II 

110TH CONGRESS 

1ST SESSION S. 1264 

To amend the Internal Revenue Code of 1986 to provide a credit to holders 

of rural renaissance bonds. 

IN THE SENATE OF THE UNITED STATES 

MAY 2, 2007 

Mr. COLEMAN (for himself and Mr. PRYOR) 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 provide 

a credit to holders of rural renaissance bonds. 

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

3 SECTION 1. CREDIT TO HOLDERS OF RURAL RENAISSANCE 

4 BONDS. 

5 (a) IN GENERAL.—Subpart H of part IV of sub6 chapter A of chapter 1 of the Internal Revenue Code of 

7 1986 (relating to credits against tax) is amended by add8 ing at the end the following new section: 

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1 ‘‘SEC. 54A. CREDIT TO HOLDERS OF RURAL RENAISSANCE 

2 BONDS. 

3 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of a tax4 payer who holds a rural renaissance bond on 1 or more 

5 credit allowance dates of the bond occurring during any 

6 taxable year, there shall be allowed as a credit against the 

7 tax imposed by this chapter for the taxable year an 

8 amount equal to the sum of the credits determined under 

9 subsection (b) with respect to such dates. 

10 ‘‘(b) AMOUNT OF CREDIT.— 

11 ‘‘(1) IN GENERAL.—The amount of the credit 

12 determined under this subsection with respect to any 

13 credit allowance date for a rural renaissance bond is 

14 25 percent of the annual credit determined with re15 spect to such bond. 

16 ‘‘(2) ANNUAL CREDIT.—The annual credit de17 termined with respect to any rural renaissance bond 

18 is the product of— 

19 ‘‘(A) the credit rate determined by the Sec20 retary under paragraph (3) for the day on 

21 which such bond was sold, multiplied by 

22 ‘‘(B) the outstanding face amount of the 

23 bond. 

24 ‘‘(3) DETERMINATION.—For purposes of para25 graph (2), with respect to any rural renaissance 

26 bond, the Secretary shall determine daily or caused 

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1 to be determined daily a credit rate which shall 

2 apply to the first day on which there is a binding, 

3 written contract for the sale or exchange of the 

4 bond. The credit rate for any day is the credit rate 

5 which the Secretary or the Secretary’s designee esti6 mates will permit the issuance of rural renaissance 

7 bonds with a specified maturity or redemption date 

8 without discount and without interest cost to the 

9 qualified issuer. 

10 ‘‘(4) CREDIT ALLOWANCE DATE.—For purposes 

11 of this section, the term ‘credit allowance date’ 

12 means— 

13 ‘‘(A) March 15, 

14 ‘‘(B) June 15, 

15 ‘‘(C) September 15, and 

16 ‘‘(D) December 15. 

17 Such term also includes the last day on which the 

18 bond is outstanding. 

19 ‘‘(5) SPECIAL RULE FOR ISSUANCE AND RE20 DEMPTION.—In the case of a bond which is issued 

21 during the 3-month period ending on a credit allow22 ance date, the amount of the credit determined 

23 under this subsection with respect to such credit al24 lowance date shall be a ratable portion of the credit 

25 otherwise determined based on the portion of the 3- 

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1 month period during which the bond is outstanding. 

2 A similar rule shall apply when the bond is redeemed 

3 or matures. 

4 ‘‘(c) LIMITATION BASED ON AMOUNT OF TAX.—The 

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

6 shall not exceed the excess of— 

7 ‘‘(1) the sum of the regular tax liability (as de8 fined in section 26(b)) plus the tax imposed by sec9 tion 55, over 

10 ‘‘(2) the sum of the credits allowable under this 

11 part (other than this subpart, subpart C, and section 

12 1400N(l)). 

13 ‘‘(d) RURAL RENAISSANCE BOND.—For purposes of 

14 this section— 

15 ‘‘(1) IN GENERAL.—The term ‘rural renais16 sance bond’ means any bond issued as part of an 

17 issue if— 

18 ‘‘(A) the bond is issued by a qualified 

19 issuer pursuant to an allocation by the Sec20 retary to such issuer of a portion of the na21 tional rural renaissance bond limitation under 

22 subsection (f)(2), 

23 ‘‘(B) 95 percent or more of the proceeds 

24 from the sale of such issue are to be used for 

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1 capital expenditures incurred by qualified bor2 rowers for 1 or more qualified projects, 

3 ‘‘(C) the qualified issuer designates such 

4 bond for purposes of this section and the bond 

5 is in registered form, 

6 ‘‘(D) the issue meets the requirements of 

7 subsection (h), and 

8 ‘‘(E) such bond is not a federally guaran9 teed bond (within the meaning of section 

10 149(b)(2)). 

11 ‘‘(2) QUALIFIED PROJECT; SPECIAL USE

12 RULES.— 

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

14 project’ means 1 or more projects described in 

15 subparagraph (B) located in a rural area. 

16 ‘‘(B) PROJECTS DESCRIBED.—A project 

17 described in this subparagraph is a project eli18 gible for assistance under— 

19 ‘‘(i) the utilities programs described in 

20 section 381E(d)(2) of the Consolidated 

21 Farm and Rural Development Act (7 

22 U.S.C. 2009d(d)(2)), 

23 ‘‘(ii) the distance learning or telemedi24 cine programs authorized pursuant to 

25 chapter 1 of subtitle D of title XXIII of 

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1 the Food, Agriculture, Conservation, and 

2 Trade Act of 1990 (7 U.S.C. 950aaa et 

3 seq.), 

4 ‘‘(iii) the rural electric programs au5 thorized pursuant to the Rural Electrifica6 tion Act of 1936 (7 U.S.C. 901 et seq.), 

7 ‘‘(iv) the rural telephone programs au8 thorized pursuant to the Rural Electrifica9 tion Act of 1936 (7 U.S.C. 901 et seq.), 

10 ‘‘(v) the broadband access programs 

11 authorized pursuant to title VI of the 

12 Rural Electrification Act of 1936 (7 

13 U.S.C. 950bb et seq.), and 

14 ‘‘(vi) the rural community facility pro15 grams as described in section 381E(d)(1) 

16 of the Consolidated Farm and Rural De17 velopment Act (7 U.S.C. 2009d(d)(1)). 

18 ‘‘(C) REFINANCING RULES.—For purposes 

19 of paragraph (1)(B), a qualified project may be 

20 refinanced with proceeds of a rural renaissance 

21 bond only if the indebtedness being refinanced 

22 (including any obligation directly or indirectly 

23 refinanced by such indebtedness) was originally 

24 incurred by a qualified borrower after the date 

25 of the enactment of this section. 

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1 ‘‘(D) REIMBURSEMENT.—For purposes of 

2 paragraph (1)(B), a rural renaissance bond 

3 may be issued to reimburse a qualified borrower 

4 for amounts paid after the date of the enact5 ment of this section with respect to a qualified 

6 project, but only if— 

7 ‘‘(i) prior to the payment of the origi8 nal expenditure, the qualified borrower de9 clared its intent to reimburse such expendi10 ture with the proceeds of a rural renais11 sance bond, 

12 ‘‘(ii) not later than 60 days after pay13 ment of the original expenditure, the quali14 fied issuer adopts an official intent to re15 imburse the original expenditure with such 

16 proceeds, and 

17 ‘‘(iii) the reimbursement is made not 

18 later than 18 months after the date the 

19 original expenditure is paid. 

20 ‘‘(E) TREATMENT OF CHANGES IN USE.— 

21 For purposes of paragraph (1)(B), the proceeds 

22 of an issue shall not be treated as used for a 

23 qualified project to the extent that a qualified 

24 borrower or qualified issuer takes any action 

25 within its control which causes such proceeds 

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1 not to be used for a qualified project. The Sec2 retary shall prescribe regulations specifying re3 medial actions that may be taken (including 

4 conditions to taking such remedial actions) to 

5 prevent an action described in the preceding 

6 sentence from causing a bond to fail to be a 

7 rural renaissance bond. 

8 ‘‘(F) TREATMENT OF OTHER SUBSIDIES.— 

9 For purposes of subparagraph (B), a qualified 

10 project does not include any portion of a project 

11 financed by grants or subsidized financing pro12 vided (directly or indirectly) under a Federal 

13 program, including any State or local obligation 

14 used to provide financing for such portion the 

15 interest on which is exempt from tax under sec16 tion 103. 

17 ‘‘(e) MATURITY LIMITATIONS.— 

18 ‘‘(1) DURATION OF TERM.—A bond shall not be 

19 treated as a rural renaissance bond if the maturity 

20 of such bond exceeds the maximum term determined 

21 by the Secretary under paragraph (2) with respect 

22 to such bond. 

23 ‘‘(2) MAXIMUM TERM.—During each calendar 

24 month, the Secretary shall determine the maximum 

25 term permitted under this paragraph for bonds 

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1 issued during the following calendar month. Such 

2 maximum term shall be the term which the Sec3 retary estimates will result in the present value of 

4 the obligation to repay the principal on the bond 

5 being equal to 50 percent of the face amount of such 

6 bond. Such present value shall be determined with7 out regard to the requirements of paragraph (3) and 

8 using as a discount rate the average annual interest 

9 rate of tax-exempt obligations having a term of 10 

10 years or more which are issued during the month. If 

11 the term as so determined is not a multiple of a 

12 whole year, such term shall be rounded to the next 

13 highest whole year. 

14 ‘‘(3) RATABLE PRINCIPAL AMORTIZATION RE15 QUIRED.—A bond shall not be treated as a rural 

16 renaissance bond unless it is part of an issue which 

17 provides for an equal amount of principal to be paid 

18 by the qualified issuer during each calendar year 

19 that the issue is outstanding. 

20 ‘‘(f) LIMITATION ON AMOUNT OF BONDS DES21 IGNATED.— 

22 ‘‘(1) NATIONAL LIMITATION.—There is a na23 tional rural renaissance bond limitation of 

24 $400,000,000. 

25 ‘‘(2) ALLOCATION BY SECRETARY.— 

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1 ‘‘(A) IN GENERAL.—In accordance with 

2 subparagraph (B), the Secretary shall allocate 

3 the amount described in paragraph (1) among 

4 at least 20 qualified projects, or such lesser 

5 number of qualified projects with proper appli6 cations filed after 12 months after the adoption 

7 of the selection process under subparagraph 

8 (B). 

9 ‘‘(B) SELECTION PROCESS.—In consulta10 tion with the Secretary of Agriculture, the Sec11 retary shall adopt a process to select projects 

12 described in subparagraph (A). Under such 

13 process, no State may receive more than 15 

14 percent of the allocation under subparagraph 

15 (A). 

16 ‘‘(g) CREDIT INCLUDED IN GROSS INCOME.—Gross 

17 income includes the amount of the credit allowed to the 

18 taxpayer under this section (determined without regard to 

19 subsection (c)) and the amount so included shall be treat20 ed as interest income. 

21 ‘‘(h) SPECIAL RULES RELATING TO EXPENDI22 TURES.— 

23 ‘‘(1) IN GENERAL.—An issue shall be treated as 

24 meeting the requirements of this subsection if, as of 

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1 the date of issuance, the qualified issuer reasonably 

2 expects— 

3 ‘‘(A) at least 95 percent of the proceeds 

4 from the sale of the issue are to be spent for 

5 1 or more qualified projects within the 5-year 

6 period beginning on the date of issuance of the 

7 rural renaissance bond, 

8 ‘‘(B) a binding commitment with a third 

9 party to spend at least 10 percent of the pro10 ceeds from the sale of the issue will be incurred 

11 within the 6-month period beginning on the 

12 date of issuance of the rural renaissance bond 

13 or, in the case of a rural renaissance bond the 

14 proceeds of which are to be loaned to 2 or more 

15 qualified borrowers, such binding commitment 

16 will be incurred within the 6-month period be17 ginning on the date of the loan of such proceeds 

18 to a qualified borrower, and 

19 ‘‘(C) such projects will be completed with 

20 due diligence and the proceeds from the sale of 

21 the issue will be spent with due diligence. 

22 ‘‘(2) EXTENSION OF PERIOD.—Upon submis23 sion of a request prior to the expiration of the period 

24 described in paragraph (1)(A), the Secretary may 

25 extend such period if the qualified issuer establishes 

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1 that the failure to satisfy the 5-year requirement is 

2 due to reasonable cause and the related projects will 

3 continue to proceed with due diligence. 

4 ‘‘(3) FAILURE TO SPEND REQUIRED AMOUNT

5 OF BOND PROCEEDS WITHIN 5 YEARS.—To the ex6 tent that less than 95 percent of the proceeds of 

7 such issue are expended by the close of the 5-year 

8 period beginning on the date of issuance (or if an 

9 extension has been obtained under paragraph (2), by 

10 the close of the extended period), the qualified issuer 

11 shall redeem all of the nonqualified bonds within 90 

12 days after the end of such period. For purposes of 

13 this paragraph, the amount of the nonqualified 

14 bonds required to be redeemed shall be determined 

15 in the same manner as under section 142. 

16 ‘‘(i) SPECIAL RULES RELATING TO ARBITRAGE.—A 

17 bond which is part of an issue shall not be treated as a 

18 rural renaissance bond unless, with respect to the issue 

19 of which the bond is a part, the qualified issuer satisfies 

20 the arbitrage requirements of section 148 with respect to 

21 proceeds of the issue. 

22 ‘‘(j) DEFINITIONS AND SPECIAL RULES RELATING

23 TO ISSUERS AND BORROWERS.—For purposes of this sec24 tion— 

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1 ‘‘(1) QUALIFIED ISSUER.—The term ‘qualified 

2 issuer’ means— 

3 ‘‘(A) a rural renaissance bond lender, 

4 ‘‘(B) a cooperative electric company, or 

5 ‘‘(C) a governmental body. 

6 ‘‘(2) QUALIFIED BORROWER.—The term ‘quali7 fied borrower’ means— 

8 ‘‘(A) a mutual or cooperative electric com9 pany described in section 501(c)(12) or 

10 1381(a)(2)(C), or 

11 ‘‘(B) a governmental body. 

12 ‘‘(3) RURAL RENAISSANCE BOND LENDER.— 

13 The term ‘rural renaissance bond lender’ means a 

14 lender which is a cooperative which is owned by, or 

15 has outstanding loans to, 100 or more cooperative 

16 electric companies and is in existence on February 

17 1, 2002, and shall include any affiliated entity which 

18 is controlled by such lender. 

19 ‘‘(4) COOPERATIVE ELECTRIC COMPANY.—The 

20 term ‘cooperative electric company’ means a mutual 

21 or cooperative electric company described in section 

22 501(c)(12) or section 1381(a)(2)(C), or a not-for23 profit electric utility which has received a loan or 

24 loan guarantee under the Rural Electrification Act. 

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1 ‘‘(5) GOVERNMENTAL BODY.—The term ‘gov2 ernmental body’ means any State, territory, posses3 sion of the United States, the District of Columbia, 

4 Indian tribal government, and any political subdivi5 sion thereof. 

6 ‘‘(k) SPECIAL RULES RELATING TO POOL BONDS.— 

7 No portion of a pooled financing bond may be allocable 

8 to loan unless the borrower has entered into a written loan 

9 commitment for such portion prior to the issue date of 

10 such issue. 

11 ‘‘(l) OTHER DEFINITIONS AND SPECIAL RULES.— 

12 For purposes of this section— 

13 ‘‘(1) BOND.—The term ‘bond’ includes any ob14 ligation. 

15 ‘‘(2) POOLED FINANCING BOND.—The term 

16 ‘pooled financing bond’ shall have the meaning given 

17 such term by section 149(f)(4)(A). 

18 ‘‘(3) RURAL AREA.—The term ‘rural area’ shall 

19 have the meaning given such term by section 

20 1393(a)(2). 

21 ‘‘(4) PARTNERSHIP; S CORPORATION; AND

22 OTHER PASS-THRU ENTITIES.— 

23 ‘‘(A) IN GENERAL.—Under regulations 

24 prescribed by the Secretary, in the case of a 

25 partnership, trust, S corporation, or other passmstockstill on PROD1PC66 with BILLS

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1 thru entity, rules similar to the rules of section 

2 41(g) shall apply with respect to the credit al3 lowable under subsection (a). 

4 ‘‘(B) NO BASIS ADJUSTMENT.—In the case 

5 of a bond held by a partnership or an S cor6 poration, rules similar to the rules under sec7 tion 1397E(i) shall apply. 

8 ‘‘(5) BONDS HELD BY REGULATED INVEST9 MENT COMPANIES.—If any rural renaissance bond is 

10 held by a regulated investment company, the credit 

11 determined under subsection (a) shall be allowed to 

12 shareholders of such company under procedures pre13 scribed by the Secretary. 

14 ‘‘(6) REPORTING.—Issuers of rural renaissance 

15 bonds shall submit reports similar to the reports re16 quired under section 149(e). 

17 ‘‘(7) TERMINATION.—This section shall not 

18 apply with respect to any bond issued after Decem19 ber 31, 2008.’’. 

20 (b) REPORTING.—Subsection (d) of section 6049 of 

21 the Internal Revenue Code of 1986 (relating to returns 

22 regarding payments of interest) is amended by adding at 

23 the end the following new paragraph: 

24 ‘‘(9) REPORTING OF CREDIT ON RURAL RENAIS25 SANCE BONDS.— 

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1 ‘‘(A) IN GENERAL.—For purposes of sub2 section (a), the term ‘interest’ includes amounts 

3 includible in gross income under section 54A(g) 

4 and such amounts shall be treated as paid on 

5 the credit allowance date (as defined in section 

6 54A(b)(4)). 

7 ‘‘(B) REPORTING TO CORPORATIONS, 

8 ETC.—Except as otherwise provided in regula9 tions, in the case of any interest described in 

10 subparagraph (A), subsection (b)(4) shall be 

11 applied without regard to subparagraphs (A), 

12 (H), (I), (J), (K), and (L)(i) of such subsection. 

13 ‘‘(C) REGULATORY AUTHORITY.—The Sec14 retary may prescribe such regulations as are 

15 necessary or appropriate to carry out the pur16 poses of this paragraph, including regulations 

17 which require more frequent or more detailed 

18 reporting.’’. 

19 (c) CONFORMING AMENDMENTS.— 

20 (1) The table of sections for subpart H of part 

21 IV of subchapter A of chapter 1 of the Internal Rev22 enue Code of 1986 is amended by adding at the end 

23 the following new item: 

‘‘Sec. 54A. Credit to holders of rural renaissance bonds.’’. 

24 (2) Section 54(c)(2) of such Code is amended 

25 by inserting ‘‘, section 54A,’’ after ‘‘subpart C’’. 

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1 (d) ISSUANCE OF REGULATIONS.—The Secretary of 

2 Treasury shall issue regulations required under section 

3 54A of the Internal Revenue Code of 1986 (as added by 

4 this section) not later than 120 days after the date of the 

5 enactment of this Act. 

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

7 this section shall apply to bonds issued after the date of 

8 the enactment of this Act. 

Æ 

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