I 

109TH CONGRESS 

1ST SESSION H. R. 2061 

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

serve their communities, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 3, 2005 

Mr. RYUN of Kansas (for himself and Mr. CANNON) introduced the following 

bill; which was referred to the Committee on Financial Services, and in 

addition to the Committee on Ways and Means, 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 enhance the ability of community banks to foster economic growth and serve their communities, and for other 

purposes. 

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

3 SECTION 1. SHORT TITLE. 

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

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

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

4 SEC. 101. INCREASE EXEMPTION LEVELS UNDER THE 

5 HOME MORTGAGE DISCLOSURE ACT OF 1975. 

6 (a) DEPOSITORY INSTITUTION AND MORTGAGE

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

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

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

10 ‘‘$250,000,000’’. 

11 (b) DEPOSITORY INSTITUTION EXEMPTIONS FROM

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

13 (12 U.S.C. 2808(a)) is amended— 

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

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

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

17 following new paragraph: 

18 ‘‘(4) INDEXING OF DEPOSITORY INSTITUTION

19 DISCLOSURE EXEMPTION AMOUNT.—By December 

20 31 of each year beginning after the date of the en21 actment of the Community Banks Serving Their 

22 Communities First Act, the amount applicable under 

23 section 304(i) with respect to institutions described 

24 in section 303(2) shall be adjusted in accordance 

25 with the procedure described in paragraphs (1) and 

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

2 subsequent year.’’. 

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

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

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

7 following new paragraph: 

8 ‘‘(11) SHORT FORM REPORTS OF CONDITION

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

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

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

13 nonsequential quarters of any calendar year.’’. 

14 SEC. 103. COMMUNITY BANK EXEMPTION FROM ANNUAL 

15 MANAGEMENT ASSESSMENT OF INTERNAL 

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

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

19 U.S.C. 7262) is amended by adding the following new sub20 section: 

21 ‘‘(c) COMMUNITY BANK EXEMPTION.— 

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

23 in any year to any insured depository institution 

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

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1 total assets, as determined on a consolidated basis, 

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

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

7 by all depository institutions, as reported by the 

8 Federal Deposit Insurance Corporation.’’. 

9 SEC. 104. CHANGES REQUIRED TO SMALL BANK HOLDING 

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

13 (a) SMALL BANK HOLDING COMPANY POLICY

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

16 (1) IN GENERAL.—Before the end of the 6- 

17 month period beginning on the date of the enact18 ment of this Act, the Board of Governors of the 

19 Federal Reserve System shall publish in the Federal 

20 Register proposed revisions to the Small Bank Hold21 ing Company Policy Statement on Assessment of Fi22 nancial and Managerial Factors (12 C.F.R. part 

23 225—appendix C) that provide that the policy shall 

24 apply to a bank holding company which has pro 

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1 forma consolidated assets of less than 

2 $1,000,000,000 and that— 

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

5 (B) does not have a significant amount of 

6 outstanding debt that is held by the general 

7 public. 

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

9 Governors of the Federal Reserve System shall an10 nually adjust the dollar amount referred to in para11 graph (1) in the Small Bank Holding Company Pol12 icy Statement on Assessment of Financial and Man13 agerial Factors by an amount equal to the percent14 age increase, for the most recent year, in total assets 

15 held by all bank holding companies, on a consoli16 dated basis, as determined by the Board. 

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

18 BANK HOLDING COMPANY.—Before the end of the 6- 

19 month period beginning on the date of the enactment of 

20 this Act, the Board of Governors of the Federal Reserve 

21 System shall publish in the Federal Register proposed re22 visions to the Small Bank Holding Company Policy State23 ment on Assessment of Financial and Managerial Factors 

24 (12 C.F.R. part 225—appendix C) such that the debt-to25 equity ratio allowable for a small bank holding company 

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1 in order to remain eligible to pay a corporate dividend and 

2 to remain eligible for expedited processing procedures 

3 under Regulation Y of the Board of Governors of the Fed4 eral Reserve System would increase from 1:1 to 3:1. 

5 SEC. 105. INCREASE IN SIZE OF A SMALL DEPOSITORY IN6 STITUTION EXCEPTION UNDER THE DEPOSI7 TORY INSTITUTION MANAGEMENT INTER8 LOCKS ACT. 

9 Section 203(1) of the Depository Institution Manage10 ment Interlocks Act (12 U.S.C. 3202(1)) is amended by 

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

12 SEC. 106. COMMUNITY BANK PROTECTION UNDER THE SE13 CURITIES INVESTOR PROTECTION ACT OF 

14 1970. 

15 Section 9 of the Securities Investor Protection Act 

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

17 following new subsection: 

18 ‘‘(d) COMMUNITY BANK PROTECTION.— 

19 ‘‘(1) IN GENERAL.—The prohibition on ad20 vances in subsection (a)(5) of this section shall not 

21 apply to a bank with total assets, on a consolidated 

22 basis, of less than $1,000,000,000. 

23 ‘‘(2) ADJUSTMENT OF AMOUNT.—The Commis24 sion shall annually adjust the dollar amount in para25 graph (1) by an amount equal to the percentage inVerDate Aug 04 2004 23:48 May 10, 2005 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2061.IH H2061
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1 crease, for the most recent year, in total assets held 

2 by all depository institutions, as reported by the 

3 Federal Deposit Insurance Corporation.’’. 

4 SEC. 107. FLEXIBLE EXAMINATION SCHEDULE FOR COMMU5 NITY BANKS. 

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

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

8 is amended— 

9 (1) by striking the matter preceding subpara10 graph (A) and inserting ‘‘In lieu of the 12-month pe11 riod referred to in paragraphs (1), (2), and (3), the 

12 examination required under paragraph (1) of an in13 sured depository institution may be conducted at 

14 such intervals as the appropriate Federal banking 

15 agency may determine to be appropriate, on the 

16 basis of factors the Financial Institutions Examina17 tion Council shall establish, if—’’; and 

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

19 ‘‘$250,000,000’’ and inserting ‘‘$1,000,000,000’’. 

20 (b) CLERICAL AMENDMENT.—The heading for para21 graph (4) of section 10(d) of the Federal Deposit Insur22 ance Act (12 U.S.C. 1820(d)) is amended by striking ‘‘18- 

23 MONTH RULE’’ and inserting ‘‘FLEXIBLE ON-SITE EXAM24 INATION SCHEDULE’’. 

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

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

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

6 (1) by striking ‘‘$100,000,000 of deposits’’ and 

7 inserting ‘‘$1,000,000,000 of total assets (on a con8 solidated basis)’’; and 

9 (2) by adding at the end the following new sen10 tence: ‘‘The Board shall annually adjust the dollar 

11 amount in the 1st sentence of this subparagraph by 

12 an amount equal to the percentage increase, for the 

13 most recent year, in total assets held by all deposi14 tory institutions, as reported by the Federal Deposit 

15 Insurance Corporation.’’. 

16 SEC. 109. CONSIDERATION OF COMMUNITY BANK IMPACT. 

17 Before establishing or making any revision in any 

18 regulation, requirement, or guideline applicable to insured 

19 depository institutions (as defined in section 3 of the Fed20 eral Deposit Insurance Act), the appropriate Federal 

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

22 account the effect of the establishment of the regulation, 

23 requirement, or guideline on community banks and sav24 ings associations. 

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1 SEC. 110. INCREASE IN CRA EXAM INTERVALS FOR COMMU2 NITY BANKS. 

3 Section 809(a) of the Community Reinvestment Act 

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

5 ‘‘$250,000,000’’ and inserting ‘‘$1,000,000,000’’. 

6 TITLE II—ADDITIONAL REGU7 LATORY RELIEF FOR COMMU8 NITY BANKS AND THEIR CUS9 TOMERS 

10 SEC. 201. PROVISIONS RELATING TO 3-DAY RIGHT OF RE11 SCISSION UNDER THE TRUTH IN LENDING 

12 ACT. 

13 (a) OPTIONAL CONSUMER WAIVERS OF RIGHT OF

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

15 (15 U.S.C. 1635(d)) is amended— 

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

17 ‘‘WAIVERS OF RESCISSION RIGHTS.— 

18 ‘‘(1) PERSONAL FINANCIAL EMERGENCIES.— 

19 The board may’’; and 

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

21 paragraph: 

22 ‘‘(2) WAIVERS WHEN CREDITOR IS INSURED

23 DEPOSITORY INSTITUTION.—The Board shall pre24 scribe regulations authorizing a consumer to waive 

25 the rights provided under this section when the cred26 itor is an insured depository institution (as that 

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1 term is defined in section 3(c)(2) of the Federal De2 posit Insurance Act) in such manner and after such 

3 notice as the Board may prescribe.’’. 

4 (b) EXEMPTION IN CASE OF REFINANCING WITH NO

5 NEW MONEY REGARDLESS OF CREDITOR.—Section 

6 125(e)(2) of the Truth in Lending Act (15 U.S.C. 

7 1635(e)(2)) is amended by striking ‘‘by the same cred8 itor’’. 

9 (c) EXEMPT HOME EQUITY LINES OF CREDIT.—Sec10 tion 125(e)(4) of the Truth in Lending Act (15 U.S.C. 

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

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

13 credit plan which provides for any extension of cred14 it which is secured by the consumer’s principal 

15 dwelling.’’. 

16 SEC. 202. ADDITIONAL EXEMPTIONS UNDER HOME MORT17 GAGE DISCLOSURE ACT OF 1975; STREAM18 LINING REPORTING. 

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

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

21 amended by adding the following new subsection: 

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

23 year, a depository institution makes fewer than 100 re24 portable loans described in any paragraph of subsection 

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

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1 disclosure requirements of this section with respect to the 

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

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

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

5 amended—— 

6 (1) in paragraph (1), by inserting ‘‘or as modi7 fied by the Board under paragraph (3),’’ after ‘‘as 

8 defined by the Department of Commerce’’; and 

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

10 paragraph: 

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

12 modify the description of any primary metropolitan 

13 statistical area, metropolitan statistical area, and 

14 consolidated metropolitan statistical area, as defined 

15 by the Secretary of Commerce, for purposes of this 

16 subsection.’’. 

17 (c) REGULAR STREAMLINING.—The Home Mortgage 

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

19 adding the following new section: 

20 ‘‘SEC. 312. REGULAR STREAMLINING. 

21 ‘‘Before the end of the 1-year period beginning on 

22 the date of the enactment of the Community Banks Serv23 ing Their Communities First Act and before the end of 

24 each 5-year period thereafter, the Board shall— 

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1 ‘‘(1) review the data collection and reporting re2 quirements of this title; 

3 ‘‘(2) streamline, reduce, or eliminate such re4 quirements by regulation to the extent consistent 

5 with the purposes of this title; 

6 ‘‘(3) revise the data collection and reporting re7 quirements under this title to ensure that they are 

8 consistent with those imposed under the Equal Cred9 it Opportunity Act; and 

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

11 Housing, and Urban Affairs of the Senate and the 

12 Committee on Financial Services of the House of 

13 Representatives such legislative recommendations as 

14 the Board determines to be necessary to streamline, 

15 reduce, or eliminate such requirements to the extent 

16 consistent with the purposes of this title and to en17 sure that they are consistent with those imposed 

18 under the Equal Credit Opportunity Act.’’. 

19 SEC. 203. EXCEPTION TO ANNUAL PRIVACY NOTICE RE20 QUIREMENT UNDER THE GRAMM-LEACH-BLI21 LEY ACT. 

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

23 U.S.C. 6803) is amended by adding the following new sub24 section: 

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1 ‘‘(c) EXCEPTION TO ANNUAL NOTICE REQUIRE2 MENT.—A financial institution that— 

3 ‘‘(1) provides nonpublic personal information 

4 only in accordance with the provisions of section 

5 502(b)(2) (relating to the consumer ‘opt out’ excep6 tion) and subsection 502(e) (relating to general ex7 ceptions); and 

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

9 with regard to disclosing nonpublic personal infor10 mation, 

11 shall be exempt from the annual disclosure requirement 

12 under subsection (a).’’. 

13 SEC. 204. STREAMLINING REPORTS OF CONDITION. 

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

15 (12 U.S.C. 1817(a)) is amended by inserting after para16 graph (11) (as added by section 102 of this Act) the fol17 lowing new paragraph: 

18 ‘‘(12) STREAMLINING REPORTS OF CONDI19 TION.— 

20 ‘‘(A) REVIEW OF INFORMATION AND

21 SCHEDULES.—Before the end of the 1-year pe22 riod beginning on the date of the enactment of 

23 the Community Banks Serving Their Commu24 nities First Act and before the end of each 5- 

25 year period thereafter, the Corporation shall, in 

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1 conjunction with the Board of Governors of the 

2 Federal Reserve System, the Comptroller of the 

3 Currency, and the Director of the Office of 

4 Thrift Supervision, review the information and 

5 schedules that are required to be filed by any 

6 insured depository institution with a report of 

7 condition under paragraph (3). 

8 ‘‘(B) REDUCTION OR ELIMINATION OF FIL9 INGS WHICH ARE MORE BURDENSOME THAN

10 BENEFICIAL.—Within 9 months of completing 

11 any review under subparagraph (A), the Cor12 poration, the Board of Governors of the Federal 

13 Reserve System, the Comptroller of the Cur14 rency, and the Director of the Office of Thrift 

15 Supervision shall reduce or eliminate any re16 quirement to file information or schedules 

17 under paragraph (3) if such agencies find that 

18 the burdens of such filings are not outweighed 

19 by the benefits to safety and soundness of the 

20 financial system or the ability of the Corpora21 tion to accurately determine the financial condi22 tion and the results of operations of each in23 sured depository institution. 

24 ‘‘(C) REPORT TO THE CONGRESS.—Before 

25 the end of the 6-month period beginning on the 

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1 date of completion of any review under subpara2 graph (A), the Corporation, the Board of Gov3 ernors of the Federal Reserve System, the 

4 Comptroller of the Currency, and the Director 

5 of the Office of Thrift Supervision shall submit 

6 a report to the Committee on Financial Services 

7 of the House of Representatives and the Com8 mittee on Banking, Housing, and Urban Affairs 

9 of the Senate containing the findings of the 

10 agencies with respect to such review and any 

11 recommendation of such agencies for legislative 

12 action to implement any such finding.’’. 

13 SEC. 205. INCREASE IN THE SPECIAL REGULATORY LEND14 ING LIMIT ON LOANS TO EXECUTIVE OFFI15 CERS. 

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

17 375b(g)) is amended by adding at the end the following 

18 new paragraph: 

19 ‘‘(11) LIMIT APPLICABLE ON AGGREGATE

20 AMOUNT OF CERTAIN LOANS TO EXECUTIVE OFFI21 CERS OF COMMUNITY BANKS.—Notwithstanding any 

22 regulation prescribed by the Board under paragraph 

23 (4) and subject to other conditions imposed under 

24 this subsection and subsection (h), the aggregate 

25 amount of extensions of credit that a member bank 

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1 may make to an executive officer of the bank under 

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

3 TITLE III—TAX RELIEF FOR 

4 BANK DEPOSITORS, RURAL 

5 BANKS, MUNICIPALITIES, AND 

6 BANKS ORGANIZED AS LIM7 ITED LIABILITY COMPANIES 

8 SEC. 301. REDUCED RATE AND DEFERRAL OF INCOME REC9 OGNITION ON LONG-TERM CERTIFICATES OF 

10 DEPOSIT. 

11 (a) DEFERRAL OF INCOME RECOGNITION.—Section 

12 451 of the Internal Revenue Code of 1986 (relating to 

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

14 adding at the end the following new subsection: 

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

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

17 cash receipts and disbursements method of accounting 

18 who holds a nonnegotiable certificate of deposit, interest 

19 income which is not made available for withdrawal before 

20 maturity of the certificate without penalty shall not be in21 cludible in gross income before the certificate is redeemed 

22 or matures.’’. 

23 (b) INTEREST INCOME ON LONG-TERM CERTIFI24 CATES OF DEPOSIT.—Subparagraph (A) of section 

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1 1(h)(11) of such Code is amended by striking ‘‘increased 

2 by’’ and all that follows and inserting: 

3 ‘‘increased by— 

4 ‘‘(i) qualified dividend income, and 

5 ‘‘(ii) interest income on any nonnego6 tiable certificate of deposit— 

7 ‘‘(I) with a fixed maturity date 

8 which is 1 year or more from the date 

9 of issue, and 

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

11 made available for withdrawal before 

12 maturity without penalty.’’. 

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

14 this section shall apply to taxable years beginning after 

15 the date of the enactment of this Act. 

16 SEC. 302. EXCLUSION FOR INTEREST ON LOANS SECURED 

17 BY AGRICULTURAL REAL PROPERTY. 

18 (a) IN GENERAL.—Part III of subchapter B of chap19 ter 1 of the Internal Revenue Code of 1986 (relating to 

20 items specifically excluded from gross income) is amended 

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

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1 ‘‘SEC. 139B. INTEREST ON LOANS SECURED BY AGRICUL2 TURAL REAL PROPERTY. 

3 ‘‘(a) EXCLUSION.—Gross income shall not include in4 terest received by a qualified lender on any qualified real 

5 estate loan. 

6 ‘‘(b) DEFINITIONS.—For purposes of this section— 

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

8 lender’ means any bank or savings association the 

9 deposits of which are insured under the Federal De10 posit Insurance Act (12 U.S.C. 1811 et seq.). 

11 ‘‘(2) QUALIFIED REAL ESTATE LOAN.—The 

12 term ‘qualified real estate loan’ means any loan se13 cured by agricultural real estate or by a leasehold 

14 mortgage (with a status as a lien) on agricultural 

15 real estate. For purposes of the preceding sentence, 

16 the determination of whether property securing such 

17 loan is agricultural real estate shall be made as of 

18 the time the interest income on such loan is accrued. 

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

20 ‘agricultural real estate’ means— 

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

22 of 1 or more agricultural products, and 

23 ‘‘(B) any single family residence— 

24 ‘‘(i) which is the principal residence 

25 (within the meaning of section 121) of its 

26 occupant, 

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1 ‘‘(ii) which is located in a rural area 

2 (as determined by the Secretary of Agri3 culture), which is not within a Metropoli4 tan Statistical Area (as defined by the Of5 fice of Management and Budget) and 

6 which has a population (determined on the 

7 basis of the most recent decennial census 

8 for which data are available) of 2,500 or 

9 less, and 

10 ‘‘(iii) which is purchased or improved 

11 with the proceeds of the qualified real es12 tate loan. 

13 ‘‘(c) COORDINATION WITH SECTION 265.—Qualified 

14 real estate loans shall be treated as obligations described 

15 in section 265(a)(2) the interest on which is wholly exempt 

16 from the taxes imposed by this subtitle.’’. 

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

18 for such part III is amended by inserting after the item 

19 relating to section 139A the following new item: 

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

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

21 this section shall apply to taxable years beginning after 

22 the date of the enactment of this Act. 

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

2 BONDS. 

3 (a) IN GENERAL.—Clause (i) of section 144(a)(4)(A) 

4 of the Internal Revenue Code of 1986 (relating to general 

5 rule for $10,000,000 limit in certain cases) is amended 

6 by striking ‘‘$10,000,000’’ and inserting ‘‘$30,000,000’’. 

7 (b) ADJUSTMENT OF CAP FOR INFLATION.—Sub8 section (a) of section 144 of such Code (relating to quali9 fied small issue bond) is amended by redesignating para10 graph (12) as paragraph (13) and by inserting after para11 graph (11) the following new paragraph: 

12 ‘‘(12) INFLATION ADJUSTMENT.—In the case of 

13 a calendar year after 2006, the $30,000,000 amount 

14 contained in paragraph (4)(A)(i) shall be increased 

15 by an amount equal to— 

16 ‘‘(A) such dollar amount, multiplied by 

17 ‘‘(B) the cost-of-living adjustment deter18 mined under section 1(f)(3) for such calendar 

19 year by substituting ‘calendar year 2005’ for 

20 ‘calendar year 1992’ in subparagraph (B) 

21 thereof. 

22 Any increase under the preceding sentence which is 

23 not a multiple of $100,000 shall be rounded to the 

24 next lowest multiple of $100,000.’’. 

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

26 this section shall apply to— 

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1 (1) obligations issued after the date of the en2 actment of this Act, and 

3 (2) capital expenditures made after such date 

4 with respect to obligations issued on or before such 

5 date. 

6 SEC. 304. LIMITED LIABILITY COMPANY TAX TREATMENT 

7 FOR FDIC-INSURED LIMITED LIABILITY COM8 PANIES. 

9 (a) IN GENERAL.—Paragraph (2) of section 7701(a) 

10 of the Internal Revenue Code of 1986 (defining partner11 ship and partner) is amended to read as follows: 

12 ‘‘(2) PARTNER AND PARTNERSHIP.— 

13 ‘‘(A) IN GENERAL.—The term ‘partner14 ship’ includes a syndicate, group, pool, joint 

15 venture, or other unincorporated organization, 

16 through or by means of which any business, fi17 nancial operation, or venture is carried on, and 

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

19 a trust or estate or a corporation; and the term 

20 ‘partner’ includes a member in such a syn21 dicate, group, pool, joint venture, or organiza22 tion. 

23 ‘‘(B) ELECTION BY CERTAIN BANKS TO BE

24 TAXED AS PARTNERSHIPS.— 

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1 ‘‘(i) IN GENERAL.—An eligible cor2 poration may elect to be treated as a part3 nership for purposes of this title. 

4 ‘‘(ii) TAX TREATMENT.—In the case 

5 of an eligible corporation making an elec6 tion under clause (i)— 

7 ‘‘(I) no gain or loss shall be rec8 ognized to the corporation or the 

9 shareholders by reason of an election 

10 under clause (i), and 

11 ‘‘(II) section 1374 shall apply to 

12 the entity after such election. 

13 ‘‘(iii) ELIGIBLE CORPORATION.—The 

14 term ‘eligible corporation’ means any of 

15 the following entities which would (but for 

16 this subparagraph) be treated as a C cor17 poration for purposes of this title: 

18 ‘‘(I) Any bank (as defined in sec19 tion 581). 

20 ‘‘(II) Any bank holding company 

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

22 Bank Holding Company Act of 1956 

23 (12 U.S.C. 1841(a))). 

24 ‘‘(III) Any savings association 

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1 eral Deposit Insurance Act (12 U.S.C. 

2 1813)). 

3 ‘‘(IV) Any savings and loan hold4 ing company (as defined in section 

5 10(a)(1)(D) of the Home Owners 

6 Loan Act).’’. 

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

8 this section shall apply to taxable years beginning after 

9 the date of the enactment of this Act. 

10 TITLE IV—TAX RELIEF FOR COM11 MUNITY BANKS AND HOLD12 ING COMPANIES 

13 SEC. 401. REDUCTION IN TAX. 

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

15 Revenue Code of 1986 (relating to tax imposed) is amend16 ed by adding at the end the following new subsection: 

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

18 ‘‘(1) IN GENERAL.—In the case of a C corpora19 tion which is a community bank, the aggregate tax 

20 imposed by this section, section 55, and section 

21 1201 shall be 80 percent of the aggregate tax which 

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

23 sections. 

24 ‘‘(2) MAXIMUM REDUCTION.—The reduction in 

25 tax by reason of this subsection shall not exceed 

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1 $250,000. Corporations treated as 1 corporation 

2 under section 1202(d)(3) shall be so treated under 

3 this subsection, and the limitation under the pre4 ceding sentence shall be allocated among such cor5 porations in such manner as the Secretary shall pre6 scribe. 

7 ‘‘(3) INCREASED BENEFIT FOR BANKS OPER8 ATING IN DISTRESSED AREAS, ETC.— 

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

10 operating in an area referred to in subpara11 graph (B)— 

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

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

14 and 

15 ‘‘(ii) paragraph (2) shall be applied by 

16 substituting ‘$500,000’ for ‘$250,000’. 

17 ‘‘(B) AREAS DESCRIBED.—The areas re18 ferred to in this subparagraph are— 

19 ‘‘(i) empowerment zones and enter20 prise communities designated under section 

21 1391, 

22 ‘‘(ii) renewal communities designated 

23 under section 1400E, 

24 ‘‘(iii) low-income communities (as de25 fined in section 45D(e)), and 

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1 ‘‘(iv) distressed communities (within 

2 the meaning of section 233 of the Bank 

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

4 1834a(b)). 

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

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

7 the following entities the gross assets of which (de8 termined under the rules of section 1202(d)) are 

9 $5,000,000,000 or less: 

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

11 ‘‘(B) Any bank holding company (as de12 fined in section 2(a) of the Bank Holding Com13 pany Act of 1956 (12 U.S.C. 1841(a))). 

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

15 section 3(b) of the Federal Deposit Insurance 

16 Act (12 U.S.C. 1813)). 

17 ‘‘(D) Any savings and loan holding com18 pany (as defined in section 10(a)(1)(D) of the 

19 Home Owners Loan Act).’’. 

20 (b) S CORPORATIONS.—Subsection (a) of section 

21 1366 of such Code is amended by adding at the end the 

22 following new paragraph: 

23 ‘‘(3) REDUCTION OF TAX ON COMMUNITY

24 BANKS.— 

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

2 corporation which is a community bank (as de3 fined in section 11(e)(4)), the net amount re4 quired to be taken into account by shareholders 

5 (without regard to this paragraph) shall be re6 duced by the lesser of— 

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

8 ‘‘(ii) $1,250,000. 

9 ‘‘(B) INCREASED BENEFIT FOR BANKS OP10 ERATING IN DISTRESSED AREAS, ETC.—In the 

11 case of a bank operating in an area referred to 

12 in section 11(e)(3)(B)— 

13 ‘‘(i) subparagraph (A)(i) shall be ap14 plied by substituting ‘50 percent’ for ‘20 

15 percent’, and 

16 ‘‘(ii) subparagraph (A)(ii) shall be ap17 plied by substituting ‘$2,500,000’ for 

18 ‘$1,250,000’.’’. 

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

20 this section shall apply to taxable years beginning after 

21 the date of the enactment of this Act. 

22 SEC. 402. COMMUNITY BANKS EXEMPT FROM MINIMUM 

23 TAX. 

24 (a) IN GENERAL.—Section 55 of the Internal Rev25 enue Code of 1986 (relating to alternative minimum tax 

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

2 new subsection: 

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

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

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

6 shall be zero. 

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

8 to the rules of paragraphs (2) through (5) of sub9 section (e) shall apply for purposes of this sub10 section.’’. 

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

12 this section shall apply to taxable years beginning after 

13 the date of the enactment of this Act. 

Æ