I 

111TH CONGRESS 

2D SESSION H. R. 5990 

To amend the Internal Revenue Code of 1986 to allow a business credit 

for investments in rural microbusinesses. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 30, 2010 

Mr. KIND (for himself and Mr. HERGER) introduced the following bill; which 

was referred to the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to allow a 

business credit for investments in rural microbusinesses. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Rural Microbusiness 

5 Investment Credit Act of 2010’’. 

6 SEC. 2. RURAL MICROBUSINESS INVESTMENT CREDIT. 

7 (a) IN GENERAL.—Subpart D of part IV of sub8 chapter A of chapter 1 of the Internal Revenue Code of 

9 1986 (relating to business related credits) is amended by 

10 adding at the end the following new section: 


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1 ‘‘SEC. 45S. RURAL MICROBUSINESS INVESTMENT CREDIT. 

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

3 amount of the rural microbusiness investment credit deter4 mined under this section for any taxable year with respect 

5 to a rural microbusiness is equal to 35 percent of the 

6 qualified new investments in the rural microbusiness for 

7 the taxable year. 

8 ‘‘(b) LIMITATIONS.— 

9 ‘‘(1) PER BUSINESS LIMITATIONS.—The 

10 amount allowed as a credit under subsection (a) with 

11 respect to any rural microbusiness for a taxable year 

12 shall not exceed— 

13 ‘‘(A) $10,000, reduced (but not below 

14 zero), by 

15 ‘‘(B) the amount allowed under subsection 

16 (a) to the rural microbusiness for all preceding 

17 taxable years. 

18 ‘‘(2) PER TAXPAYER LIMITATIONS.—The 

19 amount allowed as a credit under subsection (a) with 

20 respect to any taxpayer with respect to all rural 

21 microbusinesses of the taxpayer for a taxable year 

22 shall not exceed— 

23 ‘‘(A) $10,000, reduced (but not below 

24 zero), by 


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1 ‘‘(B) the amount allowed under subsection 

2 (a) to the taxpayer with respect to rural micro3 businesses for all preceding taxable years. 

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

5 ‘‘(1) QUALIFIED NEW INVESTMENT.—The term 

6 ‘qualified new investment’ means the excess of— 

7 ‘‘(A) qualified expenditures paid or in8 curred for the taxable year, over 

9 ‘‘(B) the greater of— 

10 ‘‘(i) qualified expenditures paid or in11 curred for the preceding taxable year, or 

12 ‘‘(ii) the average annual qualified ex13 penditures paid or incurred over the pre14 ceding three taxable years. 

15 If the rural microbusiness was not in existence (or 

16 expenditures relating to such microbusiness were not 

17 taken into account under subsection (a)) for the en18 tire 3-year period referred to in subparagraph 

19 (B)(ii), such subparagraph shall be applied on the 

20 basis of the period during which such entity (or 

21 trade or business) was in existence or such expendi22 tures taken into account. 

23 ‘‘(2) QUALIFIED EXPENDITURES.— 

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

25 expenditures’ means any amount which is paid 


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1 or incurred with respect to a rural microbusi2 ness which is not described in subparagraph 

3 (B). Such term includes costs for capital plant 

4 and equipment, inventory expenses, and wages. 

5 ‘‘(B) EXCEPTION.—Such term does not in6 clude— 

7 ‘‘(i) any interest cost, or 

8 ‘‘(ii) the cost of any vehicle and costs 

9 associated with purchasing a vehicle. 

10 ‘‘(3) RURAL MICROBUSINESS.— 

11 ‘‘(A) IN GENERAL.—The term ‘rural 

12 microbusiness’ means a trade or business car13 ried on as a proprietorship, partnership, trust 

14 (to the extent that the trust is a pass-thru enti15 ty), S corporation, or other pass-thru entity 

16 if— 

17 ‘‘(i) such trade or business is carried 

18 on in a distressed rural area for the first 

19 taxable year in which the credit under sub20 section (a) is allowable to the trade or 

21 business, 

22 ‘‘(ii) such trade or business meets the 

23 gross revenue test under subparagraph (C) 

24 for the first taxable year in which the credVerDate Mar 15 2010 21:58 Aug 02, 2010 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H5990.IH H5990

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1 it under subsection (a) is allowable to the 

2 trade or business, 

3 ‘‘(iii) such trade or business employed 

4 not more than 5 full-time equivalent em5 ployees during the taxable year, and 

6 ‘‘(iv) in the case of a trade or busi7 ness the majority of the activity of which 

8 is in agricultural production, each indi9 vidual who is an owner, shareholder, or 

10 holds a capital interest, profits interests, or 

11 beneficial interests (as the case may be) in 

12 such trade or business is a first-time farm13 er (as defined in section 147(c)(2)(C)). 

14 All persons treated as a single employer under 

15 subsection (a) or (b) or section 52 or subsection 

16 (m) or (o) of section 414 shall be treated as a 

17 trade or business for purposes of this subpara18 graph. 

19 ‘‘(B) EXCEPTIONS.—Such term shall not 

20 include— 

21 ‘‘(i) any trade or business which in22 cludes, in whole or in part, any private or 

23 commercial golf course, country club, mas24 sage parlor, hot tub facility, suntan facil25 ity, racetrack or other facility used for 


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1 gambling, or any store the principal busi2 ness of which is the sale of alcoholic bev3 erages for consumption off premises, or 

4 ‘‘(ii) any trade or business with re5 spect to which records are required under 

6 section 2257 of title 18, United States 

7 Code, to be maintained with respect to any 

8 performer. 

9 ‘‘(C) GROSS REVENUE TEST.— 

10 ‘‘(i) IN GENERAL.—A trade or busi11 ness meets the gross revenue test of this 

12 subparagraph for any taxable year if the 

13 average annual gross revenue of the trade 

14 or business for the 3-taxable year period 

15 ending with the taxable year does not ex16 ceed $1,000,000. 

17 ‘‘(ii) AGGREGATION RULES.—All per18 sons treated as a single employer under 

19 subsection (a) or (b) or section 52 or sub20 section (m) or (o) of section 414 shall be 

21 treated as a trade or business for purposes 

22 of clause (i). 

23 ‘‘(iii) SPECIAL RULES FOR ENTITIES

24 NOT IN EXISTENCE FOR ENTIRE 3-YEAR

25 PERIOD, ETC.—Rules similar to the rules 


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1 of subparagraphs (A), (B), and (D) of sec2 tion 448(c)(3) shall apply for purposes of 

3 this subparagraph. 

4 ‘‘(D) SELF-EMPLOYED INDIVIDUALS.—For 

5 purposes of this paragraph, if, with respect to 

6 a trade or business, an individual is treated as 

7 an employee under section 401(c), such indi8 vidual shall be treated as an employee of such 

9 trade or business for purposes of the preceding 

10 sentence. 

11 ‘‘(E) FULL-TIME EQUIVALENT EM12 PLOYEE.—For purposes of this paragraph— 

13 ‘‘(i) IN GENERAL.—The term ‘full14 time equivalent employee’ means a number 

15 of employees equal to the number deter16 mined by dividing— 

17 ‘‘(I) the total number of hours of 

18 service for which wages were paid by 

19 the employer to employees during the 

20 taxable year, by 

21 ‘‘(II) 2,080. 

22 Such number shall be rounded to the next 

23 lowest whole number if not otherwise a 

24 whole number. 


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1 ‘‘(ii) EXCESS HOURS NOT COUNT2 ED.—If an employee works in excess of 

3 2,080 hours of service during any taxable 

4 year, such excess shall not be taken into 

5 account under clause (i). 

6 ‘‘(iii) HOURS OF SERVICE.—The Sec7 retary, in consultation with the Secretary 

8 of Labor, shall prescribe such regulations, 

9 rules, and guidance as may be necessary to 

10 determine the hours of service of an em11 ployee, including rules for the application 

12 of this paragraph to employees who are not 

13 compensated on an hourly basis. 

14 ‘‘(4) DISTRESSED RURAL AREA.— 

15 ‘‘(A) IN GENERAL.—The term ‘distressed 

16 rural area’ means any area in the United 

17 States— 

18 ‘‘(i) that has lost at least 5 percent of 

19 its population over the last 10 years, 

20 ‘‘(ii) that lost at least 10 percent if its 

21 population over the last 20 years, 

22 ‘‘(iii) that has median family income 

23 below 85 percent of the national median 

24 family income, 


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1 ‘‘(iv) that has a poverty rate that ex2 ceeds 12.5 percent, or 

3 ‘‘(v) where average unemployment in 

4 the preceding year exceeds 125 percent of 

5 the national average. 

6 ‘‘(B) EXCEPTION.—Such term does not in7 clude any area which is— 

8 ‘‘(i) a city or town that has a popu9 lation of more than 50,000 inhabitants, or 

10 ‘‘(ii) an urbanized area contiguous 

11 and adjacent to a city or town described in 

12 clause (i). 

13 ‘‘(C) RELEVANT SOURCES OF INFORMA14 TION.—In determining whether an area is a 

15 distressed rural area under subparagraph (A) 

16 or (B), such determination shall be made in ac17 cordance with the most recent information from 

18 the Bureau of the Census, the Bureau of Labor 

19 Statistics, or other government entity with rel20 evant information. 

21 ‘‘(5) RELATED PERSONS.—A person shall be 

22 treated as related to another person if the relation23 ship between such persons would result in the dis24 allowance of losses under section 267 or 707(b) (but, 

25 in applying section 267 (b) and (c) for purposes of 


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1 this section, paragraph (4) of section 267(c) shall be 

2 treated as providing that the family of an individual 

3 shall include only his spouse, ancestors, and lineal 

4 descendants). 

5 ‘‘(d) MATERIAL PARTICIPATION.—No amount shall 

6 be allowed as a credit under subsection (a) to a taxpayer 

7 unless that taxpayer materially participates in the quali8 fied rural microbusiness with respect to which the quali9 fied expenditure is paid or incurred. For purposes of the 

10 preceding sentence, material participation shall be deter11 mined under rules similar to the rules of section 469(h). 

12 ‘‘(e) DENIAL OF DOUBLE BENEFIT.—No deduction 

13 or credit shall be allowed under any other provision of this 

14 chapter for any amount taken into account in determining 

15 the credit under this section. 

16 ‘‘(f) OTHER RULES.— 

17 ‘‘(1) MARRIED COUPLE MUST FILE JOINT RE18 TURN.—Rules similar to the rules of paragraphs (2), 

19 (3), and (4) of section 21(e) shall apply for purposes 

20 of this section. 

21 ‘‘(2) DENIAL OF CREDIT TO DEPENDENTS.—No 

22 credit shall be allowed under this section to any indi23 vidual with respect to whom a deduction is allowed 

24 under section 151 is allowable to another taxpayer 


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1 for a taxable year beginning in the calendar year in 

2 which such individual’s calendar year begins.’’. 

3 (b) CREDIT ALLOWED AS PART OF GENERAL BUSI4 NESS CREDIT.—Section 38(b) of such Code (defining cur5 rent year business credit) is amended by striking ‘‘plus’’ 

6 at the end of paragraph (35), by striking the period at 

7 the end of paragraph (36) and inserting ‘‘, plus’’, and by 

8 adding at the end the following new paragraph: 

9 ‘‘(37) the rural microbusiness investment credit 

10 determined under section 45R(a).’’. 

11 (c) CARRYOVER OF UNUSED CREDIT.—Subsection 

12 (a) of section 39 of such Code is amended by adding at 

13 the end the following new paragraph: 

14 ‘‘(4) 5-YEAR CARRYBACK FOR RURAL MICRO15 BUSINESS INVESTMENT CREDIT.—Notwithstanding 

16 subsection (d), in the case of the rural microbusiness 

17 investment credit— 

18 ‘‘(A) this section shall be applied sepa19 rately from the business credit and the mar20 ginal oil and gas well production credit (other 

21 than the rural microbusiness investment credit), 

22 ‘‘(B) paragraph (1) shall be applied by 

23 substituting ‘each of the 5 taxable years’ for 

24 ‘the taxable year’ in subparagraph (A) thereof, 

25 and 


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1 ‘‘(C) paragraph (2) shall be applied— 

2 ‘‘(i) by substituting ‘25 taxable years’ 

3 for ‘21 taxable years’ in subparagraph (A) 

4 thereof, and 

5 ‘‘(ii) by substituting ‘24 taxable years’ 

6 for ‘20 taxable years’ in subparagraph (B) 

7 thereof.’’. 

8 (d) CONFORMING AMENDMENT.—The table of sec9 tions for subpart D of part IV of subchapter A of chapter 

10 1 of such Code is amended by adding at the end the fol11 lowing new item: 

‘‘Sec. 45S. Rural microbusiness investment credit.’’. 

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

13 this section shall apply to expenditures made in taxable 

14 years beginning after the date of the enactment of this 

15 Act. 

Æ 


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