II

106TH CONGRESS

2D SESSION S. 2596

To amend the Internal Revenue Code of 1986 to encourage a strong

community-based banking system.

IN THE SENATE OF THE UNITED STATES

MAY 18, 2000

Mrs. HUTCHISON introduced the following bill; which was read twice and

referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to encourage

a strong community-based banking system.

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 Savings

5 and Investment Act of 2000’’.

6 SEC. 2. INCOME TAX ON QUALIFIED COMMUNITY LENDERS.

7 (a) IN GENERAL.—Section 11 of the Internal Rev8 enue Code of 1986 (relating to tax imposed on corpora9 tions) is amended by redesignating subsection (d) as sub-
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1 section (e) and by inserting after subsection (c) the fol2 lowing new subsection:

3 ‘‘(d) QUALIFIED COMMUNITY LENDERS.—

4 ‘‘(1) IN GENERAL.—In the case of a qualified

5 community lender, in lieu of the amount of tax

6 under subsection (b), the amount of tax imposed by

7 subsection (a) for a taxable year shall be the sum

8 of—

9 ‘‘(A) 15 percent of so much of the taxable

10 income as exceeds $250,000 but does not ex11 ceed $1,000,000, and

12 ‘‘(B) the highest rate of tax imposed by

13 subsection (b) multiplied by so much of the tax14 able income as exceeds $1,000,000.

15 ‘‘(2) QUALIFIED COMMUNITY LENDER.—For

16 purposes of paragraph (1), the term ‘qualified com17 munity lender’ means a bank—

18 ‘‘(A) which achieved a rating of ‘satisfac19 tory record of meeting community credit needs’,

20 or better, at the most recent examination of

21 such bank under the Community Reinvestment

22 Act of 1977,

23 ‘‘(B) the outstanding local community

24 loans of which at all times during the taxable
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1 year comprised not less than 60 percent of the

2 total outstanding loans of that bank,

3 ‘‘(C) meets the ownership requirements of

4 paragraph (3), and

5 ‘‘(D) at all times during the taxable year

6 has total assets of not more than

7 $1,000,000,000.’’.

8 ‘‘(3) OWNERSHIP REQUIREMENTS.—

9 ‘‘(A) IN GENERAL.—The ownership re10 quirements of this paragraph are met with re11 spect to any bank if—

12 ‘‘(i) no shares of, or other ownership

13 interests in, the bank are publicly traded,

14 or

15 ‘‘(ii) in the case of a bank the shares

16 of which or ownership interests in which

17 are publicly traded, the last known address

of the holders of at least 2 18 ⁄3 of all such

19 shares or interests, including persons for

20 whose benefit such shares or interests are

21 held by another, is in the home State of

22 the bank or a State contiguous to such

23 home State.
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1 ‘‘(B) HOME STATE DEFINED.—For pur2 poses of subparagraph (A), the term ‘home

3 State’ means—

4 ‘‘(i) with respect to a national bank or

5 Federal savings association, the State in

6 which the main office of the bank or sav7 ings association is located, and

8 ‘‘(ii) with respect to a State bank or

9 State savings association, the State by

10 which the bank or savings association is

11 chartered.

12 ‘‘(4) OTHER DEFINITIONS.—For purposes of

13 this subsection—

14 ‘‘(A) BANK.—The term ‘bank’—

15 ‘‘(i) has the meaning given to such

16 term in section 581, and

17 ‘‘(ii) includes any bank—

18 ‘‘(I) in which at least 80 percent

19 of the shares of, or other ownership

20 interests in, the bank are owned by

21 other qualified community lenders,

22 and

23 ‘‘(II) the sole purpose of which is

24 to serve the banking needs of such

25 lenders.
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1 ‘‘(B) LOCAL COMMUNITY LOAN.—The term

2 ‘local community loan’ means—

3 ‘‘(i) any loan originated by a bank to

4 any person, other than a related person

5 with respect to the bank, who is a resident

6 of a community in which the bank is char7 tered or in which it operates an office at

8 which deposits are accepted, and

9 ‘‘(ii) any loan originated by a bank to

10 any person, other than a related person

11 with respect to the bank, who is engaged

12 in a trade or business in any such commu13 nity, to the extent that all or substantially

14 all of the proceeds of such loan are ex15 pended in connection with the trade or

16 business of such person in any such com17 munity.

18 ‘‘(C) RELATED PERSON.—The term ‘re19 lated person’ means, with respect to any bank,

20 any affiliate of the bank, any person who is a

21 director, officer, or principal shareholder of the

22 bank, and any member of the immediate family

23 of any such person.’’.

24 (b) S CORPORATION INCOME.—Section 1 of the In25 ternal Revenue Code of 1986 (relating to tax imposed) is
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1 amended by adding at the end the following new sub2 section:

3 ‘‘(i) COMMUNITY LENDER INCOME FROM S COR4 PORATION.—

5 ‘‘(1) IN GENERAL.—If a taxpayer has commu6 nity lender income from a S corporation for any tax7 able year, the tax imposed by this section for such

8 taxable year shall be the sum of—

9 ‘‘(A) the tax computed at the rates and in

10 the same manner as if this subsection had not

11 been enacted on the greater of—

12 ‘‘(i) taxable income reduced by com13 munity lender income, or

14 ‘‘(ii) the lesser of—

15 ‘‘(I) the amount of taxable in16 come taxed at a rate below 28 per17 cent, or

18 ‘‘(II) taxable income reduced by

19 community lender income, and

20 ‘‘(B) a tax on community lender income

21 computed at—

22 ‘‘(i) a rate of zero on zero-rate com23 munity lender income,

24 ‘‘(ii) a rate of 15 percent on 15 per25 cent community lender income, and
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1 ‘‘(iii) the highest rate in effect under

2 this section with respect to the taxpayer on

3 the excess of community lender income on

4 which a tax is determined under clause (i)

5 or (ii).

6 ‘‘(2) COMMUNITY LENDER INCOME.—For pur7 poses of paragraph (1)—

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

9 community lender income’ means taxable in10 come (if any) of a qualified community lender

11 (as defined in section 11(d)(2)) that is an S

12 corporation, determined at the entity level.

13 ‘‘(B) ZERO-RATE COMMUNITY LENDER IN14 COME.—The term ‘zero-rate community lender

15 income’ means the taxpayer’s pro rata share of

16 so much of community lender income as does

17 not exceed $250,000.

18 ‘‘(C) 15 PERCENT COMMUNITY LENDER IN19 COME.—The term ‘15 percent community lend20 er income’ means the taxpayer’s pro rata share

21 of so much of community lender income as ex22 ceeds $250,000 but does not exceed

23 $1,000,000.

24 ‘‘(D) SPECIAL RULES.—
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1 ‘‘(i) For purposes of this paragraph,

2 the taxpayer’s pro rata share of commu3 nity lender income shall be determined

4 under part II of subchapter S.

5 ‘‘(ii) This subsection shall be applied

6 after the application of subsection (h).’’.

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

8 this section shall apply to taxable years beginning after

9 December 31, 2000.

10 SEC. 3. EXCLUSION FROM INCOME TAXATION FOR INCOME

11 DERIVED FROM BANKING SERVICES WITHIN

12 DISTRESSED COMMUNITIES.

13 (a) IN GENERAL.—Part III of subchapter B of chap14 ter 1 of the Internal Revenue Code of 1986 (relating to

15 items specifically excluded from gross income) is amended

16 by redesignating section 139 as section 140 and by insert17 ing after section 138 the following new section:

18 ‘‘SEC. 139. BANKING SERVICES WITHIN DISTRESSED COM19 MUNITIES.

20 ‘‘(a) IN GENERAL.—At the election of the taxpayer,

21 gross income shall not include distressed community bank22 ing income.

23 ‘‘(b) DISTRESSED COMMUNITY BANKING INCOME.—

24 For purposes of subsection (a), the term ‘distressed com25 munity banking income’ means net income of a qualified
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1 depository institution which is derived from the active con2 duct of a banking business in a distressed community.

3 ‘‘(c) QUALIFIED DEPOSITORY INSTITUTION.—For

4 purposes of this section, an institution is a qualified depos5 itory institution if—

6 ‘‘(1) such institution is an insured depository

7 institution (as defined in section 3 of the Federal

8 Deposit Insurance Act (12 U.S.C. 1813)),

9 ‘‘(2) such institution is located in, or has a

10 branch located in, a qualified distressed community,

11 and

12 ‘‘(3) as of the last day of the taxable year, at

13 least 85 percent of its loans from its location within

14 the qualified distressed community are local commu15 nity loans (as defined in section 11(d)(4)(B)).

16 ‘‘(d) DISTRESSED COMMUNITY.—For purposes of

17 this section, the term ‘distressed community’ has the

18 meaning given the term ‘qualified distressed community’

19 by section 233 of the Bank Enterprise Act of 1991 (12

20 U.S.C. 1834a(b)).’’.

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

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

23 Revenue Code of 1986 is amended by striking the item

24 relating to section 139 and inserting after the item relat25 ing to section 138 the following new items:
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‘‘Sec. 139. Banking services within distressed communities.

‘‘Sec. 140. Cross references to other Acts.’’.

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

2 this section shall apply to taxable years beginning after

3 the date of the enactment of this Act.

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