II 

109TH CONGRESS 

1ST SESSION S. 1568 

To enhance the ability of community banks to foster economic growth and 

serve their communities, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JULY 29, 2005 

Mr. BROWNBACK (for himself, Mr. INHOFE, and Mr. ROBERTS) introduced the 

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

A BILL 

To enhance the ability of community banks to foster economic growth and serve their communities, 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 ‘‘Community Banks 

5 Serving Their Communities First Act’’ or the ‘‘Commu6 nities First Act’’. 
2 

•S 1568 IS

1 TITLE I—TARGETED REGU2 LATORY RELIEF FOR COMMU3 NITY BANKS 

4 SEC. 101. INCREASE EXEMPTION LEVELS UNDER THE 

5 HOME MORTGAGE DISCLOSURE ACT OF 1975. 

6 (a) DEPOSITORY INSTITUTION AND MORTGAGE

7 LENDER DISCLOSURE EXEMPTIONS.—Section 304(i) of 

8 the Home Mortgage Disclosure Act (12 U.S.C. 2803(i)) 

9 is amended by striking ‘‘$30,000,000’’ and inserting 

10 ‘‘$250,000,000’’. 

11 (b) DEPOSITORY INSTITUTION EXEMPTIONS FROM

12 ACT.—Section 309 of the Home Mortgage Disclosure Act 

13 (12 U.S.C. 2808(a)) is amended— 

14 (1) in subsection (a), by striking 

15 ‘‘$10,000,000’’ and inserting ‘‘$250,000,000’’; and 

16 (2) in subsection (b), by adding at the end the 

17 following new paragraph: 

18 ‘‘(4) INDEXING OF DEPOSITORY INSTITUTION

19 DISCLOSURE EXEMPTION AMOUNT.—Not later than 

20 December 31 of each year beginning after the date 

21 of the enactment of the Community Banks Serving 

22 Their Communities First Act, the amount applicable 

23 under section 304(i) with respect to institutions de24 scribed in section 303(2) shall be adjusted in accord25 ance with the procedure described in paragraphs (1) 
3 

•S 1568 IS

1 and (3) and the adjusted amount shall apply during 

2 the subsequent year.’’. 

3 SEC. 102. SHORT FORM REPORTS OF CONDITION FOR CER4 TAIN COMMUNITY BANKS. 

5 Section 7(a) of the Federal Deposit Insurance Act 

6 (12 U.S.C. 1817(a)) is amended by adding at the end the 

7 following new paragraph: 

8 ‘‘(11) SHORT FORM REPORTS OF CONDITION

9 FOR COMMUNITY BANKS.—An insured depository in10 stitution described in subparagraphs (A), (B), (C), 

11 and (D) of section 10(d)(4) may submit a short 

12 form report of condition under paragraph (3) in 2 

13 nonsequential quarters of any calendar year.’’. 

14 SEC. 103. COMMUNITY BANK EXEMPTION FROM ANNUAL 

15 MANAGEMENT ASSESSMENT OF INTERNAL 

16 CONTROLS REQUIREMENT OF THE SAR17 BANES-OXLEY ACT OF 2002. 

18 Section 404 of the Sarbanes-Oxley Act of 2002 (15 

19 U.S.C. 7262) is amended by adding at the end the fol20 lowing new subsection: 

21 ‘‘(c) COMMUNITY BANK EXEMPTION.— 

22 ‘‘(1) IN GENERAL.—This section shall not apply 

23 in any year to any insured depository institution 

24 which, as of the close of the preceding year, had 
4 

•S 1568 IS

1 total assets, as determined on a consolidated basis, 

2 of $1,000,000,000 or less. 

3 ‘‘(2) ADJUSTMENT OF AMOUNT.—The Commis4 sion shall annually adjust the dollar amount in para5 graph (1) by an amount equal to the percentage in6 crease, for the most recent year, in total assets held 

7 by all depository institutions, as reported by the 

8 Federal Deposit Insurance Corporation.’’. 

9 SEC. 104. CHANGES REQUIRED TO SMALL BANK HOLDING 

10 COMPANY POLICY STATEMENT ON ASSESS11 MENT OF FINANCIAL AND MANAGERIAL FAC12 TORS. 

13 (a) SMALL BANK HOLDING COMPANY POLICY

14 STATEMENT ON ASSESSMENT OF FINANCIAL AND MANA15 GERIAL FACTORS.— 

16 (1) IN GENERAL.—Not later than 6 months 

17 after the date of enactment of this Act, the Board 

18 of Governors of the Federal Reserve System shall 

19 publish in the Federal Register proposed revisions to 

20 appendix C of section 225 of title 12, Code of Fed21 eral Regulations, commonly known as the Small 

22 Bank Holding Company Policy Statement on Assess23 ment of Financial and Managerial Factors that pro24 vide that the policy shall apply to a bank holding 
5 

•S 1568 IS

1 company which has pro forma consolidated assets of 

2 less than $1,000,000,000 and that— 

3 (A) is not engaged in any nonbanking ac4 tivities involving significant leverage; and 

5 (B) does not have a significant amount of 

6 outstanding debt that is held by the general 

7 public. 

8 (2) ADJUSTMENT OF AMOUNT.—The Board of 

9 Governors of the Federal Reserve System shall an10 nually adjust the dollar amount referred to in para11 graph (1) by an amount equal to the percentage in12 crease, for the most recent year, in total assets held 

13 by all bank holding companies, on a consolidated 

14 basis, as determined by the Board. 

15 (b) INCREASE IN DEBT-TO-EQUITY RATIO OF SMALL

16 BANK HOLDING COMPANY.—Not later than 6 months 

17 after the date of enactment of this Act, the Board of Gov18 ernors of the Federal Reserve System shall publish in the 

19 Federal Register proposed revisions to appendix C of sec20 tion 225 of title 12, Code of Federal Regulations, com21 monly known as the Small Bank Holding Company Policy 

22 Statement on Assessment of Financial and Managerial 

23 Factors such that the debt-to-equity ratio allowable for a 

24 small bank holding company in order to remain eligible 

25 to pay a corporate dividend and to remain eligible for ex-
6 

•S 1568 IS

1 pedited processing procedures under Regulation Y of the 

2 Board of Governors of the Federal Reserve System would 

3 increase from 1:1 to 3:1. 

4 SEC. 105. INCREASE IN SIZE OF A SMALL DEPOSITORY IN5 STITUTION EXCEPTION UNDER THE DEPOSI6 TORY INSTITUTION MANAGEMENT INTER7 LOCKS ACT. 

8 Section 203(1) of the Depository Institution Manage9 ment Interlocks Act (12 U.S.C. 3202(1)) is amended by 

10 striking ‘‘$20,000,000’’ and inserting ‘‘$500,000,000’’. 

11 SEC. 106. COMMUNITY BANK PROTECTION UNDER THE SE12 CURITIES INVESTOR PROTECTION ACT OF 

13 1970. 

14 Section 9 of the Securities Investor Protection Act 

15 of 1970 (15 U.S.C. 78fff–3) is amended by adding at the 

16 end the following new subsection: 

17 ‘‘(d) COMMUNITY BANK PROTECTION.— 

18 ‘‘(1) IN GENERAL.—The prohibition on ad19 vances in subsection (a)(5) shall not apply to a bank 

20 with total assets, on a consolidated basis, of less 

21 than $1,000,000,000. 

22 ‘‘(2) ADJUSTMENT OF AMOUNT.—The Commis23 sion shall annually adjust the dollar amount in para24 graph (1) by an amount equal to the percentage in25 crease, for the most recent year, in total assets held 
7 

•S 1568 IS

1 by all depository institutions, as reported by the 

2 Federal Deposit Insurance Corporation.’’. 

3 SEC. 107. FLEXIBLE EXAMINATION SCHEDULE FOR COMMU4 NITY BANKS. 

5 (a) IN GENERAL.—Paragraph (4) of section 10(d) of 

6 the Federal Deposit Insurance Act (12 U.S.C. 1820(d)) 

7 is amended— 

8 (1) by striking the matter preceding subpara9 graph (A) and inserting ‘‘In lieu of the 12-month pe10 riod referred to in paragraphs (1), (2), and (3), the 

11 examination required under paragraph (1) of an in12 sured depository institution may be conducted at 

13 such intervals as the appropriate Federal banking 

14 agency may determine to be appropriate, on the 

15 basis of factors the Financial Institutions Examina16 tion Council shall establish, if—’’; and 

17 (2) in subparagraph (A), by striking 

18 ‘‘$250,000,000’’ and inserting ‘‘$1,000,000,000’’. 

19 (b) CLERICAL AMENDMENT.—The heading for para20 graph (4) of section 10(d) of the Federal Deposit Insur21 ance Act (12 U.S.C. 1820(d)) is amended by striking ‘‘18- 

22 MONTH RULE’’ and inserting ‘‘FLEXIBLE ON-SITE EXAM23 INATION SCHEDULE’’. 
8 

•S 1568 IS

1 SEC. 108. INCREASE IN AMOUNT OF SMALL BANK EXCEP2 TION FOR CAP ON AGGREGATE LOANS TO EX3 ECUTIVE OFFICERS. 

4 Subparagraph (C) of section 22(h)(5) of the Federal 

5 Reserve Act (12 U.S.C. 375b(5)(C)) is amended— 

6 (1) in the first sentence— 

7 (A) by striking ‘‘The Board’’ and inserting 

8 the following: 

9 ‘‘(i) SMALL INSITUTION EXCEP10 TION.—The Board’’; and 

11 (B) by striking ‘‘$100,000,000 of depos12 its’’ and inserting ‘‘$1,000,000,000 of total as13 sets (on a consolidated basis)’’; and 

14 (2) in the second sentence, by striking ‘‘In no 

15 case’’ and inserting the following: 

16 ‘‘(ii) CAP ON CREDIT EXTENSION TO

17 EXECUTIVE OFFICERS.—In no case’’; and 

18 (3) by adding at the end the following: 

19 ‘‘(iii) ANNUAL ADJUSTMENT.—The 

20 Board shall annually adjust the dollar 

21 amount in clause (i) of this subparagraph 

22 by an amount equal to the percentage in23 crease, for the most recent year, in total 

24 assets held by all depository institutions, 

25 as reported by the Federal Deposit Insur26 ance Corporation.’’. 
9 

•S 1568 IS

1 SEC. 109. CONSIDERATION OF COMMUNITY BANK IMPACT. 

2 Before establishing or making any revision in any 

3 regulation, requirement, or guideline applicable to insured 

4 depository institutions (as defined in section 3 of the Fed5 eral Deposit Insurance Act), the appropriate Federal 

6 banking agency (as defined in such section) shall take into 

7 account the effect of the establishment of the regulation, 

8 requirement, or guideline on community banks and sav9 ings associations. 

10 SEC. 110. INCREASE IN CRA EXAM INTERVALS FOR COMMU11 NITY BANKS. 

12 Section 809(a) of the Community Reinvestment Act 

13 of 1977 (12 U.S.C. 2908(a)) is amended by striking 

14 ‘‘$250,000,000’’ and inserting ‘‘$1,000,000,000’’. 

15 TITLE II—ADDITIONAL REGU16 LATORY RELIEF FOR COMMU17 NITY BANKS AND THEIR CUS18 TOMERS 

19 SEC. 201. PROVISIONS RELATING TO 3-DAY RIGHT OF RE20 SCISSION UNDER THE TRUTH IN LENDING 

21 ACT. 

22 (a) OPTIONAL CONSUMER WAIVERS OF RIGHT OF

23 RESCISSION.—Section 125(d) of the Truth in Lending Act 

24 (15 U.S.C. 1635(d)) is amended— 

25 (1) by striking ‘‘The Board may’’ and inserting 

26 the following: 
10 

•S 1568 IS

1 ‘‘(1) PERSONAL FINANCIAL EMERGENCIES.— 

2 The Board may’’; and 

3 (2) by adding at the end the following new 

4 paragraph: 

5 ‘‘(2) WAIVERS WHEN CREDITOR IS INSURED

6 DEPOSITORY INSTITUTION.—The Board shall pre7 scribe regulations authorizing a consumer to waive 

8 the rights provided under this section when the cred9 itor is an insured depository institution (as that 

10 term is defined in section 3(c)(2) of the Federal De11 posit Insurance Act) in such manner and after such 

12 notice as the Board may prescribe.’’. 

13 (b) CLERICAL AMENDMENT.—The heading for sub14 section (d) of section 125 of the Truth in Lending Act 

15 (15 U.S.C. 1635) is amended by striking ‘‘WAIVER OF

16 RIGHTS.—’’ and inserting ‘‘WAIVERS OF RESCISSION

17 RIGHTS.—’’. 

18 (c) EXEMPTION IN CASE OF REFINANCING WITH NO

19 NEW MONEY REGARDLESS OF CREDITOR.—Section 

20 125(e)(2) of the Truth in Lending Act (15 U.S.C. 

21 1635(e)(2)) is amended by striking ‘‘by the same cred22 itor’’. 

23 (d) EXEMPT HOME EQUITY LINES OF CREDIT.— 

24 Section 125(e)(4) of the Truth in Lending Act (15 U.S.C. 

25 1635(e)(4)) is amended to read as follows: 
11 

•S 1568 IS

1 ‘‘(4) advances under an open end consumer 

2 credit plan which provides for any extension of cred3 it which is secured by the principal dwelling of a 

4 consumer.’’. 

5 SEC. 202. ADDITIONAL EXEMPTIONS UNDER HOME MORT6 GAGE DISCLOSURE ACT OF 1975; STREAM7 LINING REPORTING. 

8 (a) SMALL REPORTER EXEMPTION.—Section 304 of 

9 the Home Mortgage Disclosure Act (12 U.S.C. 2803) is 

10 amended by adding at the end the following new sub11 section: 

12 ‘‘(n) SMALL REPORTER EXEMPTION.—If, in any 

13 year, a depository institution makes fewer than 100 re14 portable loans described in any paragraph of subsection 

15 (b), the depository institution shall be exempt from the 

16 disclosure requirements of this section with respect to the 

17 loans described in that paragraph for such year.’’. 

18 (b) MSA MODIFICATIONS.—Section 304(a) of the 

19 Home Mortgage Disclosure Act (12 U.S.C. 2803(a)) is 

20 amended—— 

21 (1) in paragraph (1), by inserting ‘‘or as modi22 fied by the Board under paragraph (3),’’ after ‘‘as 

23 defined by the Department of Commerce’’; and 

24 (2) by adding at the end the following new 

25 paragraph: 
12 

•S 1568 IS

1 ‘‘(3) MODIFICATION OF MSAS.—The Board may 

2 modify the description of any primary metropolitan 

3 statistical area, metropolitan statistical area, and 

4 consolidated metropolitan statistical area, as defined 

5 by the Secretary of Commerce, for purposes of this 

6 subsection.’’. 

7 (c) REGULAR STREAMLINING.—The Home Mortgage 

8 Disclosure Act (12 U.S.C. 2801 et seq.) is amended by 

9 adding at the end the following new section: 

10 ‘‘SEC. 312. REGULAR STREAMLINING. 

11 ‘‘Not later than 1 year after the date of enactment 

12 of the Community Banks Serving Their Communities 

13 First Act and once during each 5-year period thereafter, 

14 the Board shall— 

15 ‘‘(1) review the data collection and reporting re16 quirements of this title; 

17 ‘‘(2) streamline, reduce, or eliminate such re18 quirements by regulation to the extent consistent 

19 with the purposes of this title; 

20 ‘‘(3) revise the data collection and reporting re21 quirements under this title to ensure that they are 

22 consistent with those imposed under the Equal Cred23 it Opportunity Act; and 

24 ‘‘(4) report to the Committee on Banking, 

25 Housing, and Urban Affairs of the Senate and the 
13 

•S 1568 IS

1 Committee on Financial Services of the House of 

2 Representatives such legislative recommendations as 

3 the Board determines to be necessary— 

4 ‘‘(A) to streamline, reduce, or eliminate 

5 such requirements to the extent consistent with 

6 the purposes of this title; and 

7 ‘‘(B) to ensure that such requirements are 

8 consistent with those imposed under the Equal 

9 Credit Opportunity Act.’’. 

10 SEC. 203. EXCEPTION TO ANNUAL PRIVACY NOTICE RE11 QUIREMENT UNDER THE GRAMM-LEACH-BLI12 LEY ACT. 

13 Section 503 of the Gramm-Leach-Bliley Act (15 

14 U.S.C. 6803) is amended by adding at the end the fol15 lowing new subsection: 

16 ‘‘(c) EXCEPTION TO ANNUAL NOTICE REQUIRE17 MENT.—A financial institution shall be exempt from the 

18 annual disclosure requirement under subsection (a), if 

19 such financial institution— 

20 ‘‘(1) provides nonpublic personal information 

21 only in accordance with the provisions of section 

22 502(b)(2) (relating to the consumer ‘opt out’ excep23 tion) and subsection 502(e) (relating to general ex24 ceptions); and 
14 

•S 1568 IS

1 ‘‘(2) has not changed its policies and practices 

2 with regard to disclosing nonpublic personal infor3 mation.’’. 

4 SEC. 204. STREAMLINING REPORTS OF CONDITION. 

5 Section 7(a) of the Federal Deposit Insurance Act 

6 (12 U.S.C. 1817(a)), as amended by section 102 of this 

7 Act, is amended by adding at the end the following new 

8 paragraph: 

9 ‘‘(12) STREAMLINING REPORTS OF CONDI10 TION.— 

11 ‘‘(A) REVIEW OF INFORMATION AND

12 SCHEDULES.—Not later than 1 year after the 

13 date of enactment of the Community Banks 

14 Serving Their Communities First Act and once 

15 during each 5-year period thereafter, the Cor16 poration shall, in conjunction with the Board of 

17 Governors of the Federal Reserve System, the 

18 Comptroller of the Currency, and the Director 

19 of the Office of Thrift Supervision, review the 

20 information and schedules that are required to 

21 be filed by any insured depository institution 

22 with a report of condition under paragraph (3). 

23 ‘‘(B) REDUCTION OR ELIMINATION OF FIL24 INGS WHICH ARE MORE BURDENSOME THAN

25 BENEFICIAL.—Not later than 9 months after 
15 

•S 1568 IS

1 completing any review under subparagraph (A), 

2 the Corporation, the Board of Governors of the 

3 Federal Reserve System, the Comptroller of the 

4 Currency, and the Director of the Office of 

5 Thrift Supervision shall reduce or eliminate any 

6 requirement to file information or schedules 

7 under paragraph (3) if such agencies find that 

8 the burdens of such filings are not outweighed 

9 by— 

10 ‘‘(i) the benefits to safety and sound11 ness of the financial system; or 

12 ‘‘(ii) the ability of the Corporation to 

13 accurately determine the financial condi14 tion and the results of operations of each 

15 insured depository institution. 

16 ‘‘(C) REPORT TO THE CONGRESS.—Not 

17 later than 6 months after the date of comple18 tion of any review under subparagraph (A), the 

19 Corporation, the Board of Governors of the 

20 Federal Reserve System, the Comptroller of the 

21 Currency, and the Director of the Office of 

22 Thrift Supervision shall submit a report to the 

23 Committee on Financial Services of the House 

24 of Representatives and the Committee on Bank-
16 

•S 1568 IS

1 ing, Housing, and Urban Affairs of the Senate 

2 containing— 

3 ‘‘(i) the findings of the agencies with 

4 respect to such review; and 

5 ‘‘(ii) any recommendations of such 

6 agencies for legislative action to implement 

7 any such findings.’’. 

8 SEC. 205. INCREASE IN THE SPECIAL REGULATORY LEND9 ING LIMIT ON LOANS TO EXECUTIVE OFFI10 CERS. 

11 Section 22(g) of the Federal Reserve Act (12 U.S.C. 

12 375a(g)) is amended by adding at the end the following 

13 new paragraph: 

14 ‘‘(11) LIMIT APPLICABLE ON AGGREGATE

15 AMOUNT OF CERTAIN LOANS TO EXECUTIVE OFFI16 CERS OF COMMUNITY BANKS.—Notwithstanding any 

17 regulation prescribed by the Board under paragraph 

18 (4) and subject to other conditions imposed under 

19 this subsection and section 22(h), the aggregate 

20 amount of extensions of credit that a member bank 

21 may make to an executive officer of the bank under 

22 paragraph (4) shall not exceed $250,000.’’. 
17 

•S 1568 IS

1 TITLE III—TAX RELIEF FOR 

2 BANK DEPOSITORS, RURAL 

3 BANKS, MUNICIPALITIES, AND 

4 BANKS ORGANIZED AS LIM5 ITED LIABILITY COMPANIES 

6 SEC. 301. REDUCED RATE AND DEFERRAL OF INCOME REC7 OGNITION ON LONG-TERM CERTIFICATES OF 

8 DEPOSIT. 

9 (a) DEFERRAL OF INCOME RECOGNITION.—Section 

10 451 of the Internal Revenue Code of 1986 (relating to 

11 general rule for taxable year of inclusion) is amended by 

12 adding at the end the following new subsection: 

13 ‘‘(j) CERTIFICATES OF DEPOSITS HELD BY CASH

14 BASIS INDIVIDUALS.—In the case of an individual on the 

15 cash receipts and disbursements method of accounting 

16 who holds a nonnegotiable certificate of deposit, interest 

17 income which is not made available for withdrawal before 

18 maturity of the certificate without penalty shall not be in19 cludible in gross income before the certificate is redeemed 

20 or matures.’’. 

21 (b) INTEREST INCOME ON LONG-TERM CERTIFI22 CATES OF DEPOSIT.—Section 1(h)(11)(A) of the Internal 

23 Revenue Code of 1986 is amended by striking ‘‘increased 

24 by’’ and all that follows through the end and inserting: 

25 ‘‘increased by— 
18 

•S 1568 IS

1 ‘‘(i) qualified dividend income; and 

2 ‘‘(ii) interest income on any nonnego3 tiable certificate of deposit— 

4 ‘‘(I) with a fixed maturity date 

5 which is 1 year or more from the date 

6 of issue, and 

7 ‘‘(II) the interest on which is not 

8 made available for withdrawal before 

9 maturity without penalty.’’. 

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

11 this section shall apply to taxable years beginning after 

12 the date of the enactment of this Act. 

13 SEC. 302. EXCLUSION FOR INTEREST ON LOANS SECURED 

14 BY AGRICULTURAL REAL PROPERTY. 

15 (a) IN GENERAL.—Part III of subchapter B of chap16 ter 1 of the Internal Revenue Code of 1986 (relating to 

17 items specifically excluded from gross income) is amended 

18 by inserting after section 139A the following new section: 

19 ‘‘SEC. 139B. INTEREST ON LOANS SECURED BY AGRICUL20 TURAL REAL PROPERTY. 

21 ‘‘(a) EXCLUSION.—Gross income shall not include in22 terest received by a qualified lender on any qualified real 

23 estate loan. 

24 ‘‘(b) COORDINATION WITH SECTION 265.—Qualified 

25 real estate loans shall be treated as obligations described 
19 

•S 1568 IS

1 in section 265(a)(2), the interest on which is wholly ex2 empt from the taxes imposed by this subtitle. 

3 ‘‘(c) DEFINITIONS.—For purposes of this section: 

4 ‘‘(1) QUALIFIED LENDER.—The term ‘qualified 

5 lender’ means any bank or savings association the 

6 deposits of which are insured under the Federal De7 posit Insurance Act (12 U.S.C. 1811 et seq.). 

8 ‘‘(2) QUALIFIED REAL ESTATE LOAN.— 

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

10 real estate loan’ means any loan secured by ag11 ricultural real estate or by a leasehold mortgage 

12 (with a status as a lien) on agricultural real es13 tate. 

14 ‘‘(B) DETERMINATION OF AGRICULTURAL

15 REAL ESTATE.—For purposes of subparagraph 

16 (A), the determination of whether property se17 curing such loan is agricultural real estate shall 

18 be made as of the time the interest income on 

19 such loan is accrued. 

20 ‘‘(3) AGRICULTURAL REAL ESTATE.—The term 

21 ‘agricultural real estate’ means— 

22 ‘‘(A) real property used for the production 

23 of 1 or more agricultural products, and 

24 ‘‘(B) any single family residence which 

25 is— 
20 

•S 1568 IS

1 ‘‘(i) the principal residence (within the 

2 meaning of section 121) of its occupant; 

3 ‘‘(ii) located in a rural area (as deter4 mined by the Secretary of Agriculture)— 

5 ‘‘(I) which is not within a Metro6 politan Statistical Area (as defined by 

7 the Office of Management and Budg8 et), and 

9 ‘‘(II) which has a population (de10 termined on the basis of the most re11 cent decennial census for which data 

12 are available) of 2,500 or less, and 

13 ‘‘(iii) purchased or improved with the 

14 proceeds of the qualified real estate loan.’’. 

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

16 for part III of subchapter B of chapter 1 of the Internal 

17 Revenue Code of 1986 is amended by inserting after the 

18 item relating to section 139A the following new item: 

‘‘Sec. 139B. Interest on loans secured by agricultural real property.’’ 

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

20 this section shall apply to taxable years beginning after 

21 the date of the enactment of this Act. 

22 SEC. 303. INCREASE IN CAP ON QUALIFIED SMALL ISSUE 

23 BONDS. 

24 (a) IN GENERAL.—Section 144(a)(4)(A)(i) of the In25 ternal Revenue Code of 1986 (relating to general rule for 
21 

•S 1568 IS

1 $10,000,000 limit in certain cases) is amended by striking 

2 ‘‘$10,000,000’’ and inserting ‘‘$30,000,000’’. 

3 (b) ADJUSTMENT OF CAP FOR INFLATION.—Section 

4 144(a) of the Internal Revenue Code of 1986 (relating to 

5 qualified small issue bond) is amended— 

6 (1) by redesignating paragraph (12) as para7 graph (13); and 

8 (2) by inserting after paragraph (11) the fol9 lowing new paragraph: 

10 ‘‘(12) INFLATION ADJUSTMENT.— 

11 ‘‘(A) IN GENERAL.—In the case of any cal12 endar year after 2006, the $30,000,000 amount 

13 contained in paragraph (4)(A)(i) shall be in14 creased by an amount equal to— 

15 ‘‘(i) such dollar amount, multiplied by 

16 ‘‘(ii) the cost-of-living adjustment de17 termined under section 1(f)(3) for such 

18 calendar year by substituting ‘calendar 

19 year 2005’ for ‘calendar year 1992’ in sub20 paragraph (B) thereof. 

21 ‘‘(B) ROUNDING.—Any increase under 

22 subparagraph (A) which is not a multiple of 

23 $100,000 shall be rounded to the next lowest 

24 multiple of $100,000.’’. 
22 

•S 1568 IS

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

2 this section shall apply to— 

3 (1) obligations issued after the date of the en4 actment of this Act; and 

5 (2) capital expenditures made after such date 

6 with respect to obligations issued on or before such 

7 date. 

8 SEC. 304. LIMITED LIABILITY COMPANY TAX TREATMENT 

9 FOR FDIC-INSURED LIMITED LIABILITY COM10 PANIES. 

11 (a) IN GENERAL.—Section 7701(a)(2) of the Internal 

12 Revenue Code of 1986 (defining partnership and partner) 

13 is amended to read as follows: 

14 ‘‘(2) PARTNER AND PARTNERSHIP.— 

15 ‘‘(A) PARTNERSHIP.—The term ‘partner16 ship’ includes a syndicate, group, pool, joint 

17 venture, or other unincorporated organization, 

18 through or by means of which any business, fi19 nancial operation, or venture is carried on, and 

20 which is not, within the meaning of this title, 

21 a trust or estate or a corporation. 

22 ‘‘(B) PARTNER.—The term ‘partner’ in23 cludes a member in any syndicate, group, pool, 

24 joint venture, or organization described in sub25 paragraph (A). 
23 

•S 1568 IS

1 ‘‘(C) ELECTION BY CERTAIN BANKS TO BE

2 TAXED AS PARTNERSHIPS.— 

3 ‘‘(i) IN GENERAL.—An eligible cor4 poration may elect to be treated as a part5 nership for purposes of this title. 

6 ‘‘(ii) TAX TREATMENT.—In the case 

7 of an eligible corporation making an elec8 tion under clause (i)— 

9 ‘‘(I) no gain or loss shall be rec10 ognized to the corporation or the 

11 shareholders by reason of an election 

12 under clause (i), and 

13 ‘‘(II) section 1374 shall apply to 

14 the entity after such election. 

15 ‘‘(iii) ELIGIBLE CORPORATION.—The 

16 term ‘eligible corporation’ means any of 

17 the following entities which would (but for 

18 this subparagraph) be treated as a C cor19 poration for purposes of this title: 

20 ‘‘(I) Any bank (as defined in sec21 tion 581). 

22 ‘‘(II) Any bank holding company 

23 (as defined in section 2(a) of the 

24 Bank Holding Company Act of 1956 

25 (12 U.S.C. 1841(a))). 
24 

•S 1568 IS

1 ‘‘(III) Any savings association 

2 (as defined in section 3(b) of the Fed3 eral Deposit Insurance Act (12 U.S.C. 

4 1813)). 

5 ‘‘(IV) Any savings and loan hold6 ing company (as defined in section 

7 10(a)(1)(D) of the Home Owners 

8 Loan Act).’’. 

9 (b) EFFECTIVE DATE.—The amendment made by 

10 this section shall apply to taxable years beginning after 

11 the date of the enactment of this Act. 

12 TITLE IV—TAX RELIEF FOR COM13 MUNITY BANKS AND HOLD14 ING COMPANIES 

15 SEC. 401. REDUCTION IN TAX. 

16 (a) C CORPORATIONS.—Section 11 of the Internal 

17 Revenue Code of 1986 (relating to tax imposed) is amend18 ed by adding at the end the following new subsection: 

19 ‘‘(e) REDUCTION OF TAX ON COMMUNITY BANKS.— 

20 ‘‘(1) IN GENERAL.—In the case of a C corpora21 tion which is a community bank, the aggregate tax 

22 imposed by this section, section 55, and section 

23 1201 shall be 80 percent of the aggregate tax which 

24 would (but for this subsection) be imposed by such 

25 sections. 
25 

•S 1568 IS

1 ‘‘(2) MAXIMUM REDUCTION.— 

2 ‘‘(A) IN GENERAL.—The reduction in tax 

3 by reason of this subsection shall not exceed 

4 $250,000. 

5 ‘‘(B) CORPORATIONS TREATED AS 1 COR6 PORATION.—Corporations treated as 1 corpora7 tion under section 1202(d)(3) shall be so treat8 ed under this subsection, and the limitation 

9 under subparagraph (A) shall be allocated 

10 among such corporations in such manner as the 

11 Secretary shall prescribe. 

12 ‘‘(3) INCREASED BENEFIT FOR BANKS OPER13 ATING IN DISTRESSED AREAS, ETC.— 

14 ‘‘(A) IN GENERAL.—In the case of a bank 

15 operating in an area referred to in subpara16 graph (B)— 

17 ‘‘(i) paragraph (1) shall be applied by 

18 substituting ‘50 percent’ for ‘80 percent’, 

19 and 

20 ‘‘(ii) paragraph (2)(A) shall be applied 

21 by substituting ‘$500,000’ for ‘$250,000’. 

22 ‘‘(B) AREAS DESCRIBED.—The areas re23 ferred to in this subparagraph are— 
26 

•S 1568 IS

1 ‘‘(i) empowerment zones and enter2 prise communities designated under section 

3 1391, 

4 ‘‘(ii) renewal communities designated 

5 under section 1400E, 

6 ‘‘(iii) low-income communities (as de7 fined in section 45D(e)), and 

8 ‘‘(iv) distressed communities (within 

9 the meaning of section 233 of the Bank 

10 Enterprise Act of 1991 (12 U.S.C. 

11 1834a(b)). 

12 ‘‘(4) COMMUNITY BANK.—For purposes of this 

13 section, the term ‘community bank’ means any of 

14 the following entities the gross assets of which (de15 termined under the rules of section 1202(d)) are 

16 $5,000,000,000 or less: 

17 ‘‘(A) Any bank (as defined in section 581). 

18 ‘‘(B) Any bank holding company (as de19 fined in section 2(a) of the Bank Holding Com20 pany Act of 1956 (12 U.S.C. 1841(a))). 

21 ‘‘(C) Any savings association (as defined in 

22 section 3(b) of the Federal Deposit Insurance 

23 Act (12 U.S.C. 1813)). 
27 

•S 1568 IS

1 ‘‘(D) Any savings and loan holding com2 pany (as defined in section 10(a)(1)(D) of the 

3 Home Owners Loan Act).’’. 

4 (b) S CORPORATIONS.—Section 1366(a) of the Inter5 nal Revenue Code of 1986 is amended by adding at the 

6 end the following new paragraph: 

7 ‘‘(3) REDUCTION OF TAX ON COMMUNITY

8 BANKS.— 

9 ‘‘(A) IN GENERAL.—In the case of an S 

10 corporation which is a community bank (as de11 fined in section 11(e)(4)), the net amount re12 quired to be taken into account by shareholders 

13 (without regard to this paragraph) shall be re14 duced by the lesser of— 

15 ‘‘(i) 20 percent of such net amount, or 

16 ‘‘(ii) $1,250,000. 

17 ‘‘(B) INCREASED BENEFIT FOR BANKS OP18 ERATING IN DISTRESSED AREAS, ETC.—In the 

19 case of a bank operating in an area referred to 

20 in section 11(e)(3)(B)— 

21 ‘‘(i) subparagraph (A)(i) shall be ap22 plied by substituting ‘50 percent’ for ‘20 

23 percent’, and 
28 

•S 1568 IS

1 ‘‘(ii) subparagraph (A)(ii) shall be ap2 plied by substituting ‘$2,500,000’ for 

3 ‘$1,250,000’.’’. 

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

5 this section shall apply to taxable years beginning after 

6 the date of the enactment of this Act. 

7 SEC. 402. COMMUNITY BANKS EXEMPT FROM MINIMUM 

8 TAX. 

9 (a) IN GENERAL.—Section 55 of the Internal Rev10 enue Code of 1986 (relating to alternative minimum tax 

11 imposed) is amended by adding at the end the following 

12 new subsection: 

13 ‘‘(f) EXEMPTION FOR COMMUNITY BANKS.— 

14 ‘‘(1) IN GENERAL.—The tentative minimum tax 

15 of a community bank (as defined in section 11(e)(4)) 

16 shall be zero. 

17 ‘‘(2) CERTAIN RULES TO APPLY.—Rules similar 

18 to the rules of paragraphs (2) through (5) of sub19 section (e) shall apply for purposes of this sub20 section.’’. 

21 (b) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to taxable years beginning after 

23 the date of the enactment of this Act. 

Æ