I 

109TH CONGRESS 

2D SESSION H. R. 5380 

To reward the hard work and risk of individuals who choose to live in 

and help preserve America’s small, rural towns, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 11, 2006 

Mr. POMEROY (for himself, Mr. OSBORNE, and Ms. HERSETH) introduced the 

following bill; which was referred to the Committee on Ways and Means, 

and in addition to the Committees on Agriculture and 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 reward the hard work and risk of individuals who choose 

to live in and help preserve America’s small, rural towns, 

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; ETC. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘New Homestead Act of 2006’’. 

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment 


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1 to, or repeal of, a section or other provision, the reference 

2 shall be considered to be made to a section or other provi3 sion of the Internal Revenue Code of 1986. 

4 (c) TABLE OF CONTENTS.—The table of contents for 

5 this Act is as follows: 

Sec. 1. Short title; etc. 

TITLE I—NEW HOMESTEAD OPPORTUNITIES 

Sec. 101. Loans for leadership initiative. 

Sec. 102. Credit for certain rural homebuyers. 

Sec. 103. Capital loss deduction allowed with respect to sale or exchange of 

principal residence in certain rural areas. 

Sec. 104. Individual homestead accounts. 

TITLE II—INCENTIVES FOR MAIN STREET BUSINESSES 

Sec. 201. Rural investment tax credit. 

Sec. 202. Qualified rural small business investment credit. 

Sec. 203. Accelerated depreciation for rural investment property. 

TITLE III—NEW HOMESTEAD VENTURE CAPITAL FUND 

Sec. 301. New homestead venture capital fund. 

6 TITLE I—NEW HOMESTEAD 

7 OPPORTUNITIES 

8 SEC. 101. LOANS FOR LEADERSHIP INITIATIVE. 

9 (a) DEFINITIONS.—In this section: 

10 (1) DEGREE.—The term ‘‘degree’’ means an as11 sociate’s or bachelor’s degree awarded by an institu12 tion of higher education. 

13 (2) INSTITUTION OF HIGHER EDUCATION.—The 

14 term ‘‘institution of higher education’’ has the 

15 meaning given the term in section 101 of the Higher 

16 Education Act of 1965 (20 U.S.C. 1001). 


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1 (3) QUALIFYING COUNTY.—The term ‘‘quali2 fying county’’ means any county which— 

3 (A) is outside a metropolitan statistical 

4 area (defined as such by the Office of Manage5 ment and Budget), and 

6 (B) during the 20-year period ending with 

7 the calendar year preceding the date of enact8 ment of this Act, has a net out-migration of in9 habitants from the county of at least 10 percent 

10 of the population of the county at the beginning 

11 of such period. 

12 (4) SECRETARY.—The term ‘‘Secretary’’ means 

13 the Secretary of Education. 

14 (b) PROGRAM.— 

15 (1) IN GENERAL.—The Secretary shall carry 

16 out a program of assuming the obligation to repay, 

17 pursuant to subsection (c), a loan made, insured, or 

18 guaranteed under part B, D, or E of title IV of the 

19 Higher Education Act of 1965 (20 U.S.C. 1071 et 

20 seq., 20 U.S.C. 1087a et seq., and 20 U.S.C. 

21 1087aa et seq.), excluding loans made under section 

22 428B of such Act or comparable loans made under 

23 part D of such Act, for any borrower who— 

24 (A) completes a degree; 

25 (B) resides in a qualifying county; and 


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1 (C) is employed in a qualifying county. 

2 (2) REGULATIONS.—The Secretary is author3 ized to prescribe such regulations as may be nec4 essary to carry out the provisions of this section. 

5 (c) LOAN REPAYMENT.— 

6 (1) IN GENERAL.—The Secretary shall assume 

7 the obligation to repay, after each of the first 5 

8 years of the residency and employment described in 

9 subparagraphs (B) and (C) of subsection (b)(1) that 

10 occur after the date of enactment of this section, 10 

11 percent of the total amount of all loans made to a 

12 student under the provisions of the Higher Edu13 cation Act of 1965 as described in subsection (b)(1), 

14 up to a maximum amount of $2,000 each year. 

15 (2) CONSTRUCTION.—Nothing in this section 

16 shall be construed to authorize the refunding of any 

17 repayment of a loan made under part B, D, or E 

18 of title IV of the Higher Education Act of 1965. 

19 (3) INTEREST.—If a portion of a loan is repaid 

20 by the Secretary under this section for any year, the 

21 proportionate amount of interest on such loan which 

22 accrues for such year shall be repaid by the Sec23 retary so long as the total amount repaid by the 

24 Secretary in any 1 year does not exceed $2,000. 


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1 (d) REPAYMENT TO ELIGIBLE LENDERS.—The Sec2 retary shall pay to each eligible lender or holder for each 

3 fiscal year an amount equal to the aggregate amount of 

4 loans which are subject to repayment pursuant to this sec5 tion for such year. 

6 (e) APPLICATION FOR REPAYMENT.— 

7 (1) IN GENERAL.—An eligible borrower desiring 

8 loan repayment under this section shall submit a 

9 complete and accurate application to the Secretary 

10 at such time, in such manner, and containing such 

11 information as the Secretary may require. 

12 (2) CONDITIONS.—An eligible borrower may 

13 apply for loan repayment under this section after 

14 completing each year of qualifying residency and em15 ployment. The eligible borrower shall receive forbear16 ance while engaged in qualifying residency and em17 ployment unless the borrower is in deferment while 

18 so engaged. 

19 (f) DEFINITION OF ELIGIBLE BORROWER.—In this 

20 section the term ‘‘eligible borrower’’ means any borrower 

21 who is not in default on any of the borrower’s student 

22 loans under part B, D, or E of title IV of the Higher 

23 Education Act of 1965. 

24 (g) AUTHORIZATION OF APPROPRIATIONS.— 


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1 (1) LOAN REPAYMENT.—There are authorized 

2 to be appropriated to carry out this section such 

3 sums as may be necessary. 

4 (2) PERKINS LOAN FUNDS.—There are author5 ized to be appropriated such sums as may be nec6 essary for Federal capital contributions to student 

7 loan funds established under part E of title IV of 

8 the Higher Education Act of 1965. 

9 (h) REPAYMENT EXCLUDED FROM GROSS IN10 COME.—Section 108(f)(1) (relating to student loans) is 

11 amended by inserting ‘‘or pursuant to section 101 of the 

12 New Homestead Act of 2006’’ after ‘‘employers’’. 

13 SEC. 102. CREDIT FOR CERTAIN RURAL HOMEBUYERS. 

14 (a) IN GENERAL.—Subpart A of part IV of sub15 chapter A of chapter 1 (relating to nonrefundable personal 

16 credits) is amended by inserting before section 26 the fol17 lowing new section: 

18 ‘‘SEC. 25E. PURCHASE OF RESIDENCES BY CERTAIN RURAL 

19 HOMEBUYERS. 

20 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in21 dividual who purchases a qualified residence in a quali22 fying county during any taxable year, there shall be al23 lowed as a credit against the tax imposed by this chapter 

24 for the taxable year an amount equal to the lesser of— 


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1 ‘‘(1) 10 percent of the purchase price of the 

2 residence, or 

3 ‘‘(2) $5,000. 

4 ‘‘(b) LIMITATIONS.— 

5 ‘‘(1) LIMITATION BASED ON AMOUNT OF

6 TAX.—In the case of a taxable year to which section 

7 26(a)(2) does not apply, the credit allowed under 

8 subsection (a) for any taxable year shall not exceed 

9 the excess of— 

10 ‘‘(A) the sum of the regular tax liability 

11 (as defined in section 26(b)) plus the tax im12 posed by section 55, over 

13 ‘‘(B) the sum of the credits allowable 

14 under this subpart (other than this section) and 

15 section 27 for the taxable year. 

16 ‘‘(2) MARRIED INDIVIDUALS FILING JOINTLY.— 

17 In the case of a husband and wife who file a joint 

18 return, the credit under this section is allowable only 

19 if the residence is a qualified residence with respect 

20 to both the husband and wife, and the amount speci21 fied under subsection (a)(2) shall apply to the joint 

22 return. 

23 ‘‘(3) MARRIED INDIVIDUALS FILING SEPA24 RATELY.—In the case of a married individual filing 


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1 a separate return, subsection (a)(2) shall be applied 

2 by substituting ‘$2,500’ for ‘$5,000’. 

3 ‘‘(4) OTHER TAXPAYERS.—If 2 or more individ4 uals who are not married purchase a qualified resi5 dence, the amount of the credit allowed under sub6 section (a) shall be allocated among such individuals 

7 in such manner as the Secretary may prescribe, ex8 cept that the total amount of the credits allowed to 

9 all such individuals shall not exceed $5,000. 

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

11 ‘‘(1) QUALIFIED RESIDENCE.—The term ‘quali12 fied residence’ has the same meaning as when used 

13 in section 163(h). 

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 ‘‘(3) PURCHASE AND PURCHASE PRICE.—The 

2 terms ‘purchase’ and ‘purchase price’ have the 

3 meanings provided by section 1400C(e). 

4 ‘‘(d) CARRYFORWARD OF UNUSED CREDIT.—If the 

5 credit allowable under subsection (a) for any taxable year 

6 exceeds the limitation imposed by subsection (b)(1) for 

7 such taxable year reduced by the sum of the credits allow8 able under this subpart (other than this section and sec9 tion 23), such excess shall be carried to the succeeding 

10 taxable year and added to the credit allowable under sub11 section (a) for such taxable year. 

12 ‘‘(1) RULE FOR YEARS IN WHICH ALL PER13 SONAL CREDITS ALLOWED AGAINST REGULAR AND

14 ALTERNATIVE MINIMUM TAX.—In the case of a tax15 able year to which section 26(a)(2) applies, if the 

16 credit allowable under subsection (a) for any taxable 

17 year exceeds the limitation imposed by section 

18 26(a)(2) for such taxable year reduced by the sum 

19 of the credits allowable under this subpart (other 

20 than this section), such excess shall be carried to the 

21 succeeding taxable year and added to the credit al22 lowable under subsection (a) for such taxable year. 

23 ‘‘(2) RULE FOR OTHER YEARS.—In the case of 

24 a taxable year to which section 26(a)(2) does not 

25 apply, if the credit allowable under subsection (a) for 


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1 any taxable year exceeds the limitation imposed by 

2 subsection (b)(4) for such taxable year, such excess 

3 shall be carried to the succeeding taxable year and 

4 added to the credit allowable under subsection (a) 

5 for such taxable year. 

6 ‘‘(e) REPORTING.—If the Secretary requires informa7 tion reporting under section 6045 by a person described 

8 in subsection (e)(2) thereof to verify the eligibility of tax9 payers for the credit allowable by this section, the excep10 tion provided by section 6045(e)(5) shall not apply. 

11 ‘‘(f) RECAPTURE OF CREDIT IN CASE OF CERTAIN

12 SALES.— 

13 ‘‘(1) IN GENERAL.—Except as provided in para14 graph (5), if the taxpayer disposes of a qualified res15 idence with respect to the purchase of which a credit 

16 was allowed under subsection (a) at any time within 

17 5 years after the date the taxpayer acquired the 

18 property, then the tax imposed under this chapter 

19 for the taxable year in which the disposition occurs 

20 is increased by the credit recapture amount. 

21 ‘‘(2) CREDIT RECAPTURE AMOUNT.—For pur22 poses of paragraph (1), the credit recapture amount 

23 is an amount equal to the sum of— 


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1 ‘‘(A) the applicable recapture percentage of 

2 the amount of the credit allowed to the tax3 payer under this section, plus 

4 ‘‘(B) interest at the overpayment rate es5 tablished under section 6621 on the amount de6 termined under subparagraph (A) for each 

7 prior taxable year for the period beginning on 

8 the due date for filing the return for the prior 

9 taxable year involved. 

10 No deduction shall be allowed under this chapter for 

11 interest described in subparagraph (B). 

12 ‘‘(3) APPLICABLE RECAPTURE PERCENTAGE.— 

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

14 subsection, the applicable recapture percentage 

15 shall be determined from the following table: 

The applicable 

recapture 

‘‘If the sale occurs in: percentage is: 

Year 1 ...................................................................................... 100

Year 2 ...................................................................................... 80

Year 3 ...................................................................................... 60

Year 4 ...................................................................................... 40

Year 5 ...................................................................................... 20

Years 6 and thereafter ............................................................. 0. 

16 ‘‘(B) YEARS.—For purposes of subpara17 graph (A), year 1 shall begin on the first day 

18 of the taxable year in which the purchase of the 

19 qualified residence described in subsection (a) 

20 occurs. 


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1 ‘‘(4) NO CREDITS AGAINST TAX.—Any increase 

2 in tax under this subsection shall not be treated as 

3 a tax imposed by this chapter for purposes of deter4 mining the amount of any credit under this chapter 

5 or for purposes of section 55. 

6 ‘‘(5) DEATH OF OWNER; CASUALTY LOSS; IN7 VOLUNTARY CONVERSION; ETC.—The provisions of 

8 paragraph (1) do not apply to— 

9 ‘‘(A) a disposition of a qualified residence 

10 made on account of the death of any individual 

11 having a legal or equitable interest therein oc12 curring during the 5-year period to which ref13 erence is made under paragraph (1), 

14 ‘‘(B) a disposition of the old qualified resi15 dence if it is substantially or completely de16 stroyed by a casualty described in section 

17 165(c)(3) or compulsorily or involuntarily con18 verted (within the meaning of section 1033(a)), 

19 or 

20 ‘‘(C) a disposition pursuant to a settlement 

21 in a divorce or legal separation proceeding 

22 where the qualified residence is sold or the 

23 other spouse retains such residence. 

24 ‘‘(g) BASIS ADJUSTMENT.—For purposes of this sub25 title, if a credit is allowed under this section with respect 


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1 to the purchase of any residence, the basis of such resi2 dence shall be reduced by the amount of the credit so al3 lowed.’’. 

4 (b) CONFORMING AMENDMENTS.— 

5 (1) Subsection (a) of section 1016 (relating to 

6 general rule for adjustments to basis) is amended by 

7 striking ‘‘and’’ at the end of paragraph (36), by 

8 striking the period at the end of paragraph (37) and 

9 inserting ‘‘, and’’, and by adding at the end the fol10 lowing new paragraph: 

11 ‘‘(38) in the case of a residence with respect to 

12 which a credit was allowed under section 25E, to the 

13 extent provided in section 25E(g).’’. 

14 (2) Section 23(b)(4)(B) is amended by inserting 

15 ‘‘and section 25E’’ after ‘‘other than this section’’. 

16 (3) Section 23(c)(1) is amended by inserting ‘‘, 

17 25E, ’’ after ‘‘25D’’. 

18 (4) Section 24(b)(3)(B) is amended by striking 

19 ‘‘23 and 25B’’ and inserting ‘‘23, 25B, and 25E’’. 

20 (5) Section 25(e)(1)(C) is amended by inserting 

21 ‘‘25E,’’ after ‘‘25D,’’. 

22 (6) Section 25B(g) is amended by striking ‘‘sec23 tion 23’’ and inserting ‘‘sections 23 and 25E’’. 

24 (7) Section 25D(c)(1) is amended by inserting 

25 ‘‘and section 25E’’ after ‘‘other than this section’’. 


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1 (8) Section 25D(c)(2) is amended by striking 

2 ‘‘and 25B’’ inserting ‘‘25B, and 25E’’. 

3 (9) Section 26(a)(1) is amended by striking 

4 ‘‘and 25B’’ and inserting ‘‘25B, and 25E’’. 

5 (10) Section 1400C(d)(1) is amended by strik6 ing ‘‘section 25D’’ and inserting ‘‘sections 25D and 

7 25E’’. 

8 (11) Section 1400C(d)(2) is amended by strik9 ing ‘‘and 25D’’ and inserting ‘‘25D, and 25E’’. 

10 (12) The table of sections for subpart A of part 

11 IV of subchapter A of chapter 1 is amended by in12 serting before the item relating to section 26 the fol13 lowing new item: 

‘‘Sec. 25E. Purchase of residences by certain rural homebuyers.’’. 

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

15 this section shall apply to purchases after the date of the 

16 enactment of this Act, in taxable years ending after such 

17 date. 

18 SEC. 103. CAPITAL LOSS DEDUCTION ALLOWED WITH RE19 SPECT TO SALE OR EXCHANGE OF PRINCIPAL 

20 RESIDENCE IN CERTAIN RURAL AREAS. 

21 (a) IN GENERAL.—Subsection (c) of section 165 (re22 lating to limitation on losses of individuals) is amended— 

23 (1) by striking ‘‘and’’ at the end of paragraph 

24 (2), 


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1 (2) by striking the period at the end of para2 graph (3) and inserting ‘‘; and’’, and 

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

4 paragraph: 

5 ‘‘(4) losses arising from the sale or exchange of 

6 the principal residence (within the meaning of sec7 tion 121) of the taxpayer located in a qualifying 

8 county (as defined in section 25E(c)(2)), but only if 

9 the principal residence was acquired by the taxpayer 

10 after the date of enactment of this paragraph.’’. 

11 (b) CONFORMING AMENDMENT.—Section 67(b)(3) is 

12 amended by striking ‘‘paragraph (2) or (3)’’ and inserting 

13 ‘‘paragraph (2), (3), or (4)’’. 

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

15 this section shall apply to sales and exchanges after the 

16 date of the enactment of this Act, in taxable years ending 

17 after such date. 

18 SEC. 104. INDIVIDUAL HOMESTEAD ACCOUNTS. 

19 (a) IN GENERAL.—Subchapter F of chapter 1 (relat20 ing to exempt organizations) is amended by adding at the 

21 end the following new part: 

22 ‘‘PART IX—INDIVIDUAL HOMESTEAD ACCOUNTS 

‘‘Sec. 530A. Individual homestead accounts. 


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1 ‘‘SEC. 530A. INDIVIDUAL HOMESTEAD ACCOUNTS. 

2 ‘‘(a) GENERAL RULE.—An individual homestead ac3 count shall be exempt from taxation under this subtitle. 

4 Notwithstanding the preceding sentence, any individual 

5 homestead account shall be subject to the taxes imposed 

6 by section 511 (relating to imposition of tax on unrelated 

7 business income of charitable, etc., organizations). 

8 ‘‘(b) INDIVIDUAL HOMESTEAD ACCOUNT.—For pur9 poses of this title, the term ‘individual homestead account’ 

10 means a trust created or organized in the United States 

11 for the exclusive benefit of a qualified individual or his 

12 beneficiaries, but only if the written governing instrument 

13 creating the trust meets the following requirements: 

14 ‘‘(1) Except in the case of a qualified rollover 

15 (as defined in subsection (f)(7))— 

16 ‘‘(A) no contribution will be accepted un17 less it is in cash, 

18 ‘‘(B) contributions will not be accepted for 

19 the taxable year in excess of $2,500 (deter20 mined without regard to any contribution made 

21 under subsection (d)), and 

22 ‘‘(C) contributions will not be accepted for 

23 any taxable year following the fifth taxable year 

24 in which the qualified individual has contributed 

25 to any individual homestead account. 


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1 ‘‘(2) The requirements of paragraphs (2) 

2 through (6) of section 408(a) are met. 

3 ‘‘(c) QUALIFIED INDIVIDUAL; QUALIFYING COUN4 TY.—For purposes of this section— 

5 ‘‘(1) QUALIFIED INDIVIDUAL.—The term ‘quali6 fied individual’ means, for any taxable year, an indi7 vidual who is a bona fide resident of a qualifying 

8 county. 

9 ‘‘(2) QUALIFYING COUNTY.—The term ‘quali10 fying county’ means any county which— 

11 ‘‘(A) is outside a metropolitan statistical 

12 area (defined as such by the Office of Manage13 ment and Budget), and 

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

15 with the calendar year preceding the date of the 

16 enactment of this section, has a net out-migra17 tion of inhabitants from the county of at least 

18 10 percent of the population of the county at 

19 the beginning of such period. 

20 ‘‘(d) MATCHING CONTRIBUTIONS TO INDIVIDUAL

21 HOMESTEAD ACCOUNTS.— 

22 ‘‘(1) IN GENERAL.—Not less than once each 

23 taxable year, the Secretary shall deposit (to the ex24 tent provided in appropriation Acts) into an indi25 vidual homestead account of each qualified indiVerDate Aug 31 2005 23:46 May 19, 2006 Jkt 049200 PO 00000 Frm 00017 Fmt 6652 Sfmt 6201 E:\BILLS\H5380.IH H5380

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1 vidual an amount equal to the applicable percentage 

2 of the sum of the amounts deposited into all of the 

3 individual homestead accounts of such individual 

4 during such taxable year (determined without regard 

5 to any amount contributed under this subsection). 

6 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 

7 of this subsection, the applicable percentage with re8 spect to any qualified individual for any taxable year 

9 shall be determined in accordance with the following 

10 tables: 

11 ‘‘(A) In the case of a married individual 

12 (as defined in section 7703) filing a joint re13 turn: 

‘‘If modified adjusted gross The applicable 

income is: percentage is: 

$30,000 or less ......................................................................... 50

Over $30,000 but not over $60,000 ........................................ 25

Over $60,000 but not over $100,000 ...................................... 12.5

Over $100,000 ......................................................................... zero. 

14 ‘‘(B) In the case of a head of household 

15 (as defined in section 2(b)): 

‘‘If modified adjusted gross The applicable 

income is: percentage is: 

$22,500 or less ......................................................................... 50

Over $22,500 but not over $45,000 ........................................ 25

Over $45,000 but not over $75,000 ........................................ 12.5

Over $75,000 ........................................................................... zero. 

16 ‘‘(C) In the case of any other individual: 

‘‘If modified adjusted gross The applicable 

income is: percentage is: 

$15,000 or less ......................................................................... 50

Over $15,000 but not over $30,000 ........................................ 25

Over $30,000 but not over $50,000 ........................................ 12.5

Over $50,000 ........................................................................... zero. 


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1 For purposes of this paragraph, the term ‘modified 

2 adjusted gross income’ has the meaning given such 

3 term by section 86(b)(2). 

4 ‘‘(3) EXCLUSION FROM INCOME.—Except as 

5 otherwise provided in this section, gross income shall 

6 not include any amount deposited into an individual 

7 homestead account under paragraph (1). 

8 ‘‘(4) FORFEITURE OF MATCHING CONTRIBU9 TIONS IN THE CASE OF CERTAIN DISTRIBUTIONS.— 

10 In the event of a distribution from an individual 

11 homestead account before the date described in sub12 section (f)(1)(A) (other than a distribution described 

13 in subsection (e)(2)(A)), the account holder shall 

14 forfeit the corresponding matching contributions and 

15 interest earned on the matching contributions, un16 less such distribution is recontributed to such ac17 count within 6 months of such distribution. 

18 ‘‘(e) TAX TREATMENT OF DISTRIBUTIONS.— 

19 ‘‘(1) INCLUSION OF AMOUNTS IN GROSS IN20 COME.—Except as otherwise provided in this sub21 section, any amount paid or distributed out of an in22 dividual homestead account shall be includible in the 

23 gross income of the payee or distributee, as the case 

24 may be, in the manner as provided in section 72. 

25 For purposes of the preceding sentence, distributions 


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1 which are includible in gross income shall be treated 

2 as first attributable to amounts contributed under 

3 subsection (d) to the extent thereof. 

4 ‘‘(2) EXCLUSION OF CATASTROPHIC MEDICAL

5 EXPENSE DISTRIBUTIONS IN FIRST FIVE YEARS AND

6 QUALIFIED INDIVIDUAL HOMESTEAD DISTRIBUTIONS

7 THEREAFTER.—Paragraph (1) shall not apply to— 

8 ‘‘(A) any distribution described in section 

9 72(t)(2)(B) before the date described in sub10 section (f)(1)(A), but only to the extent such 

11 distribution does not exceed the balance in the 

12 account as of the date of such distribution, re13 duced by any matching contribution under sub14 section (d), and 

15 ‘‘(B) any qualified individual homestead 

16 distribution. 

17 ‘‘(f) QUALIFIED INDIVIDUAL HOMESTEAD DISTRIBU18 TION.—For purposes of this section— 

19 ‘‘(1) IN GENERAL.—The term ‘qualified indi20 vidual homestead distribution’ means any amount 

21 paid or distributed out of an individual homestead 

22 account which would otherwise be includible in gross 

23 income, to the extent that such payment or distribu24 tion— 


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1 ‘‘(A) is paid or distributed after the 5-tax2 able year period beginning with the first taxable 

3 year in which the qualified individual made a 

4 contribution to the individual homestead ac5 count (including any predecessor account), and 

6 ‘‘(B) is used exclusively to pay qualified in7 dividual homestead expenses for the qualified 

8 individual or the spouse or dependent (as de9 fined in section 152) of such individual. 

10 ‘‘(2) QUALIFIED INDIVIDUAL HOMESTEAD EX11 PENSES.—The term ‘qualified individual homestead 

12 expenses’ means any of the following: 

13 ‘‘(A) Qualified higher education expenses. 

14 ‘‘(B) Qualified first-time homebuyer costs. 

15 ‘‘(C) Qualified business capitalization 

16 costs. 

17 ‘‘(D) Qualified medical expenses. 

18 ‘‘(E) Qualified rollovers. 

19 ‘‘(3) QUALIFIED HIGHER EDUCATION EX20 PENSES.— 

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

22 higher education expenses’ has the meaning 

23 given such term by section 72(t)(7), determined 

24 by treating postsecondary vocational eduVerDate Aug 31 2005 23:46 May 19, 2006 Jkt 049200 PO 00000 Frm 00021 Fmt 6652 Sfmt 6201 E:\BILLS\H5380.IH H5380

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1 cational schools as eligible educational institu2 tions. 

3 ‘‘(B) POSTSECONDARY VOCATIONAL EDU4 CATION SCHOOL.—The term ‘postsecondary vo5 cational educational school’ means an area vo6 cational education school (as defined in sub7 paragraph (C) or (D) of section 521(4) of the 

8 Carl D. Perkins Vocational and Applied Tech9 nology Education Act (20 U.S.C. 2471(4))) 

10 which is in any State (as defined in section 

11 521(33) of such Act), as such sections are in 

12 effect on the date of the enactment of this sec13 tion. 

14 ‘‘(C) COORDINATION WITH OTHER BENE15 FITS.—The amount of qualified higher edu16 cation expenses for any taxable year shall be re17 duced as provided in section 25A(g)(2). 

18 ‘‘(4) QUALIFIED FIRST-TIME HOMEBUYER

19 COSTS.—The term ‘qualified first-time homebuyer 

20 costs’ means qualified acquisition costs (as defined 

21 in section 72(t)(8) without regard to subparagraph 

22 (B) thereof) with respect to a principal residence 

23 (within the meaning of section 121) located in a 

24 qualifying county for a qualified first-time home25 buyer (as defined in section 72(t)(8)). 


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1 ‘‘(5) QUALIFIED BUSINESS CAPITALIZATION

2 COSTS.— 

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

4 business capitalization costs’ means qualified 

5 expenditures for the capitalization of a qualified 

6 business pursuant to a qualified plan. 

7 ‘‘(B) QUALIFIED EXPENDITURES.—The 

8 term ‘qualified expenditures’ means expendi9 tures included in a qualified plan, including 

10 capital, plant, equipment, working capital, and 

11 inventory expenses. 

12 ‘‘(C) QUALIFIED BUSINESS.—The term 

13 ‘qualified business’ means any trade or business 

14 located in a qualifying county other than any 

15 trade or business— 

16 ‘‘(i) which consists of the operation of 

17 any facility described in section 

18 144(c)(6)(B), or 

19 ‘‘(ii) which contravenes any law. 

20 Rules similar to the rules under subsection (b) 

21 or (c) of section 1397C shall apply to any quali22 fied business under this section. 

23 ‘‘(D) QUALIFIED PLAN.—The term ‘quali24 fied plan’ means a business plan which meets 

25 such requirements as the Secretary may specify. 


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1 ‘‘(6) QUALIFIED MEDICAL EXPENSES.—The 

2 term ‘qualified medical expenses’ means any amount 

3 paid during the taxable year, not compensated for by 

4 insurance or otherwise, for medical care (as defined 

5 in section 213(d)) of the taxpayer, his spouse, or his 

6 dependent (as defined in section 152). 

7 ‘‘(7) QUALIFIED ROLLOVERS.—The term ‘quali8 fied rollover’ means any amount paid from an indi9 vidual homestead account of a taxpayer into another 

10 such account established for the benefit of— 

11 ‘‘(A) such taxpayer, or 

12 ‘‘(B) any qualified individual who is— 

13 ‘‘(i) the spouse of such taxpayer, or 

14 ‘‘(ii) any dependent (as defined in sec15 tion 152) of the taxpayer. 

16 Rules similar to the rules of section 408(d)(3) shall 

17 apply for purposes of this paragraph. 

18 ‘‘(g) TAX TREATMENT OF ACCOUNTS.— 

19 ‘‘(1) LOSS OF EXEMPTION IN CASE OF PROHIB20 ITED TRANSACTIONS.—For purposes of this section, 

21 rules similar to the rules of section 408(e) shall 

22 apply. 

23 ‘‘(2) OTHER RULES TO APPLY.—Rules similar 

24 to the rules of paragraphs (4), (5), and (6) of sec25 tion 408(d) shall apply for purposes of this section. 


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1 ‘‘(h) OTHER DEFINITIONS AND SPECIAL RULES.— 

2 For purposes of this section— 

3 ‘‘(1) ALL ACCOUNTS TREATED AS ONE AC4 COUNT.—All individual homestead accounts of a 

5 qualified individual shall be treated as 1 account. 

6 ‘‘(2) TIME WHEN CONTRIBUTIONS DEEMED

7 MADE.—A taxpayer shall be deemed to have made a 

8 contribution to an individual homestead account on 

9 the last day of the preceding taxable year if the con10 tribution is made on account of such taxable year 

11 and is made not later than the time prescribed by 

12 law for filing the return for such taxable year (not 

13 including extensions thereof). 

14 ‘‘(3) CUSTODIAL ACCOUNTS.—Rules similar to 

15 the rules of section 408(h) shall apply. 

16 ‘‘(4) REPORTS.—The trustee of an individual 

17 homestead account shall make such reports regard18 ing such account to the Secretary and to the indi19 vidual for whom the account is maintained with re20 spect to contributions (and the years to which they 

21 relate), distributions, and such other matters as the 

22 Secretary may require under regulations. The re23 ports required by this paragraph— 


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1 ‘‘(A) shall be filed at such time and in 

2 such manner as the Secretary prescribes in 

3 such regulations, and 

4 ‘‘(B) shall be furnished to individuals— 

5 ‘‘(i) not later than January 31 of the 

6 calendar year following the calendar year 

7 to which such reports relate, and 

8 ‘‘(ii) in such manner as the Secretary 

9 prescribes in such regulations. 

10 ‘‘(5) INVESTMENT IN COLLECTIBLES TREATED

11 AS DISTRIBUTIONS.—Rules similar to the rules of 

12 section 408(m) shall apply. 

13 ‘‘(i) DESIGNATION OF EARNED INCOME TAX CREDIT

14 PAYMENTS FOR DEPOSIT TO INDIVIDUAL HOMESTEAD

15 ACCOUNT.— 

16 ‘‘(1) IN GENERAL.—With respect to the return 

17 of any qualified individual for the taxable year of the 

18 tax imposed by this chapter, such individual may 

19 designate that a specified portion (not less than $1) 

20 of any overpayment of tax for such taxable year 

21 which is attributable to the earned income tax credit 

22 shall be deposited by the Secretary into an individual 

23 homestead account of such individual. The Secretary 

24 shall so deposit such portion designated under this 

25 subsection. 


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1 ‘‘(2) MANNER AND TIME OF DESIGNATION.—A 

2 designation under paragraph (1) may be made with 

3 respect to any taxable year— 

4 ‘‘(A) at the time of filing the return of the 

5 tax imposed by this chapter for such taxable 

6 year, or 

7 ‘‘(B) at any other time (after the time of 

8 filing the return of the tax imposed by this 

9 chapter for such taxable year) specified in regu10 lations prescribed by the Secretary. 

11 Such designation shall be made in such manner as 

12 the Secretary prescribes by regulations. 

13 ‘‘(3) PORTION ATTRIBUTABLE TO EARNED IN14 COME TAX CREDIT.—For purposes of this sub15 section, an overpayment for any taxable year shall 

16 be treated as attributable to the earned income tax 

17 credit to the extent that such overpayment does not 

18 exceed the credit allowed to the taxpayer under sec19 tion 32 for such taxable year. 

20 ‘‘(4) OVERPAYMENTS TREATED AS RE21 FUNDED.—For purposes of this title, any portion of 

22 an overpayment of tax designated under paragraph 

23 (1) shall be treated as being refunded to the tax24 payer as of the last date prescribed for filing the re25 turn of tax imposed by this chapter (determined 


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1 without regard to extensions) or, if later, the date 

2 the return is filed. 

3 ‘‘(j) PENALTY FOR DISTRIBUTIONS NOT USED FOR

4 QUALIFIED INDIVIDUAL HOMESTEAD EXPENSES.— 

5 ‘‘(1) IN GENERAL.—If any amount is distrib6 uted from an individual homestead account and is 

7 not used exclusively to pay qualified individual 

8 homestead expenses for the holder of the account or 

9 the spouse or dependent (as defined in section 152) 

10 of such holder, the tax imposed by this chapter for 

11 the taxable year of such distribution shall be in12 creased by 10 percent of such amount which is in13 cludible in gross income. For purposes of the pre14 ceding sentence, distributions which are includible in 

15 gross income shall be treated as first attributable to 

16 amounts contributed under subsection (d) to the ex17 tent thereof. 

18 ‘‘(2) EXCEPTION FOR CERTAIN DISTRIBU19 TIONS.—Paragraph (1) shall not apply to distribu20 tions which are— 

21 ‘‘(A) made on or after the date on which 

22 the account holder attains age 591/2, 

23 ‘‘(B) made to a beneficiary (or the estate 

24 of the account holder) on or after the death of 

25 the account holder, 


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1 ‘‘(C) attributable to the account holder’s 

2 being disabled within the meaning of section 

3 72(m)(7), or 

4 ‘‘(D) described in subsection (e)(2)(A). 

5 ‘‘(k) APPLICATION OF SECTION.—This section shall 

6 apply to amounts paid to an individual homestead account 

7 for any taxable year beginning after the date of the enact8 ment of the New Homestead Act of 2006.’’. 

9 (b) TAX ON EXCESS CONTRIBUTIONS.— 

10 (1) TAX IMPOSED.—Subsection (a) of section 

11 4973 is amended by striking ‘‘or’’ at the end of 

12 paragraph (4), by redesignating paragraph (5) as 

13 paragraph (6), and by inserting after paragraph (4) 

14 the following new paragraph: 

15 ‘‘(5) an individual homestead account (within 

16 the meaning of section 530A(b)), or’’. 

17 (2) EXCESS CONTRIBUTIONS.—Section 4973 is 

18 amended by adding at the end the following sub19 section: 

20 ‘‘(h) INDIVIDUAL HOMESTEAD ACCOUNTS.—For pur21 poses of this section, in the case of individual homestead 

22 accounts, the term ‘excess contributions’ means the sum 

23 of— 

24 ‘‘(1) the excess (if any) of— 


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1 ‘‘(A) the amount contributed for the tax2 able year to the accounts (other than a quali3 fied rollover, as defined in section 530A(f)(7), 

4 or a contribution under section 530A(d)), over 

5 ‘‘(B) the amount allowable under section 

6 530A for such contributions, and 

7 ‘‘(2) the amount determined under this sub8 section for the preceding taxable year reduced by the 

9 sum of— 

10 ‘‘(A) the distributions out of the accounts 

11 for the taxable year which were included in the 

12 gross income of the payee under section 

13 530A(e)(1), 

14 ‘‘(B) the distributions out of the accounts 

15 for the taxable year to which rules similar to 

16 the rules of section 408(d)(5) apply by reason 

17 of section 530A(g)(2), and 

18 ‘‘(C) the excess (if any) of the maximum 

19 amount allowable as a contribution under sec20 tion 530A for the taxable year over the amount 

21 contributed to the account for the taxable year 

22 (other than a contribution under section 

23 530A(d)). 

24 For purposes of this subsection, any contribution which 

25 is distributed from the individual homestead account in 


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1 a distribution to which rules similar to the rules of section 

2 408(d)(4) apply by reason of section 530A(g)(2) shall be 

3 treated as an amount not contributed.’’. 

4 (c) TAX ON PROHIBITED TRANSACTIONS.—Section 

5 4975 is amended— 

6 (1) by adding at the end of subsection (c) the 

7 following paragraph: 

8 ‘‘(7) SPECIAL RULE FOR INDIVIDUAL HOME9 STEAD ACCOUNTS.—An individual for whose benefit 

10 an individual homestead account is established and 

11 any contributor to such account shall be exempt 

12 from the tax imposed by this section with respect to 

13 any transaction concerning such account (which 

14 would otherwise be taxable under this section) if, 

15 with respect to such transaction, the account ceases 

16 to be an individual homestead account by reason of 

17 the application of section 530A(g)(1) to such ac18 count.’’, and 

19 (2) in subsection (e)(1), by striking ‘‘or’’ at the 

20 end of subparagraph (F), by redesignating subpara21 graph (G) as subparagraph (H), and by inserting 

22 after subparagraph (F) the following new subpara23 graph: 

24 ‘‘(G) an individual homestead account de25 scribed in section 530A(b), or’’. 


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1 (d) INFORMATION RELATING TO CERTAIN TRUSTS

2 AND ANNUITY PLANS.—Subsection (c) of section 6047 is 

3 amended— 

4 (1) by inserting ‘‘or section 530A’’ after ‘‘sec5 tion 219’’, and 

6 (2) by inserting ‘‘, of any individual homestead 

7 account described in section 530A(b),’’, after ‘‘sec8 tion 408(a)’’. 

9 (e) INSPECTION OF APPLICATIONS FOR TAX EXEMP10 TION.—Clause (i) of section 6104(a)(1)(B) is amended by 

11 inserting ‘‘an individual homestead account described in 

12 section 530A(b),’’ after ‘‘section 408(a),’’. 

13 (f) FAILURE TO PROVIDE REPORTS ON INDIVIDUAL

14 HOMESTEAD ACCOUNTS.—Paragraph (2) of section 

15 6693(a) is amended by striking ‘‘and’’ at the end of sub16 paragraph (D), by striking the period and inserting ‘‘, 

17 and’’ at the end of subparagraph (E), and by inserting 

18 after subparagraph (E) the following new subparagraph: 

19 ‘‘(F) section 530A(h)(4) (relating to indi20 vidual homestead accounts).’’. 

21 (g) CLERICAL AMENDMENT.—The table of parts for 

22 subchapter F of chapter 1 is amended by adding at the 

23 end the following new item: 

‘‘PART IX. INDIVIDUAL HOMESTEAD ACCOUNTS.’’. 


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1 TITLE II—INCENTIVES FOR MAIN 

2 STREET BUSINESSES 

3 SEC. 201. RURAL INVESTMENT TAX CREDIT. 

4 (a) IN GENERAL.—Subpart D of part IV of sub5 chapter A of chapter 1 (relating to business related cred6 its) is amended by inserting after section 42 the following 

7 new section: 

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: 70 PERCENT

15 PRESENT VALUE CREDIT FOR NEW BUILDINGS; 30 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) 70 percent of the eligible basis of a 

15 new building, and 

16 ‘‘(B) 30 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 2005, 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 2004’ 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 orgaVerDate Aug 31 2005 23:46 May 19, 2006 Jkt 049200 PO 00000 Frm 00046 Fmt 6652 Sfmt 6201 E:\BILLS\H5380.IH H5380

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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 subpara22 graph (A) to any taxpayer. 

23 ‘‘(iii) CREDIT NOT INCOME.—A trans24 fer under subparagraph (B) of any credit 

25 allowable under subparagraph (A) shall not 


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1 result in income for purposes of section 

2 511. 

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

23 CREDIT DOLLAR AMOUNT IS LESS THAN CREDIT

24 WHICH WOULD BE ALLOWABLE WITHOUT RE25 GARD TO SALES CONVENTION, 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, then the taxpayer’s 

7 tax under this chapter for the taxable year shall be 

8 increased by the credit recapture amount determined 

9 under rules similar to the rules of section 42(j). 

10 ‘‘(j) CERTIFICATIONS AND OTHER REPORTS TO SEC11 RETARY.— 

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

13 YEAR OF CREDIT PERIOD.—Following the close of 

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

15 to any qualified rural investment building, the tax16 payer shall certify to the Secretary (at such time 

17 and in such form and in such manner as the Sec18 retary prescribes)— 

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

20 in which such building was first placed in serv21 ice, 

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

23 of the beginning of the credit period, 

24 ‘‘(C) the maximum applicable percentage 

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1 count by the appropriate rural investment cred2 it agency under subsection (g), 

3 ‘‘(D) the election made under subsection 

4 (f) with respect to the qualified rural invest5 ment project of which such building is a part, 

6 and 

7 ‘‘(E) such other information as the Sec8 retary may require. 

9 In the case of a failure to make the certification re10 quired by the preceding sentence on the date pre11 scribed therefor, unless it is shown that such failure 

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

13 no credit shall be allowable by reason of subsection 

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

15 year ending before such certification is made. 

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

17 The Secretary may require taxpayers to submit an 

18 information return (at such time and in such form 

19 and manner as the Secretary prescribes) for each 

20 taxable year setting forth— 

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

22 of each qualified rural investment building of 

23 the taxpayer, 

24 ‘‘(B) the information described in para25 graph (1)(C) for the taxable year, and 


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1 ‘‘(C) such other information as the Sec2 retary may require. 

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

4 failure to submit the return required by the Sec5 retary under the preceding sentence on the date pre6 scribed therefor. 

7 ‘‘(3) ANNUAL REPORTS FROM RURAL INVEST8 MENT CREDIT AGENCIES.—Each agency which allo9 cates any rural investment credit amount to any 

10 building for any calendar year shall submit to the 

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

12 Secretary shall prescribe) an annual report speci13 fying— 

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

15 amount allocated to each building for such year, 

16 ‘‘(B) sufficient information to identify each 

17 such building and the taxpayer with respect 

18 thereto, and 

19 ‘‘(C) such other information as the Sec20 retary may require. 

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

22 failure to submit the report required by the pre23 ceding sentence on the date prescribed therefor. 

24 ‘‘(k) RESPONSIBILITIES OF RURAL INVESTMENT

25 CREDIT AGENCIES.— 


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1 ‘‘(1) PLANS FOR ALLOCATION OF CREDIT

2 AMONG INVESTMENT PROJECTS.— 

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

4 other provision of this section, the rural invest5 ment credit dollar amount with respect to any 

6 building shall be zero unless— 

7 ‘‘(i) such amount was allocated pursu8 ant to a qualified rural investment plan of 

9 the agency which is approved by the gov10 ernmental unit (in accordance with rules 

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

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

13 of which such agency is a part, 

14 ‘‘(ii) such agency notifies the chief ex15 ecutive officer (or the equivalent) of the 

16 local jurisdiction within which the building 

17 is located of such investment project and 

18 provides such individual a reasonable op19 portunity to comment on the investment 

20 project, 

21 ‘‘(iii) a comprehensive market study 

22 of the development needs of individuals in 

23 the qualifying county to be served by the 

24 investment project is conducted before the 

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1 oper’s expense by a disinterested party who 

2 is approved by such agency, and 

3 ‘‘(iv) a written explanation is available 

4 to the general public for any allocation of 

5 a rural investment credit dollar amount 

6 which is not made in accordance with es7 tablished priorities and selection criteria of 

8 the rural investment credit agency. 

9 ‘‘(B) QUALIFIED RURAL INVESTMENT

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

11 ‘qualified rural investment plan’ means any 

12 plan— 

13 ‘‘(i) which sets forth selection criteria 

14 to be used to determine priorities of the 

15 rural investment credit agency which are 

16 appropriate to qualifying counties, 

17 ‘‘(ii) which also gives preference in al18 locating rural investment credit dollar 

19 amounts among selected investment 

20 projects to— 

21 ‘‘(I) investment projects that tar22 get those small rural counties with 

23 consistently high rates of net out-mi24 gration, 


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1 ‘‘(II) investment projects that 

2 link the economic development and job 

3 creation efforts of 2 or more small 

4 rural counties with high rates of net 

5 out-migration, and 

6 ‘‘(III) investment projects that 

7 link the economic development and job 

8 creation efforts of 1 or more small 

9 rural counties in the State with high 

10 rates of net out-migration to related 

11 efforts in regions of such State experi12 encing economic growth, and 

13 ‘‘(iii) which provides a procedure that 

14 the agency (or an agent or other private 

15 contractor of such agency) will follow in 

16 monitoring for noncompliance with the 

17 provisions of this section and in notifying 

18 the Internal Revenue Service of such non19 compliance which such agency becomes 

20 aware of and in monitoring for noncompli21 ance through regular site visits. 

22 ‘‘(C) CERTAIN SELECTION CRITERIA MUST

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

24 qualified rural investment plan must include— 

25 ‘‘(i) investment project location, 


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1 ‘‘(ii) technology and transportation in2 frastructure needs, and 

3 ‘‘(iii) private development trends. 

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

5 EXCEED AMOUNT NECESSARY TO ASSURE INVEST6 MENT PROJECT FEASIBILITY.— 

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

8 credit dollar amount allocated to an investment 

9 project shall not exceed the amount the rural 

10 investment credit agency determines is nec11 essary for the financial feasibility of the invest12 ment project and its viability as a qualified 

13 rural investment project throughout the compli14 ance period. 

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

16 the determination under subparagraph (A), the 

17 rural investment credit agency shall consider— 

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

19 the total financing planned for the invest20 ment project, 

21 ‘‘(ii) any proceeds or receipts expected 

22 to be generated by reason of tax benefits, 

23 ‘‘(iii) the percentage of the rural in24 vestment credit dollar amount used for inVerDate Aug 31 2005 23:46 May 19, 2006 Jkt 049200 PO 00000 Frm 00058 Fmt 6652 Sfmt 6201 E:\BILLS\H5380.IH H5380

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1 vestment project costs other than the cost 

2 of intermediaries, and 

3 ‘‘(iv) the reasonableness of the devel4 opmental and operational costs of the in5 vestment project. 

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

7 the development of investment projects in hard8 to-develop areas. 

9 ‘‘(C) DETERMINATION MADE WHEN CRED10 IT AMOUNT APPLIED FOR AND WHEN BUILDING

11 PLACED IN SERVICE.— 

12 ‘‘(i) IN GENERAL.—A determination 

13 under subparagraph (A) shall be made as 

14 of each of the following times: 

15 ‘‘(I) The application for the rural 

16 investment credit dollar amount. 

17 ‘‘(II) The allocation of the rural 

18 investment credit dollar amount. 

19 ‘‘(III) The date the building is 

20 first placed in service. 

21 ‘‘(ii) CERTIFICATION AS TO AMOUNT

22 OF OTHER SUBSIDIES.—Prior to each de23 termination under clause (i), the taxpayer 

24 shall certify to the rural investment credit 

25 agency the full extent of all Federal, State, 


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1 and local subsidies which apply (or which 

2 the taxpayer expects to apply) with respect 

3 to the building. 

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

5 such regulations as may be necessary or appropriate to 

6 carry out the purposes of this section, including regula7 tions— 

8 ‘‘(1) dealing with— 

9 ‘‘(A) investment projects which include 

10 more than 1 building or only a portion of a 

11 building, 

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

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

14 to short taxable years, 

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

16 this section, and 

17 ‘‘(4) providing the opportunity for rural invest18 ment credit agencies to correct administrative errors 

19 and omissions with respect to allocations and record 

20 keeping within a reasonable period after their dis21 covery, taking into account the availability of regula22 tions and other administrative guidance from the 

23 Secretary.’’. 

24 (b) CURRENT YEAR BUSINESS CREDIT CALCULA25 TION.—Section 38(b) (relating to current year business 


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1 credit) is amended by striking ‘‘plus’’ at the end of para2 graph (29), by striking the period at the end of paragraph 

3 (30) and inserting ‘‘, plus’’, and by adding at the end the 

4 following new paragraph: 

5 ‘‘(31) the rural investment credit determined 

6 under section 42A(a).’’. 

7 (c) CONFORMING AMENDMENTS.— 

8 (1) Section 55(c)(1) is amended by inserting 

9 ‘‘or subsection (i) or (j) of section 42A’’ after ‘‘sec10 tion 42’’. 

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

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

13 ‘‘or 42A’’ after ‘‘section 42’’. 

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

15 ‘‘and’’ at the end of paragraph (10), by redesig16 nating paragraph (11) as paragraph (12), and by in17 serting after paragraph (10) the following new para18 graph: 

19 ‘‘(11) the rural investment credit determined 

20 under section 42A, and’’. 

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

22 ‘‘, 42A(i),’’ after ‘‘section 42(j)’’. 

23 (d) CLERICAL AMENDMENT.—The table of sections 

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


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1 is amended by inserting after the item relating to section 

2 42 the following new item: 

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

3 (e) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to expenditures made in taxable 

5 years beginning after the date of the enactment of this 

6 Act. 

7 SEC. 202. QUALIFIED RURAL SMALL BUSINESS INVEST8 MENT CREDIT. 

9 (a) IN GENERAL.—Subpart D of part IV of sub10 chapter A of chapter 1 (relating to business related cred11 its), as amended by this Act, is amended by inserting after 

12 section 42A the following new section: 

13 ‘‘SEC. 42B. QUALIFIED RURAL SMALL BUSINESS INVEST14 MENT CREDIT. 

15 ‘‘(a) IN GENERAL.—For purposes of section 38, in 

16 the case of a qualified rural small business, the amount 

17 of the qualified rural small business investment credit de18 termined under this section for any taxable year is equal 

19 to 30 percent of the qualified expenditures for the taxable 

20 year of such business. 

21 ‘‘(b) DOLLAR LIMITATION.— 

22 ‘‘(1) IN GENERAL.—The credit allowable under 

23 subsection (a) for any taxable year shall not exceed 

24 the lesser of— 

25 ‘‘(A) $5,000, or 


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1 ‘‘(B) the amount when added to the aggre2 gate credits allowable to the taxpayer under 

3 subsection (a) for all preceding taxable years 

4 does not exceed $25,000. 

5 ‘‘(2) NO DOUBLE CREDIT ALLOWED.—In the 

6 case of any qualified rural small business which 

7 places in service a qualified rural investment build8 ing with respect to which a rural investment credit 

9 is allowed under section 42A for any taxable year, 

10 paragraph (1)(A) shall be applied with respect to 

11 such taxable year by substituting ‘zero’ for ‘$5,000’. 

12 ‘‘(c) QUALIFIED RURAL SMALL BUSINESS.—For 

13 purposes of this section, the term ‘qualified rural small 

14 business’ means any person if such person— 

15 ‘‘(1) employed not more than 5 full-time em16 ployees during the taxable year, 

17 ‘‘(2) materially and substantially participates in 

18 management, 

19 ‘‘(3) is located is a qualifying county, and 

20 ‘‘(4) submitted a qualified business plan with 

21 respect to which the rural investment credit agency 

22 with jurisdiction over such qualifying county has al23 located a portion of the State rural investment ceil24 ing for such taxable year under section 42A(g)(7). 


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1 For purposes of paragraph (1), an employee shall be con2 sidered full-time if such employee is employed at least 30 

3 hours per week for 20 or more calendar weeks in the tax4 able year. 

5 ‘‘(d) QUALIFIED EXPENDITURES.—For purposes of 

6 this section— 

7 ‘‘(1) IN GENERAL.—The term ‘qualified expend8 itures’ means expenditures normally associated with 

9 starting or expanding a business and included in a 

10 qualified business plan, including costs for capital, 

11 plant and equipment, inventory expenses, and wages, 

12 but not including interest costs. 

13 ‘‘(2) ONLY CERTAIN EXPENDITURES INCLUDED

14 FOR EXISTING BUSINESSES.—In the case of a quali15 fied rural small business with respect to which a 

16 credit under subsection (a) was allowed for a pre17 ceding taxable year, such term shall include only so 

18 much of the expenditures described in paragraph (1) 

19 for the taxable year as exceed the aggregate of such 

20 expenditures for the preceding taxable year. 

21 ‘‘(e) QUALIFIED BUSINESS PLAN.—For purposes of 

22 this section, the term ‘qualified business plan’ means a 

23 business plan which— 

24 ‘‘(1) has been approved by the rural investment 

25 credit agency with jurisdiction over the qualifying 


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1 county in which the qualified rural small business is 

2 located pursuant to such agency’s rural investment 

3 plan, and 

4 ‘‘(2) meets such requirements as the agency 

5 may specify. 

6 ‘‘(f) DENIAL OF DOUBLE BENEFIT.—In the case of 

7 the amount of the credit determined under this section— 

8 ‘‘(1) no deduction or credit shall be allowed for 

9 such amount under any other provision of this chap10 ter, and 

11 ‘‘(2) no increase in the adjusted basis of any 

12 property shall result from such amount. 

13 ‘‘(g) DEFINITIONS AND SPECIAL RULES.—For pur14 poses of this section— 

15 ‘‘(1) any term which is used in this section 

16 which is used in section 42A shall have the meaning 

17 given such term by section 42A, and 

18 ‘‘(2) rules similar to the rules under subsections 

19 (j)(2), (j)(3), and (k) of section 42A shall apply.’’. 

20 (b) CURRENT YEAR BUSINESS CREDIT CALCULA21 TION.—Section 38(b) (relating to current year business 

22 credit), as amended by this Act, is amended by striking 

23 ‘‘plus’’ at the end of paragraph (30), by striking the period 

24 at the end of paragraph (31) and inserting ‘‘, plus’’, and 

25 by adding at the end the following new paragraph: 


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1 ‘‘(32) the qualified rural small business invest2 ment credit determined under section 42B(a).’’. 

3 (c) CLERICAL AMENDMENT.—The table of sections 

4 for subpart D of part IV of subchapter A of chapter 1, 

5 as amended by this Act, is amended by inserting after the 

6 item relating to section 42A the following new item: 

‘‘Sec. 42B. Qualified rural small business investment credit.’’. 

7 (d) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to expenditures made in taxable 

9 years beginning after the date of the enactment of this 

10 Act. 

11 SEC. 203. ACCELERATED DEPRECIATION FOR RURAL IN12 VESTMENT PROPERTY. 

13 (a) IN GENERAL.—Section 168 is amended by adding 

14 at the end the following new subsection: 

15 ‘‘(l) PROPERTY IN RURAL INVESTMENT PROJECTS.— 

16 ‘‘(1) IN GENERAL.—For purposes of subsection 

17 (a), the applicable recovery period for qualified rural 

18 investment property shall be determined in accord19 ance with the table contained in paragraph (2) in 

20 lieu of the table contained in subsection (c). 

21 ‘‘(2) APPLICABLE RECOVERY PERIOD FOR

22 RURAL INVESTMENT PROPERTY.—For purposes of 

23 paragraph (1)— 

The applicable 

‘‘In the case of: recovery period is: 

3-year property ........................................................................ 2 years


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The applicable 

‘‘In the case of: recovery period is: 

5-year property ........................................................................ 3 years

7-year property ........................................................................ 4 years

10-year property ...................................................................... 6 years

15-year property ...................................................................... 9 years

20-year property ...................................................................... 12 years

Nonresidential real property .................................................... 22 years. 

1 ‘‘(3) DEDUCTION ALLOWED IN COMPUTING

2 MINIMUM TAX.—For purposes of determining alter3 native minimum taxable income under section 55, 

4 the deduction under subsection (a) for property to 

5 which paragraph (1) applies shall be determined 

6 under this section without regard to any adjustment 

7 under section 56. 

8 ‘‘(4) QUALIFIED RURAL INVESTMENT PROP9 ERTY DEFINED.—For purposes of this subsection— 

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

11 rural investment property’ means property 

12 which is property described in the table in para13 graph (2) and which is— 

14 ‘‘(i) used by the taxpayer predomi15 nantly in the active conduct of a trade or 

16 business within a qualified rural invest17 ment project, 

18 ‘‘(ii) not used or located outside the 

19 qualified rural investment project on a reg20 ular basis, 


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1 ‘‘(iii) not acquired (directly or indi2 rectly) by the taxpayer from a person who 

3 is related to the taxpayer (within the 

4 meaning of section 465(b)(3)(C)), and 

5 ‘‘(iv) not property (or any portion 

6 thereof) placed in service for purposes of 

7 operating any facility described in section 

8 144(c)(6)(B). 

9 ‘‘(B) EXCEPTION FOR ALTERNATIVE DE10 PRECIATION PROPERTY.—The term ‘qualified 

11 rural investment property’ does not include any 

12 property to which the alternative depreciation 

13 system under subsection (g) applies, deter14 mined— 

15 ‘‘(i) without regard to subsection 

16 (g)(7) (relating to election to use alter17 native depreciation system), and 

18 ‘‘(ii) after the application of section 

19 280F(b) (relating to listed property with 

20 limited business use). 

21 ‘‘(C) SPECIAL RULE FOR INFRASTRUCTURE

22 INVESTMENT.— 

23 ‘‘(i) IN GENERAL.—Subparagraph 

24 (A)(ii) shall not apply to qualified infra25 structure property located outside of the 


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1 qualified rural investment project if the 

2 purpose of such property is to connect with 

3 qualified infrastructure property located 

4 within such project. 

5 ‘‘(ii) QUALIFIED INFRASTRUCTURE

6 PROPERTY.—For purposes of this subpara7 graph, the term ‘qualified infrastructure 

8 property’ means qualified rural investment 

9 property (determined without regard to 

10 subparagraph (A)(ii)) which— 

11 ‘‘(I) benefits the qualifying coun12 ty infrastructure, 

13 ‘‘(II) is available to the general 

14 public, and 

15 ‘‘(III) is placed in service in con16 nection with the taxpayer’s active con17 duct of a trade or business within a 

18 qualified rural investment project. 

19 Such term includes, but is not limited to, 

20 roads, power lines, water systems, railroad 

21 spurs, and communications facilities. 

22 ‘‘(5) DEFINITIONS.—For purposes of this sub23 section, any term used in this section which is used 

24 in section 42A shall have the meaning given such 

25 term by section 42A.’’. 


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

2 this section shall apply to property placed in service after 

3 the date of the enactment of this Act, in taxable years 

4 ending after such date. 

5 TITLE III—NEW HOMESTEAD 

6 VENTURE CAPITAL FUND 

7 SEC. 301. NEW HOMESTEAD VENTURE CAPITAL FUND. 

8 The Consolidated Farm and Rural Development Act 

9 (7 U.S.C. 1921 et seq.) is amended by adding at the end 

10 the following new subtitle: 

11 ‘‘Subtitle G—New Homestead 

12 Venture Capital Fund 

13 ‘‘SEC. 383A. SHORT TITLE. 

14 ‘‘This subtitle may be cited as the ‘New Homestead 

15 Venture Capital Fund Act’. 

16 ‘‘SEC. 383B. DEFINITIONS. 

17 ‘‘In this subtitle: 

18 ‘‘(1) AUTHORIZED PRIVATE INVESTOR.—The 

19 term ‘authorized private investor’ means an indi20 vidual, legal entity, or affiliate or subsidiary of an 

21 individual or legal entity that— 

22 ‘‘(A) is eligible to receive a loan guarantee 

23 under this title; 


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1 ‘‘(B) is eligible to receive a loan guarantee 

2 under the Rural Electrification Act of 1936 (7 

3 U.S.C. 901 et seq.); 

4 ‘‘(C) is created under the National Con5 sumer Cooperative Bank Act (12 U.S.C. 3011 

6 et seq.); 

7 ‘‘(D) is an insured depository institution 

8 subject to section 383D(b)(2); 

9 ‘‘(E) is a Farm Credit System institution 

10 described in section 1.2(a) of the Farm Credit 

11 Act of 1971 (12 U.S.C. 2002(a)); or 

12 ‘‘(F) is determined by the Board to be an 

13 appropriate investor in the Fund. 

14 ‘‘(2) BOARD.—The term ‘Board’ means the 

15 board of directors of the Fund established under 

16 section 383F. 

17 ‘‘(3) FUND.—The term ‘Fund’ means the New 

18 Homestead Venture Capital Fund established under 

19 section 383C. 

20 ‘‘(4) GROUP OF SIMILAR AUTHORIZED PRIVATE

21 INVESTORS.—The term ‘group of similar authorized 

22 private investors’ means any 1 of the following: 

23 ‘‘(A) Insured depository institutions with 

24 total assets of more than $250,000,000. 


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1 ‘‘(B) Insured depository institutions with 

2 total assets equal to or less than $250,000,000. 

3 ‘‘(C) Farm Credit System institutions de4 scribed in section 1.2(a) of the Farm Credit Act 

5 of 1971 (12 U.S.C. 2002(a)). 

6 ‘‘(D) Cooperative financial institutions 

7 (other than Farm Credit System institutions). 

8 ‘‘(E) Authorized private investors, other 

9 than those described in subparagraphs (A) 

10 through (D). 

11 ‘‘(F) Other nonprofit organizations, includ12 ing credit unions. 

13 ‘‘(5) INSURED DEPOSITORY INSTITUTION.—The 

14 term ‘insured depository institution’ means any bank 

15 or savings association the deposits of which are in16 sured under the Federal Deposit Insurance Act (12 

17 U.S.C. 1811 et seq.). 

18 ‘‘(6) QUALIFYING COUNTY.—The term ‘quali19 fying county’ means any county that— 

20 ‘‘(A) is located outside a metropolitan sta21 tistical area (as defined by the Office of Man22 agement and Budget); and 

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

24 with the fiscal year preceding the applicable fis25 cal year for which assistance is made available 


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1 under section 383E, has a net outmigration of 

2 inhabitants from the county of at least 10 per3 cent of the population of the county at the be4 ginning of the period. 

5 ‘‘(7) RURAL BUSINESS.—The term ‘rural busi6 ness’ means a rural cooperative, a value-added agri7 cultural enterprise, or any other enterprise that is or 

8 will be located in a qualifying county. 

9 ‘‘SEC. 383C. ESTABLISHMENT OF THE FUND. 

10 ‘‘(a) IN GENERAL.— 

11 ‘‘(1) AUTHORITY TO ESTABLISH.—Upon certifi12 cation by the Secretary that, to the maximum extent 

13 practicable, the parties proposing to establish a fund 

14 provide a broad representation of all of the groups 

15 of similar authorized private investors described in 

16 subparagraphs (A) through (F) of section 383B(4), 

17 the parties so certified may establish, a non-Federal 

18 entity under State law, to purchase shares of, and 

19 manage a fund to be known as the ‘New Homestead 

20 Venture Capital Fund’, to generate and provide eq21 uity capital to rural businesses. 

22 ‘‘(2) OWNERSHIP.— 

23 ‘‘(A) IN GENERAL.—To the maximum ex24 tent practicable, equity ownership of the Fund 

25 shall be distributed among authorized private 


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1 investors representing all of the groups of simi2 lar authorized private investors described in 

3 subparagraphs (A) through (F) of section 

4 383B(4). 

5 ‘‘(B) EXCLUSION OF GROUPS.—No group 

6 of similar authorized private investors shall be 

7 excluded from equity ownership of the Fund 

8 during any period during which the Fund is in 

9 existence if an authorized private investor rep10 resentative of the group is able and willing to 

11 invest in the Fund. 

12 ‘‘(b) PURPOSE.—The purpose of the Fund is to 

13 strengthen the economies of qualifying counties by— 

14 ‘‘(1) making needed investments in qualifying 

15 counties to reverse the devastating impact of chronic 

16 outmigration and to help the qualifying counties re17 build and grow; 

18 ‘‘(2) providing equity funding for existing and 

19 startup rural businesses with high potential for job 

20 creation that are or will be located in qualifying 

21 counties; 

22 ‘‘(3) offering the funding described in para23 graph (2) to rural businesses, many of which have 

24 difficulty obtaining equity capital; 


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1 ‘‘(4) authorizing use of the funding described in 

2 paragraph (2) only after State and local govern3 ments match a significant portion of the funding; 

4 ‘‘(5) requiring a portion of the funding de5 scribed in paragraph (2) to be used for technical and 

6 other similar assistance to rural businesses; and 

7 ‘‘(6) providing incentives to greater participa8 tion by authorized private investors through provi9 sion of guarantees of up to 60 percent of the invest10 ments of the authorized private investors in quali11 fying counties. 

12 ‘‘(c) ARTICLES OF INCORPORATION AND BY-LAWS.— 

13 The articles of incorporation and by-laws of the Fund shall 

14 set forth purposes of the Fund that are consistent with 

15 the purposes described in subsection (b). 

16 ‘‘SEC. 383D. INVESTMENT IN THE FUND. 

17 ‘‘(a) IN GENERAL.—The Secretary shall— 

18 ‘‘(1) subject to subsection (b)(1), make avail19 able to the Fund $200,000,000 for each of fiscal 

20 years 2006 through 2015; 

21 ‘‘(2) subject to subsection (c), guarantee a por22 tion of each investment made by an authorized pri23 vate investor in the Fund; and 

24 ‘‘(3) subject to subsection (d), guarantee the re25 payment of principal of, and accrued interest on, deVerDate Aug 31 2005 23:46 May 19, 2006 Jkt 049200 PO 00000 Frm 00075 Fmt 6652 Sfmt 6201 E:\BILLS\H5380.IH H5380

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1 bentures issued by the Fund to authorized private 

2 investors. 

3 ‘‘(b) NON-FEDERAL FUNDS.— 

4 ‘‘(1) IN GENERAL.—Under subsection (a)(1), 

5 the Secretary shall make an amount available to the 

6 Fund for a fiscal year only after— 

7 ‘‘(A) at least $50,000,000 has been in8 vested in the Fund for the fiscal year by au9 thorized private investors in accordance with 

10 this subtitle and the terms and conditions set 

11 forth in the by-laws of the Fund; and 

12 ‘‘(B) at least $50,000,000 has been in13 vested in the Fund for the fiscal year by State 

14 and local governments. 

15 ‘‘(2) INSURED DEPOSITORY INSTITUTIONS.— 

16 ‘‘(A) IN GENERAL.—Subject to subpara17 graphs (B) and (C)— 

18 ‘‘(i) an insured depository institution 

19 may be an authorized private investor in 

20 the Fund; and 

21 ‘‘(ii) an investment in the Fund may 

22 be considered to be part of the record of 

23 an institution in meeting the credit needs 

24 of the community in which the institution 


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1 is located under any applicable Federal 

2 law. 

3 ‘‘(B) INVESTMENT LIMIT.—The total in4 vestment in the Fund of an insured depository 

5 institution shall not exceed 5 percent of the in6 stitution’s capital and surplus. 

7 ‘‘(C) REGULATORY AUTHORITY.—An ap8 propriate Federal banking agency may, by regu9 lation or order, impose on any insured deposi10 tory institution investing in the Fund, any safe11 guard, limitation, or condition (including an in12 vestment limit that is lower than the investment 

13 limit under subparagraph (B)) that the Federal 

14 banking agency considers to be appropriate to 

15 ensure that the institution operates— 

16 ‘‘(i) in a financially sound manner; 

17 and 

18 ‘‘(ii) in compliance with all applicable 

19 law. 

20 ‘‘(c) GUARANTEE OF PRIVATE INVESTMENTS.— 

21 ‘‘(1) IN GENERAL.—The Secretary shall guar22 antee, under terms and conditions determined by the 

23 Secretary— 

24 ‘‘(A) except as provided in subparagraph 

25 (B), 40 percent of any loss of the principal of 


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1 each investment made by an authorized private 

2 investor in the Fund; and 

3 ‘‘(B) 60 percent of any loss of the prin4 cipal of each investment made by an authorized 

5 private investor in the Fund if the investment 

6 is used for a manufacturing or high-technology 

7 business. 

8 ‘‘(2) MAXIMUM TOTAL GUARANTEE.—The ag9 gregate potential liability of the Secretary with re10 spect to all guarantees under paragraph (1) shall 

11 not apply to more than $500,000,000 in private in12 vestments in the Fund. 

13 ‘‘(3) REDEMPTION OF GUARANTEE.— 

14 ‘‘(A) DATE.—An authorized private inves15 tor in the Fund may redeem a guarantee under 

16 paragraph (1), with respect to the total invest17 ments in the Fund and the total losses of the 

18 authorized private investor as of the date of re19 demption— 

20 ‘‘(i) on the date that is 5 years after 

21 the date of the initial investment of the au22 thorized private investor; or 

23 ‘‘(ii) annually thereafter. 


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1 ‘‘(B) EFFECT OF REDEMPTION.—On re2 demption of a guarantee under subparagraph 

3 (A)— 

4 ‘‘(i) the shares in the Fund of the au5 thorized private investor shall be redeemed; 

6 and 

7 ‘‘(ii) the authorized private investor 

8 shall be prohibited from making any future 

9 investment in the Fund. 

10 ‘‘(d) DEBENTURES.— 

11 ‘‘(1) IN GENERAL.—The Fund may, at the dis12 cretion of the Board, raise additional capital through 

13 the issuance of debentures and through other means 

14 determined to be appropriate by the Board. 

15 ‘‘(2) GUARANTEE OF DEBT BY SECRETARY.— 

16 ‘‘(A) IN GENERAL.—The Secretary shall 

17 guarantee 100 percent of the principal of, and 

18 accrued interest on, debentures issued by the 

19 Fund that are approved by the Secretary. 

20 ‘‘(B) MAXIMUM DEBT GUARANTEED BY

21 SECRETARY.—The outstanding value of deben22 tures issued by the Fund and guaranteed by 

23 the Secretary shall not exceed the lesser of— 

24 ‘‘(i) the amount equal to twice the 

25 value of the assets held by the Fund; or 


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1 ‘‘(ii) $500,000,000. 

2 ‘‘(C) RECAPTURE OF GUARANTEE PAY3 MENTS.—If the Secretary makes a payment on 

4 a debenture issued by the Fund as a result of 

5 a guarantee of the Secretary under this para6 graph, the Secretary shall have priority over 

7 other creditors for repayment of the debenture. 

8 ‘‘(3) AUTHORIZED PRIVATE INVESTORS.—An 

9 authorized private investor may purchase debentures 

10 issued by the Fund. 

11 ‘‘SEC. 383E. INVESTMENTS AND OTHER ACTIVITIES OF THE 

12 FUND. 

13 ‘‘(a) INVESTMENTS.— 

14 ‘‘(1) IN GENERAL.— 

15 ‘‘(A) TYPES.—Subject to subparagraphs 

16 (B) and (C), the Fund may— 

17 ‘‘(i) make equity investments in a 

18 rural business that meets the requirements 

19 of paragraph (6) and such other require20 ments as the Board may establish; and 

21 ‘‘(ii) extend credit to such rural busi22 ness in— 

23 ‘‘(I) the form of mezzanine debt, 

24 convertible debt, or subordinated debt; 

25 or 


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1 ‘‘(II) any other form of near-eq2 uity debt. 

3 ‘‘(B) LIMITATIONS ON EQUITY INVEST4 MENTS.—After the initial equity investment in 

5 a rural business described in subparagraph 

6 (A)(i), the Fund may not make additional eq7 uity investments in such rural business if the 

8 additional equity investments would result in 

9 the Fund owning more than 30 percent of the 

10 equity of such rural business. 

11 ‘‘(C) LIMITATION ON NONEQUITY INVEST12 MENTS.—Except in the case of a project to as13 sist a rural cooperative, the total amount of 

14 nonequity investments described in subpara15 graph (A)(ii) that may be provided by the Fund 

16 shall not exceed 20 percent of the total invest17 ments of the Fund in the project. 

18 ‘‘(2) PROCEDURES.—The Fund shall implement 

19 procedures to ensure that— 

20 ‘‘(A) the financing arrangements of the 

21 Fund meet the Fund’s primary focus of pro22 viding equity capital; and 

23 ‘‘(B) the Fund does not compete with con24 ventional sources of credit. 

25 ‘‘(3) DIVERSITY OF PROJECTS.—The Fund— 


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1 ‘‘(A) shall seek to make equity investments 

2 in a variety of viable projects for rural busi3 nesses, with a significant share of invest4 ments— 

5 ‘‘(i) in manufacturing or high-tech6 nology businesses of diverse sizes; 

7 ‘‘(ii) in smaller projects in rural com8 munities of diverse sizes; and 

9 ‘‘(iii) in cooperative and noncoopera10 tive businesses; and 

11 ‘‘(B) shall be managed in a manner that 

12 diversifies the risks to the Fund among a vari13 ety of projects. 

14 ‘‘(4) LIMITATION ON RURAL BUSINESSES AS15 SISTED.—The Fund shall not invest in any rural 

16 business that— 

17 ‘‘(A) is primarily retail in nature (as deter18 mined by the Board), other than a purchasing 

19 cooperative, or 

20 ‘‘(B) consists of the operation of any facil21 ity described in section 144(c)(6)(B). 

22 ‘‘(5) INTEREST RATE LIMITATIONS.—Returns 

23 on investments in and by the Fund, and returns on 

24 the extension of credit by participants in projects as25 sisted by the Fund, shall not be subject to any State 


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1 or Federal law establishing a maximum allowable in2 terest rate. 

3 ‘‘(6) REQUIREMENTS FOR RECIPIENTS.— 

4 ‘‘(A) OTHER INVESTMENTS.—Any recipi5 ent of amounts from the Fund shall make or 

6 obtain a significant investment from a source of 

7 capital other than the Fund. 

8 ‘‘(B) SPONSORSHIP.—To be considered for 

9 an equity investment from the Fund, a rural 

10 business investment project shall be sponsored 

11 by a regional, State, or local sponsoring or en12 dorsing organization such as— 

13 ‘‘(i) a financial institution; 

14 ‘‘(ii) a development organization; or 

15 ‘‘(iii) any other established entity en16 gaging or assisting in rural business devel17 opment, including a rural cooperative. 

18 ‘‘(b) TECHNICAL ASSISTANCE.—The Board shall use 

19 not less than 2 percent of capital provided by the Federal 

20 Government to provide technical assistance to rural busi21 nesses seeking an equity investment from the Fund. 

22 ‘‘(c) ANNUAL AUDIT.— 

23 ‘‘(1) IN GENERAL.—The Board shall authorize 

24 an annual audit of the financial statements of the 


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1 Fund by a nationally recognized auditing firm using 

2 generally accepted accounting procedures. 

3 ‘‘(2) AVAILABILITY OF AUDIT RESULTS.—The 

4 results of the audit required by paragraph (1) shall 

5 be made available to investors in the Fund. 

6 ‘‘(d) ANNUAL REPORT.—The Board shall prepare 

7 and make available to the public an annual report that— 

8 ‘‘(1) describes the projects funded with amounts 

9 from the Fund; 

10 ‘‘(2) specifies the recipients of amounts from 

11 the Fund; 

12 ‘‘(3) specifies the co-investors in all projects 

13 that receive amounts from the Fund; and 

14 ‘‘(4) meets the reporting requirements, if any, 

15 of the State under the law of which the Fund is es16 tablished. 

17 ‘‘(e) OTHER AUTHORITIES.— 

18 ‘‘(1) IN GENERAL.—The Board may exercise 

19 such other authorities as are necessary to carry out 

20 this subtitle. 

21 ‘‘(2) OVERSIGHT.—The Secretary shall enter 

22 into a contract with the Administrator of the Small 

23 Business Administration under which the Adminis24 trator of the Small Business Administration shall be 


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1 responsible for the routine duties of the Secretary in 

2 regard to the Fund. 

3 ‘‘SEC. 383F. GOVERNANCE OF THE FUND. 

4 ‘‘(a) IN GENERAL.—The Fund shall be governed by 

5 a board of directors that represents all of the authorized 

6 private investors in the Fund and the Federal Government 

7 and that consists of— 

8 ‘‘(1) a designee of the Secretary; 

9 ‘‘(2) 2 members who are appointed by the Sec10 retary and are not Federal employees, including— 

11 ‘‘(A) 1 member with expertise in venture 

12 capital investment; and 

13 ‘‘(B) 1 member with expertise in coopera14 tive development; 

15 ‘‘(3) 1 member who is appointed by the Sec16 retary and is a State government representative 

17 from among States with the highest rates of out18 migration from qualifying counties; and 

19 ‘‘(4) 7 members who are elected by the author20 ized private investors with investments in the Fund, 

21 of whom not less than 1 member shall be a rural 

22 community banker from an insured depository insti23 tution with total assets equal to or less than 

24 $250,000,000 with an investment in the Fund. 


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1 ‘‘(b) LIMITATION ON VOTING CONTROL.—No indi2 vidual investor or group of similar authorized private in3 vestors may control more than 25 percent of the votes on 

4 the Board. 

5 ‘‘SEC. 383G. AUTHORIZATION OF APPROPRIATIONS. 

6 ‘‘There are authorized to be appropriated such sums 

7 as are necessary to carry out this subtitle.’’. 

Æ 


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