SUBSIDI12 ARIES.—

13 ‘‘(i) IN GENERAL.—For purposes of 

14 this paragraph, a qualified nonprofit orga15 nization shall be treated as satisfying the 

16 ownership and material participation test 

17 of subparagraph (B) if any qualified cor18 poration in which such organization holds 

19 stock satisfies such test. 

20 ‘‘(ii) QUALIFIED CORPORATION.—For 

21 purposes of clause (i), the term ‘qualified 

22 corporation’ means any corporation if 100 

23 percent of the stock of such corporation is 

24 held by 1 or more qualified nonprofit orga-
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1 nizations at all times during the period 

2 such corporation is in existence. 

3 ‘‘(E) STATE MAY NOT OVERRIDE SET4 ASIDE.—Nothing in subparagraph (F) of para5 graph (3) shall be construed to permit a State 

6 not to comply with subparagraph (A) of this 

7 paragraph. 

8 ‘‘(F) CREDITS FOR QUALIFIED NONPROFIT

9 ORGANIZATIONS.—

10 ‘‘(i) ALLOWANCE OF CREDIT.—Any 

11 credit which would be allowable under sub12 section (a) with respect to a qualified rural 

13 investment building of a qualified nonprofit 

14 organization if such organization were not 

15 exempt from tax under this chapter shall 

16 be treated as a credit allowable under sub17 part C to such organization. 

18 ‘‘(ii) USE OF CREDIT.—A qualified 

19 nonprofit organization may assign, trade, 

20 sell, or otherwise transfer any credit allow21 able to such organization under clause (i) 

22 to any taxpayer. 

23 ‘‘(iii) CREDIT NOT INCOME.—A trans24 fer under clause (ii) of any credit allowable 
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1 under clause (i) shall not result in income 

2 for purposes of section 511. 

3 ‘‘(5) SPECIAL RULES.—

4 ‘‘(A) BUILDING MUST BE LOCATED WITH5 IN JURISDICTION OF CREDIT AGENCY.—A rural 

6 investment credit agency may allocate its aggre7 gate rural investment credit dollar amount only 

8 to buildings located in the jurisdiction of the 

9 governmental unit of which such agency is a 

10 part. 

11 ‘‘(B) AGENCY ALLOCATIONS IN EXCESS OF

12 LIMIT.—If the aggregate rural investment cred13 it dollar amounts allocated by a rural invest14 ment credit agency for any calendar year exceed 

15 the portion of the State rural investment credit 

16 ceiling allocated to such agency for such cal17 endar year, the rural investment credit dollar 

18 amounts so allocated shall be reduced (to the 

19 extent of such excess) for buildings in the re20 verse of the order in which the allocations of 

21 such amounts were made. 

22 ‘‘(C) Credit reduced if allocated credit dol23 lar amount is less than credit which would be 

24 allowable without regard to sales convention, 

25 etc.—
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1 ‘‘(i) IN GENERAL.—The amount of 

2 the credit determined under this section 

3 with respect to any building shall not ex4 ceed the clause (ii) percentage of the 

5 amount of the credit which would (but for 

6 this subparagraph) be determined under 

7 this section with respect to such building. 

8 ‘‘(ii) DETERMINATION OF PERCENT9 AGE.—For purposes of clause (i), the 

10 clause (ii) percentage with respect to any 

11 building is the percentage which—

12 ‘‘(I) the rural investment credit 

13 dollar amount allocated to such build14 ing bears to 

15 ‘‘(II) the credit amount deter16 mined in accordance with clause (iii). 

17 ‘‘(iii) DETERMINATION OF CREDIT

18 AMOUNT.—The credit amount determined 

19 in accordance with this clause is the 

20 amount of the credit which would (but for 

21 this subparagraph) be determined under 

22 this section with respect to the building if 

23 this section were applied without regard to 

24 paragraph (2)(A) of subsection (e). 
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1 ‘‘(D) RURAL INVESTMENT CREDIT AGENCY

2 TO SPECIFY APPLICABLE PERCENTAGE AND

3 MAXIMUM ELIGIBLE BASIS.—In allocating a 

4 rural investment credit dollar amount to any 

5 building, the rural investment credit agency 

6 shall specify the applicable percentage and the 

7 maximum eligible basis which may be taken 

8 into account under this section with respect to 

9 such building. The applicable percentage and 

10 maximum eligible basis so specified shall not ex11 ceed the applicable percentage and eligible basis 

12 determined under this section without regard to 

13 this subsection. 

14 ‘‘(6) OTHER DEFINITIONS.—For purposes of 

15 this subsection—

16 ‘‘(A) RURAL INVESTMENT CREDIT AGEN17 CY.—The term ‘rural investment credit agency’ 

18 means any agency authorized to carry out this 

19 subsection. 

20 ‘‘(B) POSSESSIONS TREATED AS STATES.—

21 The term ‘State’ includes a possession of the 

22 United States. 

23 ‘‘(7) PORTION OF STATE CEILING SET-ASIDE

24 FOR QUALIFIED RURAL SMALL BUSINESS INVEST25 MENT CREDITS.—Not more than 20 percent of the 
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1 State rural investment credit ceiling for any State 

2 for any calendar year may be allocated to qualified 

3 rural small business investment credits under section 

4 42B. 

5 ‘‘(h) DEFINITIONS AND SPECIAL RULES.—For pur6 poses of this section—

7 ‘‘(1) COMPLIANCE PERIOD.—The term ‘compli8 ance period’ means, with respect to any building, the 

9 period of 10 taxable years beginning with the 1st 

10 taxable year of the credit period with respect there11 to. 

12 ‘‘(2) NEW BUILDING.—The term ‘new building’ 

13 means a building the original use of which begins 

14 with the taxpayer. 

15 ‘‘(3) EXISTING BUILDING.—The term ‘existing 

16 building’ means any building which is not a new 

17 building. 

18 ‘‘(4) APPLICATION TO ESTATES AND TRUSTS.—

19 In the case of an estate or trust, the amount of the 

20 credit determined under subsection (a) and any in21 crease in tax under subsection (i) shall be appor22 tioned between the estate or trust and the bene23 ficiaries on the basis of the income of the estate or 

24 trust allocable to each. 

25 ‘‘(i) RECAPTURE OF CREDIT.—If—
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1 ‘‘(1) as of the close of any taxable year in the 

2 compliance period, the amount of the eligible basis 

3 of any building with respect to the taxpayer is less 

4 than 

5 ‘‘(2) the amount of such basis as of the close 

6 of the preceding taxable year, 

7 then the taxpayer’s tax under this chapter for the 

8 taxable year shall be increased by the credit recap9 ture amount determined under rules similar to the 

10 rules of section 42(j). 

11 ‘‘(j) CERTIFICATIONS AND OTHER REPORTS TO SEC12 RETARY.—

13 ‘‘(1) CERTIFICATION WITH RESPECT TO 1ST

14 YEAR OF CREDIT PERIOD.—Following the close of 

15 the 1st taxable year in the credit period with respect 

16 to any qualified rural investment building, the tax17 payer shall certify to the Secretary (at such time 

18 and in such form and in such manner as the Sec19 retary prescribes)—

20 ‘‘(A) the taxable year, and calendar year, 

21 in which such building was first placed in serv22 ice, 

23 ‘‘(B) the eligible basis of such building as 

24 of the beginning of the credit period, 
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1 ‘‘(C) the maximum applicable percentage 

2 and eligible basis permitted to be taken into ac3 count by the appropriate rural investment cred4 it agency under subsection (g), 

5 ‘‘(D) the election made under subsection 

6 (f) with respect to the qualified rural invest7 ment project of which such building is a part, 

8 and 

9 ‘‘(E) such other information as the Sec10 retary may require. 

11 In the case of a failure to make the certification re12 quired by the preceding sentence on the date pre13 scribed therefor, unless it is shown that such failure 

14 is due to reasonable cause and not to willful neglect, 

15 no credit shall be allowable by reason of subsection 

16 (a) with respect to such building for any taxable 

17 year ending before such certification is made. 

18 ‘‘(2) ANNUAL REPORTS TO THE SECRETARY.—

19 The Secretary may require taxpayers to submit an 

20 information return (at such time and in such form 

21 and manner as the Secretary prescribes) for each 

22 taxable year setting forth—

23 ‘‘(A) the eligible basis for the taxable year 

24 of each qualified rural investment building of 

25 the taxpayer, 
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1 ‘‘(B) the information described in para2 graph (1)(C) for the taxable year, and 

3 ‘‘(C) such other information as the Sec4 retary may require. 

5 The penalty under section 6652(j) shall apply to any 

6 failure to submit the return required by the Sec7 retary under the preceding sentence on the date pre8 scribed therefor. 

9 ‘‘(3) ANNUAL REPORTS FROM RURAL INVEST10 MENT CREDIT AGENCIES.—Each agency which allo11 cates any rural investment credit amount to any 

12 building for any calendar year shall submit to the 

13 Secretary (at such time and in such manner as the 

14 Secretary shall prescribe) an annual report speci15 fying—

16 ‘‘(A) the amount of rural investment credit 

17 amount allocated to each building for such year, 

18 ‘‘(B) sufficient information to identify each 

19 such building and the taxpayer with respect 

20 thereto, and 

21 ‘‘(C) such other information as the Sec22 retary may require. 

23 The penalty under section 6652(j) shall apply to any 

24 failure to submit the report required by the pre25 ceding sentence on the date prescribed therefor. 
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1 ‘‘(k) RESPONSIBILITIES OF RURAL INVESTMENT

2 CREDIT AGENCIES.—

3 ‘‘(1) PLANS FOR ALLOCATION OF CREDIT

4 AMONG INVESTMENT PROJECTS.—

5 ‘‘(A) IN GENERAL.—Notwithstanding any 

6 other provision of this section, the rural invest7 ment credit dollar amount with respect to any 

8 building shall be zero unless—

9 ‘‘(i) such amount was allocated pursu10 ant to a qualified rural investment plan of 

11 the agency which is approved by the gov12 ernmental unit (in accordance with rules 

13 similar to the rules of section 147(f)(2) 

14 (other than subparagraph (B)(ii) thereof)) 

15 of which such agency is a part, 

16 ‘‘(ii) such agency notifies the chief ex17 ecutive officer (or the equivalent) of the 

18 local jurisdiction within which the building 

19 is located of such investment project and 

20 provides such individual a reasonable op21 portunity to comment on the investment 

22 project, 

23 ‘‘(iii) a comprehensive market study 

24 of the development needs of individuals in 

25 the qualifying county to be served by the 
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1 investment project is conducted before the 

2 credit allocation is made and at the devel3 oper’s expense by a disinterested party who 

4 is approved by such agency, and 

5 ‘‘(iv) a written explanation is available 

6 to the general public for any allocation of 

7 a rural investment credit dollar amount 

8 which is not made in accordance with es9 tablished priorities and selection criteria of 

10 the rural investment credit agency. 

11 ‘‘(B) QUALIFIED RURAL INVESTMENT

12 PLAN.—For purposes of this section, the term 

13 ‘qualified rural investment plan’ means any 

14 plan—

15 ‘‘(i) which sets forth selection criteria 

16 to be used to determine priorities of the 

17 rural investment credit agency which are 

18 appropriate to qualifying counties, 

19 ‘‘(ii) which also gives preference in al20 locating rural investment credit dollar 

21 amounts among selected investment 

22 projects to—

23 ‘‘(I) investment projects that tar24 get those small rural counties with 
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1 consistently high rates of net out-mi2 gration, 

3 ‘‘(II) investment projects that 

4 link the economic development and job 

5 creation efforts of 2 or more small 

6 rural counties with high rates of net 

7 out-migration, and 

8 ‘‘(III) investment projects that 

9 link the economic development and job 

10 creation efforts of 1 or more small 

11 rural counties in the State with high 

12 rates of net out-migration to related 

13 efforts in regions of such State experi14 encing economic growth, and 

15 ‘‘(iii) which provides a procedure that 

16 the agency (or an agent or other private 

17 contractor of such agency) will follow in 

18 monitoring for noncompliance with the 

19 provisions of this section and in notifying 

20 the Internal Revenue Service of such non21 compliance which such agency becomes 

22 aware of and in monitoring for noncompli23 ance through regular site visits. 
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1 ‘‘(C) CERTAIN SELECTION CRITERIA MUST

2 BE USED.—The selection criteria set forth in a 

3 qualified rural investment plan must include—

4 ‘‘(i) investment project location, 

5 ‘‘(ii) technology and transportation in6 frastructure needs, and 

7 ‘‘(iii) private development trends. 

8 ‘‘(2) CREDIT ALLOCATED TO BUILDING NOT TO

9 EXCEED AMOUNT NECESSARY TO ASSURE INVEST10 MENT PROJECT FEASIBILITY.—

11 ‘‘(A) IN GENERAL.—The rural investment 

12 credit dollar amount allocated to an investment 

13 project shall not exceed the amount the rural 

14 investment credit agency determines is nec15 essary for the financial feasibility of the invest16 ment project and its viability as a qualified 

17 rural investment project throughout the compli18 ance period. 

19 ‘‘(B) AGENCY EVALUATION.—In making 

20 the determination under subparagraph (A), the 

21 rural investment credit agency shall consider—

22 ‘‘(i) the sources and uses of funds and 

23 the total financing planned for the invest24 ment project, 
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1 ‘‘(ii) any proceeds or receipts expected 

2 to be generated by reason of tax benefits, 

3 ‘‘(iii) the percentage of the rural in4 vestment credit dollar amount used for in5 vestment project costs other than the cost 

6 of intermediaries, and 

7 ‘‘(iv) the reasonableness of the devel8 opmental and operational costs of the in9 vestment project. 

10 Clause (iii) shall not be applied so as to impede 

11 the development of investment projects in hard12 to-develop areas. 

13 ‘‘(C) DETERMINATION MADE WHEN CRED14 IT AMOUNT APPLIED FOR AND WHEN BUILDING

15 PLACED IN SERVICE.—

16 ‘‘(i) IN GENERAL.—A determination 

17 under subparagraph (A) shall be made as 

18 of each of the following times: 

19 ‘‘(I) The application for the rural 

20 investment credit dollar amount. 

21 ‘‘(II) The allocation of the rural 

22 investment credit dollar amount. 

23 ‘‘(III) The date the building is 

24 first placed in service. 
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1 ‘‘(ii) CERTIFICATION AS TO AMOUNT

2 OF OTHER SUBSIDIES.—Prior to each de3 termination under clause (i), the taxpayer 

4 shall certify to the rural investment credit 

5 agency the full extent of all Federal, State, 

6 and local subsidies which apply (or which 

7 the taxpayer expects to apply) with respect 

8 to the building. 

9 ‘‘(l) REGULATIONS.—The Secretary shall prescribe 

10 such regulations as may be necessary or appropriate to 

11 carry out the purposes of this section, including regula12 tions—

13 ‘‘(1) dealing with—

14 ‘‘(A) investment projects which include 

15 more than 1 building or only a portion of a 

16 building, 

17 ‘‘(B) buildings which are sold in portions, 

18 ‘‘(2) providing for the application of this section 

19 to short taxable years, 

20 ‘‘(3) preventing the avoidance of the rules of 

21 this section, and 

22 ‘‘(4) providing the opportunity for rural invest23 ment credit agencies to correct administrative errors 

24 and omissions with respect to allocations and record 

25 keeping within a reasonable period after their dis-
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1 covery, taking into account the availability of regula2 tions and other administrative guidance from the 

3 Secretary.’’. 

4 (b) CURRENT YEAR BUSINESS CREDIT CALCULA5 TION.—Section 38(b) (relating to current year business 

6 credit) is amended by striking ‘‘plus’’ at the end of para7 graph (14), by striking the period at the end of paragraph 

8 (15) and inserting ‘‘, plus’’, and by adding at the end the 

9 following: 

10 ‘‘(16) the rural investment credit determined 

11 under section 42A(a).’’. 

12 (c) LIMITATION ON CARRYBACK.—Subsection (d) of 

13 section 39 (relating to carryback and carryforward of un14 used credits) is amended by adding at the end the fol15 lowing: 

16 ‘‘(11) NO CARRYBACK OF RURAL INVESTMENT

17 CREDIT BEFORE EFFECTIVE DATE.—No portion of 

18 the unused business credit for any taxable year 

19 which is attributable to the rural investment credit 

20 determined under section 42A may be carried back 

21 to a taxable year beginning before the date of the 

22 enactment of the New HomesteadRural Economic 

23 Growth Act of 2003.’’. 

24 (d) CONFORMING AMENDMENTS.—
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1 (1) Section 55(c)(1) is amended by inserting 

2 ‘‘or subsection (i) or (j) of section 42A’’ after ‘‘sec3 tion 42’’. 

4 (2) Subsections (i)(c)(3), (i)(c)(6)(B)(i), and 

5 (k)(1) of section 469 are each amended by inserting 

6 ‘‘or 42A’’ after ‘‘section 42’’. 

7 (3) Section 772(a) is amended by striking 

8 ‘‘and’’ at the end of paragraph (10), by redesig9 nating paragraph (11) as paragraph (12), and by in10 serting after paragraph (10) the following: 

11 ‘‘(11) the rural investment credit determined 

12 under section 42A, and’’. 

13 (4) Section 774(b)(4) is amended by inserting 

14 ‘‘, 42A(i),’’ after ‘‘section 42(j)’’. 

15 (e) CLERICAL AMENDMENT.—The table of sections 

16 for subpart D of part IV of subchapter A of chapter 1 

17 is amended by inserting after the item relating to section 

18 42 the following:

‘‘Sec. 42A. Rural investment credit.’’.

19 (f) EFFECTIVE DATE.—The amendments made by 

20 this section shall apply to expenditures made in taxable 

21 years beginning after the date of the enactment of this 

22 Act. 
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1 TITLE II—EMPLOYER TAX CRED2 IT FOR HIRING RURAL EM3 PLOYEES 

4 § 201. Employer tax credit to apply to new employees 

5 who are residents of rural areas 

6 (a) IN GENERAL.—Paragraph (1) of section 51(d) of 

7 the Internal Revenue Code of 1986 (relating to members 

8 of targeted groups) is amended by striking ‘‘or’’ at the 

9 end of subparagraph (G), by striking the period at the 

10 end of subparagraph (H), and by adding at the end the 

11 following new subparagraph: 

12 ‘‘(I) a qualified rural employee.’’. 

13 (b) QUALIFIED RURAL EMPLOYEE.—Subsection (d) 

14 of section 51 of such Code is amended by redesignating 

15 paragraphs (10), (11), and (12) as paragraphs (11), (12), 

16 and (13), respectively, and by inserting after paragraph 

17 (9) the following new paragraph: 

18 ‘‘(10) QUALIFIED RURAL EMPLOYEE.—The 

19 term ‘qualified rural employee’ means, with respect 

20 to any period, any employee of an employer if—

21 ‘‘(A) substantially all of the services per22 formed during such period by such employee for 

23 such employer are performed within an area de24 termined by the Secretary of Agriculture to be 

25 a rural area, and 
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1 ‘‘(B) the principal place of abode of such 

2 employee while performing such services is 

3 within such area.’’. 

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

5 this section shall apply to individuals who begin work for 

6 the employer after the date of the enactment of this Act. 

7 TITLE III—GRANTS FOR JOB 

8 TRAINING IN RURAL AREAS 

9 § 301. Grants for job training in rural areas 

10 (a) AUTHORIZATION.—

11 (1) IN GENERAL.—The Secretary of Labor, in 

12 consultation with the Secretary of Commerce, shall 

13 award grants to eligible entities described in para14 graph (2) to assist such entities to improve the job 

15 skills necessary for employment in specific indus16 tries. 

17 (2) ELIGIBLE ENTITIES.—

18 (A) IN GENERAL.—For the purposes of 

19 this section, eligible entities shall include busi20 nesses, job training centers, and educational in21 stitutions that offer career training to residents 

22 of rural areas. 

23 (B) RURAL AREA DEFINED.—For purposes 

24 of this section, the term ‘‘rural area’’ means an 
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•HR 2972 IH 

1 area that has a population density of less than 

2 500 people per square mile. 

3 (3) PRIORITY FOR SMALL BUSINESSES.—In 

4 providing grants under paragraph (1), the Secretary 

5 of Labor shall give priority to small-business con6 cerns (as defined in section 3(a) of the Small Busi7 ness Act (15 U.S.C. 632(a))). 

8 (4) MAXIMUM AMOUNT OF GRANT.—The 

9 amount of a grant awarded to an eligible entity 

10 under paragraph (1) may not exceed $250,000 for 

11 any fiscal year. 

12 (b) USE OF AMOUNTS.—

13 (1) IN GENERAL.—The Secretary of Labor may 

14 not award a grant under subsection (a) to an eligible 

15 entity unless such entity agrees to use amounts re16 ceived from such grant to improve the job skills nec17 essary for employment in the rural area in which 

18 such entity is located. 

19 (2) CONDUCT OF PROGRAM.—

20 (A) IN GENERAL.—In carrying out the 

21 program described in paragraph (1), the eligible 

22 entity may provide for—

23 (i) an assessment of training and job 

24 skill needs for the industry; 
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1 (ii) the development of a sequence of 

2 skill standards that are benchmarked to 

3 advanced industry practices; 

4 (iii) the development of curriculum 

5 and training methods, including, where ap6 propriate, e-learning or technology-based 

7 training; 

8 (iv) the purchase, lease, or receipt of 

9 donations of training equipment; 

10 (v) the identification of training pro11 viders and the development of partnerships 

12 between the industry and educational insti13 tutions, including community colleges; 

14 (vi) the development of apprenticeship 

15 programs; 

16 (vii) the development of training pro17 grams for workers, including dislocated 

18 workers; 

19 (viii) the development of training 

20 plans for businesses; and 

21 (ix) the development of the member22 ship of the entity. 

23 (B) ADDITIONAL REQUIREMENT.—In car24 rying out the program described in paragraph 

25 (1), the eligible entity shall provide for the de-
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1 velopment and tracking of performance outcome 

2 measures for the program and the training pro3 viders involved in the program. 

4 (3) ADMINISTRATIVE COSTS.—The eligible enti5 ty may use not more than 10 percent of the amount 

6 of a grant to pay for administrative costs associated 

7 with the program described in paragraph (1). 

8 (c) REQUIREMENT OF MATCHING FUNDS.—

9 (1) IN GENERAL.—The Secretary of Labor may 

10 not award a grant under subsection (a) to an eligible 

11 entity unless such entity agrees that the entity will 

12 make available non-Federal contributions toward the 

13 costs of carrying out activities under the grant in an 

14 amount that is not less than $1 for each $5 of Fed15 eral funds provided under the grant. 

16 (2) OTHER CONTRIBUTIONS.—

17 (A) EQUIPMENT.—Equipment donations to 

18 facilities that are not owned or operated by the 

19 eligible entity involved may be included in de20 termining compliance with paragraph (1). 

21 (B) LIMITATION.—An eligible entity may 

22 not include in-kind contributions in complying 

23 with the requirement of paragraph (1). The 

24 Secretary of Labor may consider such dona25 tions in ranking applications. 
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1 (d) LIMIT ON ADMINISTRATIVE EXPENSES.—The 

2 Secretary of Labor may use not more than 5 percent of 

3 the amounts made available to carry out this section to 

4 pay the Federal administrative costs associated with 

5 awarding grants under this section. 

6 (e) AUTHORIZATION OF APPROPRIATIONS.—There 

7 are authorized to be appropriated to carry out this section 

8 $10,000,000 for each of fiscal years 2004 through 2008.

Æ