I

107TH CONGRESS

1ST SESSION H. R. 1220

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

community-based banking system.

IN THE HOUSE OF REPRESENTATIVES

MARCH 27, 2001

Mr. SESSIONS (for himself, Mr. POMEROY, and Mr. HALL of Texas) 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 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 This Act may be cited as the ‘‘Community Savings

4 and Investment Act of 2001’’.

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

6 (a) IN GENERAL.—Section 11 of the Internal Rev7 enue Code of 1986 (relating to tax imposed on corpora8 tions) is amended by redesignating subsection (d) as sub9 section (e) and by inserting after subsection (c) the fol10 lowing new subsection:
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1 ‘‘(d) QUALIFIED COMMUNITY LENDERS.—

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

3 community lender, in lieu of the amount of tax

4 under subsection (b) the amount of tax imposed by

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

6 of—

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

8 income as exceeds $250,000 but does not ex9 ceed $1,000,000, and

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

11 subsection (b) multiplied by so much of the tax12 able income as exceeds $1,000,000.

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

14 purposes of paragraph (1), the term ‘qualified com15 munity lender’ means a bank—

16 ‘‘(A) which achieved a rating of ‘satisfac17 tory record of meeting community credit needs’,

18 or better, at the most recent examination of

19 such bank under the Community Reinvestment

20 Act of 1977,

21 ‘‘(B) whose outstanding local community

22 loans at all times during the taxable year com23 prised not less than 60 percent of the total out24 standing loans,
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1 ‘‘(C) meets the ownership requirements of

2 paragraph (3), and

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

4 has total assets of not more than

5 $1,000,000,000.’’.

6 ‘‘(3) OWNERSHIP REQUIREMENTS.—

7 ‘‘(A) IN GENERAL.—The ownership re8 quirements of this paragraph are met with re9 spect to any bank if—

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

11 interests in, the bank are publicly traded,

12 or

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

14 of which or ownership interests in which

15 are publicly traded, the last known address

of the holders of at least 2 16 ⁄3 of all such

17 shares or interests, including persons for

18 whose benefit such shares or interests are

19 held by another, is in the home State of

20 the bank or a State contiguous to such

21 home State.

22 ‘‘(B) HOME STATE DEFINED.—For pur23 poses of subparagraph (A), the term ‘home

24 State’ means—
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1 ‘‘(i) with respect to a national bank or

2 Federal savings association, the State in

3 which the main office of the bank or sav4 ings association is located, and

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

6 State savings association, the State by

7 which the bank or savings association is

8 chartered.

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

10 this subsection—

11 ‘‘(A) BANK.—The term ‘bank’—

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

13 term in section 581, and

14 ‘‘(ii) includes any bank—

15 ‘‘(I) in which at least 80 percent

16 of the shares of, or other ownership

17 interests in the bank are owned by

18 other qualified community lenders,

19 and

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

21 to serve the banking needs of such

22 lenders.

23 ‘‘(B) LOCAL COMMUNITY LOAN.—The term

24 ‘local community loan’ means—
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1 ‘‘(i) any loan originated by a bank to

2 any person, other than a related person

3 with respect to the bank, who is a resident

4 of a community in which the bank is char5 tered or in which it operates an office at

6 which deposits are accepted, and

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

8 any person, other than a related person

9 with respect to the bank, who is engaged

10 in a trade or business in any such commu11 nity, to the extent that all or substantially

12 all of the proceeds of such loan are ex13 pended in connection with the trade or

14 business of such person in any such com15 munity.

16 ‘‘(C) RELATED PERSON.—The term ‘re17 lated person’ means, with respect to any bank,

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

19 director, officer, or principal shareholder of the

20 bank, and any member of the immediate family

21 of any such person.’’.

22 (b) S CORPORATION INCOME.—

23 (1) IN GENERAL.—Section 1 of such Code (re24 lating to tax imposed) is amended by adding at the

25 end the following new subsection:
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1 ‘‘(i) COMMUNITY LENDER INCOME FROM S COR2 PORATION.—

3 ‘‘(1) IN GENERAL.—If a taxpayer has commu4 nity lender income from a S corporation for any tax5 able year, the tax imposed by this section for such

6 taxable year shall be the sum of—

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

8 the same manner as if this subsection had not

9 been enacted on the greater of—

10 ‘‘(i) taxable income reduced by com11 munity lender income, or

12 ‘‘(ii) the lesser of—

13 ‘‘(I) the amount of taxable in14 come taxed at a rate below 28 per15 cent, or

16 ‘‘(II) taxable income reduced by

17 community lender income, and

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

19 computed at—

20 ‘‘(i) a rate of zero on zero-rate com21 munity lender income,

22 ‘‘(ii) a rate of 15 percent on 15 per23 cent community lender income, and

24 ‘‘(iii) the highest rate in effect under

25 this section with respect to the taxpayer on
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1 the excess of community lender income on

2 which a tax is determined under clause (i)

3 or (ii).

4 ‘‘(2) COMMUNITY LENDER INCOME.—For pur5 poses of paragraph (1)—

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

7 community lender income’ means taxable in8 come (if any) of a qualified community lender

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

10 corporation, determined at the entity level.

11 ‘‘(B) ZERO-RATE COMMUNITY LENDER IN12 COME.—The term ‘zero-rate community lender

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

14 so much of community lender income as does

15 not exceed $250,000.

16 ‘‘(C) 15 PERCENT COMMUNITY LENDER IN17 COME.—The term ‘15 percent community lend18 er income’ means the taxpayer’s pro rata share

19 of so much of community lender income as ex20 ceeds $250,000 but does not exceed

21 $1,000,000.

22 ‘‘(D) SPECIAL RULES.—

23 ‘‘(i) For purposes of this paragraph,

24 the taxpayer’s pro rata share of commu-
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1 nity lender income shall be determined

2 under part II of subchapter S.

3 ‘‘(ii) This subsection shall be applied

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

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

6 this section shall apply to taxable years beginning after

7 December 31, 2001.

8 SEC. 3. EXCLUSION FROM INCOME TAXATION FOR INCOME

9 DERIVED FROM BANKING SERVICES WITHIN

10 DISTRESSED COMMUNITIES.

11 (a) FEDERAL TAXATION.—Part III of subchapter B

12 of chapter 1 of the Internal Revenue Code of 1986 (relat13 ing to items specifically excluded from gross income) is

14 amended by redesignating section 139 as section 140 and

15 by inserting after section 138 the following new section:

16 ‘‘SEC. 139. BANKING SERVICES WITHIN DISTRESSED COM17 MUNITIES.

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

19 gross income shall not include distressed community bank20 ing income.

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

22 For purposes of subsection (a), the term ‘distressed com23 munity banking income’ means net income of a qualified

24 depository institution which is derived from the active con25 duct of a banking business in a distressed community.
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1 ‘‘(c) QUALIFIED DEPOSITORY INSTITUTION.—An in2 stitution is a qualified depository institution if—

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

4 institution (as defined in section 3 of the Federal

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

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

7 branch located in, a qualified distressed community,

8 and

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

10 least 85 percent of its loans from its location within

11 the qualified distressed community are local commu12 nity loans (as defined in section 11(d)(4)(B)).

13 ‘‘(d) DISTRESSED COMMUNITY.—The term ‘dis14 tressed community’ has the meaning given the term ‘quali15 fied distressed community’ by section 233 of the Bank En16 terprise Act of 1991 (12 U.S.C. 1834a(b)).’’.

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

18 for part III of subchapter B of chapter 1 of such Code

19 is amended by striking the item relating to section 139

20 and inserting after the item relating to section 138 the

21 following new items:

‘‘Sec. 139. Banking services within distressed communities.

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