II 

109TH CONGRESS 

1ST SESSION S.1147 

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

of broadband Internet access expenditures, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MAY 26, 2005 

Mr. ROCKEFELLER (for himself, Ms. SNOWE, Mr. BAUCUS, Mr. BURNS, Mr. 

SCHUMER, Mr. BUNNING, and Ms. CANTWELL) introduced the following 

bill; which was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

for the expensing of broadband Internet access expenditures, 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. EXPENSING OF BROADBAND INTERNET ACCESS 

4 EXPENDITURES. 

5 (a) IN GENERAL.—Part VI of subchapter B of chap6 ter 1 of the Internal Revenue Code of 1986 (relating to 

7 itemized deductions for individuals and corporations) is 

8 amended by inserting after section 190 the following new 

9 section: 
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1 ‘‘SEC. 191. BROADBAND EXPENDITURES. 

2 ‘‘(a) TREATMENT OF EXPENDITURES.— 

3 ‘‘(1) IN GENERAL.—A taxpayer may elect to 

4 treat any qualified broadband expenditure which is 

5 paid or incurred by the taxpayer as an expense 

6 which is not chargeable to capital account. Any ex7 penditure which is so treated shall be allowed as a 

8 deduction. 

9 ‘‘(2) ELECTION.—An election under paragraph 

10 (1) shall be made at such time and in such manner 

11 as the Secretary may prescribe by regulation. 

12 ‘‘(b) QUALIFIED BROADBAND EXPENDITURES.—For 

13 purposes of this section— 

14 ‘‘(1) IN GENERAL.—The term ‘qualified 

15 broadband expenditure’ means, with respect to any 

16 taxable year, any direct or indirect costs incurred 

17 after the date of the enactment of this Act and be18 fore the date which is 10 years after such date and 

19 properly taken into account with respect to— 

20 ‘‘(A) the purchase or installation of quali21 fied equipment (including any upgrades there22 to), and 

23 ‘‘(B) the connection of such qualified 

24 equipment to any qualified subscriber. 

25 ‘‘(2) CERTAIN SATELLITE EXPENDITURES EX26 CLUDED.—Such term shall not include any costs in-
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1 curred with respect to the launching of any satellite 

2 equipment. 

3 ‘‘(3) LEASED EQUIPMENT.—Such term shall in4 clude so much of the purchase price paid by the les5 sor of qualified equipment subject to a lease de6 scribed in subsection (c)(2)(B) as is attributable to 

7 expenditures incurred by the lessee which would oth8 erwise be described in paragraph (1). 

9 ‘‘(4) LIMITATION WITH REGARD TO CURRENT

10 GENERATION BROADBAND SERVICES.—Only 50 per11 cent of the amounts taken into account under para12 graph (1) with respect to qualified equipment 

13 through which current generation broadband serv14 ices are provided shall be treated as qualified 

15 broadband expenditures. 

16 ‘‘(c) WHEN EXPENDITURES TAKEN INTO AC17 COUNT.—For purposes of this section— 

18 ‘‘(1) IN GENERAL.—Qualified broadband ex19 penditures with respect to qualified equipment shall 

20 be taken into account with respect to the first tax21 able year in which— 

22 ‘‘(A) current generation broadband services 

23 are provided through such equipment to quali24 fied subscribers, or 
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1 ‘‘(B) next generation broadband services 

2 are provided through such equipment to quali3 fied subscribers. 

4 ‘‘(2) LIMITATION.— 

5 ‘‘(A) IN GENERAL.—Qualified expenditures 

6 shall be taken into account under paragraph (1) 

7 only with respect to qualified equipment— 

8 ‘‘(i) the original use of which com9 mences with the taxpayer, and 

10 ‘‘(ii) which is placed in service, after 

11 the date of the enactment of this Act. 

12 ‘‘(B) SALE-LEASEBACKS.—For purposes of 

13 subparagraph (A), if property— 

14 ‘‘(i) is originally placed in service 

15 after the date of the enactment of this Act 

16 by any person, and 

17 ‘‘(ii) sold and leased back by such per18 son within 3 months after the date such 

19 property was originally placed in service, 

20 such property shall be treated as originally 

21 placed in service not earlier than the date on 

22 which such property is used under the leaseback 

23 referred to in clause (ii). 

24 ‘‘(d) SPECIAL ALLOCATION RULES.— 
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1 ‘‘(1) CURRENT GENERATION BROADBAND SERV2 ICES.—For purposes of determining the amount of 

3 qualified broadband expenditures under subsection 

4 (a)(1) with respect to qualified equipment through 

5 which current generation broadband services are 

6 provided, if the qualified equipment is capable of 

7 serving both qualified subscribers and other sub8 scribers, the qualified broadband expenditures shall 

9 be multiplied by a fraction— 

10 ‘‘(A) the numerator of which is the sum of 

11 the number of potential qualified subscribers 

12 within the rural areas and the underserved 

13 areas which the equipment is capable of serving 

14 with current generation broadband services, and 

15 ‘‘(B) the denominator of which is the total 

16 potential subscriber population of the area 

17 which the equipment is capable of serving with 

18 current generation broadband services. 

19 ‘‘(2) NEXT GENERATION BROADBAND SERV20 ICES.—For purposes of determining the amount of 

21 qualified broadband expenditures under subsection 

22 (a)(1) with respect to qualified equipment through 

23 which next generation broadband services are pro24 vided, if the qualified equipment is capable of serv25 ing both qualified subscribers and other subscribers, 
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1 the qualified expenditures shall be multiplied by a 

2 fraction— 

3 ‘‘(A) the numerator of which is the sum 

4 of— 

5 ‘‘(i) the number of potential qualified 

6 subscribers within the rural areas and un7 derserved areas, plus 

8 ‘‘(ii) the number of potential qualified 

9 subscribers within the area consisting only 

10 of residential subscribers not described in 

11 clause (i), 

12 which the equipment is capable of serving with 

13 next generation broadband services, and 

14 ‘‘(B) the denominator of which is the total 

15 potential subscriber population of the area 

16 which the equipment is capable of serving with 

17 next generation broadband services. 

18 ‘‘(e) DEFINITIONS.—For purposes of this section— 

19 ‘‘(1) ANTENNA.—The term ‘antenna’ means 

20 any device used to transmit or receive signals 

21 through the electromagnetic spectrum, including sat22 ellite equipment. 

23 ‘‘(2) CABLE OPERATOR.—The term ‘cable oper24 ator’ has the meaning given such term by section 
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1 602(5) of the Communications Act of 1934 (47 

2 U.S.C. 522(5)). 

3 ‘‘(3) COMMERCIAL MOBILE SERVICE CAR4 RIER.—The term ‘commercial mobile service carrier’ 

5 means any person authorized to provide commercial 

6 mobile radio service as defined in section 20.3 of 

7 title 47, Code of Federal Regulations. 

8 ‘‘(4) CURRENT GENERATION BROADBAND SERV9 ICE.—The term ‘current generation broadband serv10 ice’ means the transmission of signals at a rate of 

11 at least 1,000,000 bits per second to the subscriber 

12 and at least 128,000 bits per second from the sub13 scriber. 

14 ‘‘(5) MULTIPLEXING OR DEMULTIPLEXING.— 

15 The term ‘multiplexing’ means the transmission of 2 

16 or more signals over a single channel, and the term 

17 ‘demultiplexing’ means the separation of 2 or more 

18 signals previously combined by compatible multi19 plexing equipment. 

20 ‘‘(6) NEXT GENERATION BROADBAND SERV21 ICE.—The term ‘next generation broadband service’ 

22 means the transmission of signals at a rate of at 

23 least 22,000,000 bits per second to the subscriber 

24 and at least 5,000,000 bits per second from the sub25 scriber. 
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1 ‘‘(7) NONRESIDENTIAL SUBSCRIBER.—The 

2 term ‘nonresidential subscriber’ means any person 

3 who purchases broadband services which are deliv4 ered to the permanent place of business of such per5 son. 

6 ‘‘(8) OPEN VIDEO SYSTEM OPERATOR.—The 

7 term ‘open video system operator’ means any person 

8 authorized to provide service under section 653 of 

9 the Communications Act of 1934 (47 U.S.C. 573). 

10 ‘‘(9) OTHER WIRELESS CARRIER.—The term 

11 ‘other wireless carrier’ means any person (other than 

12 a telecommunications carrier, commercial mobile 

13 service carrier, cable operator, open video system op14 erator, or satellite carrier) providing current genera15 tion broadband services or next generation 

16 broadband service to subscribers through the radio 

17 transmission of energy. 

18 ‘‘(10) PACKET SWITCHING.—The term ‘packet 

19 switching’ means controlling or routing the path of 

20 any digitized transmission signal which is assembled 

21 into packets or cells. 

22 ‘‘(11) PROVIDER.—The term ‘provider’ means, 

23 with respect to any qualified equipment— 

24 ‘‘(A) a cable operator, 

25 ‘‘(B) a commercial mobile service carrier, 
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1 ‘‘(C) an open video system operator, 

2 ‘‘(D) a satellite carrier, 

3 ‘‘(E) a telecommunications carrier, or 

4 ‘‘(F) any other wireless carrier, 

5 providing current generation broadband services or 

6 next generation broadband services to subscribers 

7 through such qualified equipment. 

8 ‘‘(12) PROVISION OF SERVICES.—A provider 

9 shall be treated as providing services to 1 or more 

10 subscribers if— 

11 ‘‘(A) such a subscriber has been passed by 

12 the provider’s equipment and can be connected 

13 to such equipment for a standard connection 

14 fee, 

15 ‘‘(B) the provider is physically able to de16 liver current generation broadband services or 

17 next generation broadband services, as applica18 ble, to such a subscriber without making more 

19 than an insignificant investment with respect to 

20 such subscriber, 

21 ‘‘(C) the provider has made reasonable ef22 forts to make such subscribers aware of the 

23 availability of such services, 

24 ‘‘(D) such services have been purchased by 

25 1 or more such subscribers, and 
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1 ‘‘(E) such services are made available to 

2 such subscribers at average prices comparable 

3 to those at which the provider makes available 

4 similar services in any areas in which the pro5 vider makes available such services. 

6 ‘‘(13) QUALIFIED EQUIPMENT.— 

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

8 equipment’ means equipment which provides 

9 current generation broadband services or next 

10 generation broadband services— 

11 ‘‘(i) at least a majority of the time 

12 during periods of maximum demand to 

13 each subscriber who is utilizing such serv14 ices, and 

15 ‘‘(ii) in a manner substantially the 

16 same as such services are provided by the 

17 provider to subscribers through equipment 

18 with respect to which no deduction is al19 lowed under subsection (a)(1). 

20 ‘‘(B) ONLY CERTAIN INVESTMENT TAKEN

21 INTO ACCOUNT.—Except as provided in sub22 paragraph (C) or (D), equipment shall be taken 

23 into account under subparagraph (A) only to 

24 the extent it— 
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1 ‘‘(i) extends from the last point of 

2 switching to the outside of the unit, build3 ing, dwelling, or office owned or leased by 

4 a subscriber in the case of a telecommuni5 cations carrier, 

6 ‘‘(ii) extends from the customer side 

7 of the mobile telephone switching office to 

8 a transmission/receive antenna (including 

9 such antenna) owned or leased by a sub10 scriber in the case of a commercial mobile 

11 service carrier, 

12 ‘‘(iii) extends from the customer side 

13 of the headend to the outside of the unit, 

14 building, dwelling, or office owned or 

15 leased by a subscriber in the case of a 

16 cable operator or open video system oper17 ator, or 

18 ‘‘(iv) extends from a transmission/re19 ceive antenna (including such antenna) 

20 which transmits and receives signals to or 

21 from multiple subscribers, to a trans22 mission/receive antenna (including such 

23 antenna) on the outside of the unit, build24 ing, dwelling, or office owned or leased by 

25 a subscriber in the case of a satellite car-
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1 rier or other wireless carrier, unless such 

2 other wireless carrier is also a tele3 communications carrier. 

4 ‘‘(C) PACKET SWITCHING EQUIPMENT.— 

5 Packet switching equipment, regardless of loca6 tion, shall be taken into account under subpara7 graph (A) only if it is deployed in connection 

8 with equipment described in subparagraph (B) 

9 and is uniquely designed to perform the func10 tion of packet switching for current generation 

11 broadband services or next generation 

12 broadband services, but only if such packet 

13 switching is the last in a series of such func14 tions performed in the transmission of a signal 

15 to a subscriber or the first in a series of such 

16 functions performed in the transmission of a 

17 signal from a subscriber. 

18 ‘‘(D) MULTIPLEXING AND

19 DEMULTIPLEXING EQUIPMENT.—Multiplexing 

20 and demultiplexing equipment shall be taken 

21 into account under subparagraph (A) only to 

22 the extent it is deployed in connection with 

23 equipment described in subparagraph (B) and 

24 is uniquely designed to perform the function of 

25 multiplexing and demultiplexing packets or cells 
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1 of data and making associated application 

2 adaptions, but only if such multiplexing or 

3 demultiplexing equipment is located between 

4 packet switching equipment described in sub5 paragraph (C) and the subscriber’s premises. 

6 ‘‘(14) QUALIFIED SUBSCRIBER.—The term 

7 ‘qualified subscriber’ means— 

8 ‘‘(A) with respect to the provision of cur9 rent generation broadband services— 

10 ‘‘(i) any nonresidential subscriber 

11 maintaining a permanent place of business 

12 in a rural area or underserved area, or 

13 ‘‘(ii) any residential subscriber resid14 ing in a dwelling located in a rural area or 

15 underserved area which is not a saturated 

16 market, and 

17 ‘‘(B) with respect to the provision of next 

18 generation broadband services— 

19 ‘‘(i) any nonresidential subscriber 

20 maintaining a permanent place of business 

21 in a rural area or underserved area, or 

22 ‘‘(ii) any residential subscriber. 

23 ‘‘(15) RESIDENTIAL SUBSCRIBER.—The term 

24 ‘residential subscriber’ means any individual who 
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1 purchases broadband services which are delivered to 

2 such individual’s dwelling. 

3 ‘‘(16) RURAL AREA.—The term ‘rural area’ 

4 means any census tract which— 

5 ‘‘(A) is not within 10 miles of any incor6 porated or census designated place containing 

7 more than 25,000 people, and 

8 ‘‘(B) is not within a county or county 

9 equivalent which has an overall population den10 sity of more than 500 people per square mile of 

11 land. 

12 ‘‘(17) RURAL SUBSCRIBER.—The term ‘rural 

13 subscriber’ means any residential subscriber residing 

14 in a dwelling located in a rural area or nonresiden15 tial subscriber maintaining a permanent place of 

16 business located in a rural area. 

17 ‘‘(18) SATELLITE CARRIER.—The term ‘sat18 ellite carrier’ means any person using the facilities 

19 of a satellite or satellite service licensed by the Fed20 eral Communications Commission and operating in 

21 the Fixed-Satellite Service under part 25 of title 47 

22 of the Code of Federal Regulations or the Direct 

23 Broadcast Satellite Service under part 100 of title 

24 47 of such Code to establish and operate a channel 

25 of communications for distribution of signals, and 
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1 owning or leasing a capacity or service on a satellite 

2 in order to provide such point-to-multipoint distribu3 tion. 

4 ‘‘(19) SATURATED MARKET.—The term ‘satu5 rated market’ means any census tract in which, as 

6 of the date of the enactment of this section— 

7 ‘‘(A) current generation broadband services 

8 have been provided by a single provider to 85 

9 percent or more of the total number of potential 

10 residential subscribers residing in dwellings lo11 cated within such census tract, and 

12 ‘‘(B) such services can be utilized— 

13 ‘‘(i) at least a majority of the time 

14 during periods of maximum demand by 

15 each such subscriber who is utilizing such 

16 services, and 

17 ‘‘(ii) in a manner substantially the 

18 same as such services are provided by the 

19 provider to subscribers through equipment 

20 with respect to which no deduction is al21 lowed under subsection (a)(1). 

22 ‘‘(20) SUBSCRIBER.—The term ‘subscriber’ 

23 means any person who purchases current generation 

24 broadband services or next generation broadband 

25 services. 
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1 ‘‘(21) TELECOMMUNICATIONS CARRIER.—The 

2 term ‘telecommunications carrier’ has the meaning 

3 given such term by section 3(44) of the Communica4 tions Act of 1934 (47 U.S.C. 153(44)), but— 

5 ‘‘(A) includes all members of an affiliated 

6 group of which a telecommunications carrier is 

7 a member, and 

8 ‘‘(B) does not include a commercial mobile 

9 service carrier. 

10 ‘‘(22) TOTAL POTENTIAL SUBSCRIBER POPU11 LATION.—The term ‘total potential subscriber popu12 lation’ means, with respect to any area and based on 

13 the most recent census data, the total number of po14 tential residential subscribers residing in dwellings 

15 located in such area and potential nonresidential 

16 subscribers maintaining permanent places of busi17 ness located in such area. 

18 ‘‘(23) UNDERSERVED AREA.—The term ‘under19 served area’ means— 

20 ‘‘(A) any census tract which is located in— 

21 ‘‘(i) an empowerment zone or enter22 prise community designated under section 

23 1391, or 
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1 ‘‘(ii) the District of Columbia Enter2 prise Zone established under section 1400, 

3 or 

4 ‘‘(B) any census tract— 

5 ‘‘(i) the poverty level of which is at 

6 least 30 percent (based on the most recent 

7 census data), and 

8 ‘‘(ii) the median family income of 

9 which does not exceed— 

10 ‘‘(I) in the case of a census tract 

11 located in a metropolitan statistical 

12 area, 70 percent of the greater of the 

13 metropolitan area median family in14 come or the statewide median family 

15 income, and 

16 ‘‘(II) in the case of a census tract 

17 located in a nonmetropolitan statis18 tical area, 70 percent of the non19 metropolitan statewide median family 

20 income. 

21 ‘‘(24) UNDERSERVED SUBSCRIBER.—The term 

22 ‘underserved subscriber’ means any residential sub23 scriber residing in a dwelling located in an under24 served area or nonresidential subscriber maintaining 
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1 a permanent place of business located in an under2 served area. 

3 ‘‘(f) SPECIAL RULES.— 

4 ‘‘(1) PROPERTY USED OUTSIDE THE UNITED

5 STATES, ETC., NOT QUALIFIED.—No expenditures 

6 shall be taken into account under subsection (a)(1) 

7 with respect to the portion of the cost of any prop8 erty referred to in section 50(b) or with respect to 

9 the portion of the cost of any property specified in 

10 an election under section 179. 

11 ‘‘(2) BASIS REDUCTION.— 

12 ‘‘(A) IN GENERAL.—For purposes of this 

13 title, the basis of any property shall be reduced 

14 by the portion of the cost of such property 

15 taken into account under subsection (a)(1). 

16 ‘‘(B) ORDINARY INCOME RECAPTURE.— 

17 For purposes of section 1245, the amount of 

18 the deduction allowable under subsection (a)(1) 

19 with respect to any property which is of a char20 acter subject to the allowance for depreciation 

21 shall be treated as a deduction allowed for de22 preciation under section 167. 

23 ‘‘(3) COORDINATION WITH SECTION 38.—No 

24 credit shall be allowed under section 38 with respect 
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1 to any amount for which a deduction is allowed 

2 under subsection (a)(1).’’. 

3 (b) SPECIAL RULE FOR MUTUAL OR COOPERATIVE

4 TELEPHONE COMPANIES.—Section 512(b) of the Internal 

5 Revenue Code of 1986 (relating to modifications) is 

6 amended by adding at the end the following new para7 graph: 

8 ‘‘(18) SPECIAL RULE FOR MUTUAL OR COOPER9 ATIVE TELEPHONE COMPANIES.—A mutual or coop10 erative telephone company which for the taxable year 

11 satisfies the requirements of section 501(c)(12)(A) 

12 may elect to reduce its unrelated business taxable in13 come for such year, if any, by an amount that does 

14 not exceed the qualified broadband expenditures 

15 which would be taken into account under section 

16 191 for such year by such company if such company 

17 was not exempt from taxation. Any amount which is 

18 allowed as a deduction under this paragraph shall 

19 not be allowed as a deduction under section 191 and 

20 the basis of any property to which this paragraph 

21 applies shall be reduced under section 

22 1016(a)(32).’’. 

23 (c) CONFORMING AMENDMENTS.— 

24 (1) Section 263(a)(1) of the Internal Revenue 

25 Code of 1986 (relating to capital expenditures) is 
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1 amended by striking ‘‘or’’ at the end of subpara2 graph (H), by striking the period at the end of sub3 paragraph (I) and inserting ‘‘, or’’, and by adding 

4 at the end the following new subparagraph: 

5 ‘‘(J) expenditures for which a deduction is 

6 allowed under section 191.’’. 

7 (2) Section 1016(a) of such Code is amended 

8 by striking ‘‘and’’ at the end of paragraph (30), by 

9 striking the period at the end of paragraph (31) and 

10 inserting ‘‘, and’’, and by adding at the end the fol11 lowing new paragraph: 

12 ‘‘(32) to the extent provided in section 

13 191(f)(2).’’. 

14 (3) The table of sections for part VI of sub15 chapter A of chapter 1 of such Code is amended by 

16 inserting after the item relating to section 190 the 

17 following new item: 

‘‘Sec. 191. Broadband expenditures.’’. 

18 (d) DESIGNATION OF CENSUS TRACTS.— 

19 (1) IN GENERAL.—The Secretary of the Treas20 ury shall, not later than 90 days after the date of 

21 the enactment of this Act, designate and publish 

22 those census tracts meeting the criteria described in 

23 paragraphs (16), (22), and (23) of section 191(e) of 

24 the Internal Revenue Code of 1986 (as added by 

25 this section). In making such designations, the Sec-
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1 retary of the Treasury shall consult with such other 

2 departments and agencies as the Secretary deter3 mines appropriate. 

4 (2) SATURATED MARKET.— 

5 (A) IN GENERAL.—For purposes of desig6 nating and publishing those census tracts meet7 ing the criteria described in subsection (e)(19) 

8 of such section 191— 

9 (i) the Secretary of the Treasury shall 

10 prescribe not later than 30 days after the 

11 date of the enactment of this Act the form 

12 upon which any provider which takes the 

13 position that it meets such criteria with re14 spect to any census tract shall submit a 

15 list of such census tracts (and any other 

16 information required by the Secretary) not 

17 later than 60 days after the date of the 

18 publication of such form, and 

19 (ii) the Secretary of the Treasury 

20 shall publish an aggregate list of such cen21 sus tracts and the applicable providers not 

22 later than 30 days after the last date such 

23 submissions are allowed under clause (i). 

24 (B) NO SUBSEQUENT LISTS REQUIRED.— 

25 The Secretary of the Treasury shall not be re-
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1 quired to publish any list of census tracts meet2 ing such criteria subsequent to the list de3 scribed in subparagraph (A)(ii). 

4 (e) OTHER REGULATORY MATTERS.— 

5 (1) PROHIBITION.—No Federal or State agency 

6 or instrumentality shall adopt regulations or rate7 making procedures that would have the effect of 

8 eliminating or reducing any deduction or portion 

9 thereof allowed under section 191 of the Internal 

10 Revenue Code of 1986 (as added by this section) or 

11 otherwise subverting the purpose of this section. 

12 (2) TREASURY REGULATORY AUTHORITY.—It is 

13 the intent of Congress in providing the election to 

14 deduct qualified broadband expenditures under sec15 tion 191 of the Internal Revenue Code of 1986 (as 

16 added by this section) to provide incentives for the 

17 purchase, installation, and connection of equipment 

18 and facilities offering expanded broadband access to 

19 the Internet for users in certain low income and 

20 rural areas of the United States, as well as to resi21 dential users nationwide, in a manner that main22 tains competitive neutrality among the various class23 es of providers of broadband services. Accordingly, 

24 the Secretary of the Treasury shall prescribe such 

25 regulations as may be necessary or appropriate to 
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1 carry out the purposes of section 191 of such Code, 

2 including— 

3 (A) regulations to determine how and when 

4 a taxpayer that incurs qualified broadband ex5 penditures satisfies the requirements of section 

6 191 of such Code to provide broadband serv7 ices, and 

8 (B) regulations describing the information, 

9 records, and data taxpayers are required to pro10 vide the Secretary to substantiate compliance 

11 with the requirements of section 191 of such 

12 Code. 

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

14 this section shall apply to expenditures incurred after the 

15 date of the enactment of this Act. 

Æ