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[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 1405 Introduced in Senate (IS)]

110th CONGRESS
  1st Session
                                S. 1405

To enhance the ability of community banks to foster economic growth and 
 serve their communities, boost small businesses, increase individual 
                    savings, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                              May 16, 2007

Mr. Brownback (for himself, Mr. Roberts, and Mr. Coburn) introduced the 
 following bill; which was read twice and referred to the Committee on 
                                Finance

_______________________________________________________________________

                                 A BILL

 
To enhance the ability of community banks to foster economic growth and 
 serve their communities, boost small businesses, increase individual 
                    savings, and for other purposes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Community Banks 
Serving Their Communities First Act'' or the ``Communities First Act''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
        TITLE I--TARGETED REGULATORY RELIEF FOR COMMUNITY BANKS

Sec. 101. Short form reports of condition for certain community banks.
Sec. 102. Community bank exemption from annual management assessment of 
                            internal controls requirement of the 
                            Sarbanes-Oxley Act of 2002.
Sec. 103. Changes required to small bank holding company policy 
                            statement on assessment of financial and 
                            managerial factors.
Sec. 104. Community bank protection under the Securities Investor 
                            Protection Act of 1970.
Sec. 105. Updating the amount of small bank exception for cap on 
                            aggregate loans to officers.
Sec. 106. Consideration of community bank impact.
Sec. 107. Increase in shareholder registration threshold.
 TITLE II--ADDITIONAL REGULATORY RELIEF FOR COMMUNITY BANKS AND THEIR 
                               CUSTOMERS

Sec. 201. Enhance customer capital access.
Sec. 202. Seasoned customer CTR exemption.
Sec. 203. Exception to annual privacy notice requirement under the 
                            Gramm-Leach-Bliley Act.
Sec. 204. Privacy protection of consumer reports during loan 
                            application.
Sec. 205. Update in the special regulatory lending limit on loans to 
                            executive officers.
Sec. 206. Reimbursement for production of mandated records.
Sec. 207. Study by the Comptroller General on implementation of 
                            commercial real estate guidance.
TITLE III--TAX RELIEF FOR BANK DEPOSITORS, RURAL BANKS, MUNICIPALITIES, 
BANKS ORGANIZED AS LIMITED LIABILITY COMPANIES, INDIVIDUAL SAVERS, AND 
                            SMALL BUSINESSES

Sec. 301. Reduced rate and deferral of income recognition on long-term 
                            certificates of deposit.
Sec. 302. Exclusion for interest on loans secured by agricultural real 
                            property.
Sec. 303. Update in cap on qualified small issue bonds.
Sec. 304. Limited liability company tax treatment for FDIC-insured 
                            limited liability companies.
Sec. 305. Repeal of individual alternative minimum tax.
Sec. 306. Young savers accounts.
Sec. 307. Section 179 expensing for small business.
     TITLE IV--TAX RELIEF FOR COMMUNITY BANKS AND HOLDING COMPANIES

Sec. 401. Limited tax credit.
Sec. 402. Community bank relief from minimum tax.
              TITLE V--SMALL BUSINESS SUBCHAPTER S REFORMS

Sec. 501. Increasing Shareholder Limit for Subchapter S to 150.
Sec. 502. Treatment of qualifying director shares.
Sec. 503. Recapture of bad debt reserves.
Sec. 504. Issuance of preferred stock permitted for subchapter S 
                            corporations.
             TITLE VI--SMALL BUSINESS LENDING ENHANCEMENTS

Sec. 601. Reduced fees for section 7(a) loans.
Sec. 602. Low documentation loan program made mandatory.
Sec. 603. Effective date.

        TITLE I--TARGETED REGULATORY RELIEF FOR COMMUNITY BANKS

SEC. 101. SHORT FORM REPORTS OF CONDITION FOR CERTAIN COMMUNITY BANKS.

    (a) In General.--Section 7(a) of the Federal Deposit Insurance Act 
(12 U.S.C. 1817(a)) is amended by adding at the end the following new 
paragraph:
            ``(12) Short form reports of condition for community 
        banks.--
                    ``(A) In general.--With respect to reports of 
                condition required under paragraph (3) for each 
                calendar quarter, an insured depository institution 
                described in subparagraphs (A), (B), (C), and (D) of 
                section 10(d)(4) may submit a short form of any such 
                report of condition in 2 nonsequential quarters of any 
                calendar year.
                    ``(B) Short form defined.--The term `short form', 
                when used in connection with any report of condition 
                required under paragraph (3), means a report of 
                condition in a format established by the appropriate 
                Federal banking agency, after notice and opportunity 
                for comment, that--
                            ``(i) is significantly and materially less 
                        burdensome for the insured depository 
                        institution to prepare than the format of the 
                        report of condition required under paragraph 
                        (3); and
                            ``(ii) provides sufficient material 
                        information for the appropriate Federal banking 
                        agency to assure the maintenance of the safe 
                        and sound condition of the depository 
                        institution and safe and sound practices.''.
    (b) Regulations.--Any regulation required to carry out the 
amendment made by subsection (a) shall be published in final form 
before the end of the 6-month period beginning on the date of the 
enactment of this Act.

SEC. 102. COMMUNITY BANK EXEMPTION FROM ANNUAL MANAGEMENT ASSESSMENT OF 
              INTERNAL CONTROLS REQUIREMENT OF THE SARBANES-OXLEY ACT 
              OF 2002.

    Section 404 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7262) is 
amended by adding at the end the following new subsection:
    ``(c) Community Bank Exemption.--
            ``(1) In general.--This section shall not apply in any year 
        to any insured depository institution which, as of the close of 
        the preceding year, had total assets, as determined on a 
        consolidated basis, of $1,000,000,000 or less.
            ``(2) Adjustment of amount.--The Commission shall annually 
        adjust the dollar amount in paragraph (1) by an amount equal to 
        the percentage increase, for the most recent year, in total 
        assets held by all depository institutions, as reported by the 
        Federal Deposit Insurance Corporation.''.

SEC. 103. CHANGES REQUIRED TO SMALL BANK HOLDING COMPANY POLICY 
              STATEMENT ON ASSESSMENT OF FINANCIAL AND MANAGERIAL 
              FACTORS.

    (a) Small Bank Holding Company Policy Statement on Assessment of 
Financial and Managerial Factors.--
            (1) In general.--Before the end of the 6-month period 
        beginning on the date of the enactment of this Act, the Board 
        of Governors of the Federal Reserve System shall publish in the 
        Federal Register proposed revisions to the Small Bank Holding 
        Company Policy Statement on Assessment of Financial and 
        Managerial Factors (12 C.F.R. part 225--appendix C) that 
        provide that the policy shall apply to a bank holding company 
        which has pro forma consolidated assets of less than 
        $1,000,000,000 and that--
                    (A) is not engaged in any nonbanking activities 
                involving significant leverage; and
                    (B) does not have a significant amount of 
                outstanding debt that is held by the general public.
            (2) Adjustment of amount.--The Board of Governors of the 
        Federal Reserve System shall annually adjust the dollar amount 
        referred to in paragraph (1) in the Small Bank Holding Company 
        Policy Statement on Assessment of Financial and Managerial 
        Factors by an amount equal to the percentage increase, for the 
        most recent year, in total assets held by all insured 
        depository institutions, as determined by the Board.
    (b) Increase in Debt-to-Equity Ratio of Small Bank Holding 
Company.--Before the end of the 6-month period beginning on the date of 
the enactment of this Act, the Board of Governors of the Federal 
Reserve System shall publish in the Federal Register proposed revisions 
to the Small Bank Holding Company Policy Statement on Assessment of 
Financial and Managerial Factors (12 C.F.R. part 225--appendix C) such 
that the debt-to-equity ratio allowable for a small bank holding 
company in order to remain eligible to pay a corporate dividend and to 
remain eligible for expedited processing procedures under Regulation Y 
of the Board of Governors of the Federal Reserve System would increase 
from 1:1 to 3:1.

SEC. 104. COMMUNITY BANK PROTECTION UNDER THE SECURITIES INVESTOR 
              PROTECTION ACT OF 1970.

    Section 9 of the Securities Investor Protection Act of 1970 (15 
U.S.C. 78fff-3) is amended by adding at the end the following new 
subsection:
    ``(d) Community Bank Protection.--
            ``(1) In general.--The prohibition on advances in 
        subsection (a)(5) shall not apply to a bank with total assets, 
        on a consolidated basis, of less than $1,000,000,000.
            ``(2) Adjustment of amount.--The Commission shall annually 
        adjust the dollar amount in paragraph (1) by an amount equal to 
        the percentage increase, for the most recent year, in total 
        assets held by all depository institutions, as reported by the 
        Federal Deposit Insurance Corporation.''.

SEC. 105. UPDATING THE AMOUNT OF SMALL BANK EXCEPTION FOR CAP ON 
              AGGREGATE LOANS TO OFFICERS.

    Subparagraph (C) of section 22(h)(5) of the Federal Reserve Act (12 
U.S.C. 375b(5)(C)) is amended--
            (1) by striking ``$100,000,000 of deposits'' and inserting 
        ``$1,000,000,000 of total assets (on a consolidated basis)'';
            (2) by striking ``2 times'' and inserting ``4 times''; and
            (3) by adding at the end the following new sentence: ``The 
        Board shall annually adjust the dollar amount in the 1st 
        sentence of this subparagraph by an amount equal to the 
        percentage increase, for the most recent year, in total assets 
        held by all depository institutions, as reported by the Federal 
        Deposit Insurance Corporation.''.

SEC. 106. CONSIDERATION OF COMMUNITY BANK IMPACT.

    Before establishing or making any revision in any regulation, 
requirement, or guideline applicable to insured depository institutions 
(as that term is defined in section 3 of the Federal Deposit Insurance 
Act), the appropriate Federal banking agency (as that term is defined 
in such section) shall take into account the effect of the 
establishment of the regulation, requirement, or guideline on community 
banks and savings associations.

SEC. 107. INCREASE IN SHAREHOLDER REGISTRATION THRESHOLD.

    Subsection (g) of section 12 of the Securities Exchange Act of 1934 
(15 U.S.C. 78l(g)) is amended by striking ``instrumentality of 
interstate commerce shall--'' and all that follows through ``register 
such security by filing'' and inserting ``instrumentality of interstate 
commerce and which has total assets exceeding $1,000,000 and a class of 
equity security (other than an exempted security) held of record by 
more than 1,000 persons shall register such security by filing''.

 TITLE II--ADDITIONAL REGULATORY RELIEF FOR COMMUNITY BANKS AND THEIR 
                               CUSTOMERS

SEC. 201. ENHANCE CUSTOMER CAPITAL ACCESS.

    (a) Optional Consumer Waivers of Right of Rescission.--Section 
125(d) of the Truth in Lending Act (15 U.S.C. 1635(d)) is amended--
            (1) by striking ``The Board may'' and inserting ``Waivers 
        of Rescission Rights.--
            ``(1) Personal financial emergencies.--The Board may''; and
            (2) by adding at the end the following new paragraph:
            ``(2) Waivers when creditor is insured depository 
        institution.--The Board shall prescribe regulations authorizing 
        a consumer to waive the rights provided under this section when 
        the creditor is an insured depository institution (as that term 
        is defined in section 3(c)(2) of the Federal Deposit Insurance 
        Act) in such manner and after such notice as the Board may 
        prescribe.''.
    (b) Exemption in Case of Refinancing With No New Money Regardless 
of Creditor.--Section 125(e)(2) of the Truth in Lending Act (15 U.S.C. 
1635(e)(2)) is amended by striking ``by the same creditor''.
    (c) Exempt Home Equity Lines of Credit.--Section 125(e)(4) of the 
Truth in Lending Act (15 U.S.C. 1635(e)(4)) is amended to read as 
follows:
            ``(4) advances under an open end consumer credit plan which 
        provides for any extension of credit which is secured by the 
        consumer's principal dwelling.''.

SEC. 202. SEASONED CUSTOMER CTR EXEMPTION.

    (a) Short Title.--This section may be cited as the ``Seasoned 
Customer CTR Exemption Act of 2007''.
    (b) Seasoned Customer Exemption.--Section 5313(e) of title 31, 
United States Code, is amended to read as follows:
    ``(e) Qualified Customer Exemption.--
            ``(1) In general.--Before the end of the 270-day period 
        beginning on the date of the enactment of the Seasoned Customer 
        CTR Exemption Act of 2007, the Secretary of the Treasury shall 
        prescribe regulations that exempt any depository institution 
        from filing a report pursuant to this section in a transaction 
        for the payment, receipt, or transfer of United States coins or 
        currency (or other monetary instruments the Secretary of the 
        Treasury prescribes) with a qualified customer of the 
        depository institution.
            ``(2) Qualified customer defined.--For purposes of this 
        section, the term `qualified customer', with respect to a 
        depository institution, has such meaning as the Secretary of 
        the Treasury shall prescribe, which shall include any person 
        that--
                    ``(A) is incorporated or organized under the laws 
                of the United States or any State, including a sole 
                proprietorship (as defined in 31 C.F.R. 
                103.22(d)(6)(vii), as in effect on May 10, 2006), or is 
                registered as, and eligible to do business within, the 
                United States or a State;
                    ``(B) has maintained a deposit account with the 
                depository institution for at least 12 months; and
                    ``(C) has engaged, using such account, in multiple 
                currency transactions that are subject to the reporting 
                requirements of subsection (a).
            ``(3) Regulations.--
                    ``(A) In general.--The Secretary of the Treasury 
                shall prescribe regulations requiring a depository 
                institution to file a 1-time notice of designation of 
                exemption for each qualified customer of the depository 
                institution.
                    ``(B) Form and content of exemption notice.--The 
                Secretary shall by regulation prescribe the form, 
                manner, content, and timing of the qualified customer 
                exemption notice and such notice shall include 
                information sufficient to identify the qualified 
                customer and the accounts of the customer.
                    ``(C) Authority of secretary.--
                            ``(i) In general.--The Secretary may 
                        suspend, reject, or revoke any qualified 
                        customer exemption notice, in accordance with 
                        criteria prescribed by the Secretary by 
                        regulation.
                            ``(ii) Conditions.--The Secretary may 
                        establish conditions, in accordance with 
                        criteria prescribed by regulation, under which 
                        exempt qualified customers of an insured 
                        depository institution that is merged with or 
                        acquired by another insured depository 
                        institution will continue to be treated as 
                        designated exempt qualified customers of the 
                        surviving or acquiring institution.''.
    (c) Periodic Review of Reporting Threshold and Adjustment for 
Inflation.--Section 5318 of title 31, United States Code, is amended by 
adding at the end the following new subsection:
    ``(o) Periodic Review of Reporting Threshold and Adjustment for 
Inflation.--
            ``(1) In general.--Before the end of the 90-day period 
        beginning on the date of the enactment of the Seasoned Customer 
        CTR Exemption Act of 2007, and at least every 5 years after the 
        end of such period, the Secretary of the Treasury shall--
                    ``(A) review the continuing appropriateness, 
                relevance, and utility of each threshold amount or 
                denomination established by the Secretary, in the 
                Secretary's discretion, for any report required by the 
                Secretary under this subchapter; and
                    ``(B) adjust each such amount, at such time and in 
                such manner as the Secretary considers appropriate, for 
                any inflation that the Secretary determines has 
                occurred since the date any such amount was established 
                or last adjusted, as the case may be.
            ``(2) Report.--Before the end of the 60-day period 
        beginning upon the completion of any review by the Secretary of 
        the Treasury under paragraph (1), the Secretary shall submit a 
        report to the Congress containing the findings and conclusions 
        of the Secretary in connection with such review, together with 
        an explanation for any adjustment, or lack of adjustment, of 
        any threshold amount or denomination by the Secretary as a 
        result of such review, including the adjustment for 
        inflation.''.

SEC. 203. EXCEPTION TO ANNUAL PRIVACY NOTICE REQUIREMENT UNDER THE 
              GRAMM-LEACH-BLILEY ACT.

    Section 503 of the Gramm-Leach-Bliley Act (15 U.S.C. 6803) is 
amended by adding the following new subsections:
    ``(f) Exception to Annual Notice Requirement.--A financial 
institution that--
            ``(1) provides nonpublic personal information only in 
        accordance with the provisions of subsection (b)(2) or (e) of 
        section 502 or regulations prescribed under section 504(b);
            ``(2) does not share information with affiliates under 
        section 603(d)(2)(A) of the Fair Credit Reporting Act; and
            ``(3) has not changed its policies and practices with 
        regard to disclosing nonpublic personal information from the 
        policies and practices that were disclosed in the most recent 
        disclosure sent to consumers in accordance with this 
        subsection,
shall not be required to provide an annual disclosure under this 
subsection until such time as the financial institution fails to comply 
with any criteria described in paragraph (1), (2), or (3).
    ``(g) Exception to Notice Requirement.--A financial institution 
shall not be required to provide any disclosure under this section if--
            ``(1) the financial institution is licensed by a State and 
        is subject to existing regulation of consumer confidentiality 
        that prohibits disclosure of nonpublic personal information 
        without knowing and expressed consent of the consumer in the 
        form of laws, rules, or regulation of professional conduct or 
        ethics promulgated either by the court of highest appellate 
        authority or by the principal legislative body or regulatory 
        agency or body of any State of the United States, the District 
        of Columbia, any territory of the United States, Puerto Rico, 
        Guam, American Samoa, the Trust Territory of the Pacific 
        Islands, the Virgin Islands, or the Northern Mariana Islands; 
        or
            ``(2) the financial institution is licensed by a State and 
        becomes subject to future regulation of consumer 
        confidentiality that prohibits disclosure of nonpublic personal 
        information without knowing and expressed consent of the 
        consumer in the form of laws, rules, or regulation of 
        professional conduct or ethics promulgated either by the court 
        of highest appellate authority or by the principal legislative 
        body or regulatory agency or body of any State of the United 
        States, the District of Columbia, any territory of the United 
        States, Puerto Rico, Guam, American Samoa, the Trust Territory 
        of the Pacific Islands, the Virgin Islands, or the Northern 
        Mariana Islands.''.

SEC. 204. PRIVACY PROTECTION OF CONSUMER REPORTS DURING LOAN 
              APPLICATION.

    Section 604(c) of the Fair Credit Reporting Act (15 U.S.C. 
1681b(c)) is amended by adding at the end the following new paragraph
            ``(4) Report prompted by a request for a consumer report 
        from another creditor prohibited.--
                    ``(A) In general.--A consumer reporting agency 
                shall not furnish a consumer report if such action is 
                prompted by a request for a consumer report from 
                another creditor unless approved in writing by the 
                consumer.
                    ``(B) Regulations.--The Commission shall prescribe 
                regulations in final form to enforce this paragraph 
                before the end of the 180-day period beginning on the 
                date of the enactment of the Communities First Act.''.

SEC. 205. UPDATE IN THE SPECIAL REGULATORY LENDING LIMIT ON LOANS TO 
              EXECUTIVE OFFICERS.

    Section 22(g) of the Federal Reserve Act (12 U.S.C. 375a) is 
amended by inserting after paragraph (8) the following new paragraph:
            ``(9) Limit applicable on aggregate amount of certain loans 
        to executive officers of community banks.--Notwithstanding any 
        regulation prescribed by the Board under paragraph (4) and 
        subject to other conditions imposed under this subsection and 
        subsection (h), the aggregate amount of extensions of credit 
        that a member bank may make to an executive officer of the bank 
        under paragraph (4) shall not exceed $250,000.''.

SEC. 206. REIMBURSEMENT FOR PRODUCTION OF MANDATED RECORDS.

    (a) Corporate Records.--Section 1101(4) of the Right to Financial 
Privacy Act of 1978 (12 U.S.C. 3401(4)) is amended by inserting ``, 
except that, for purposes of section 1115, such term includes any 
entity'' after ``fewer individuals''.
    (b) Clarification of Scope.--Section 1115(b) of the Right to 
Financial Privacy Act of 1978 (12 U.S.C. 3415) is amended to read as 
follows:
    ``(b) Clarification of Scope.--Notwithstanding the introductory 
clause to the first sentence of subsection (a), this section shall 
apply to all records required to be assembled or provided for any 
Federal law enforcement or investigative purpose.''.

SEC. 207. STUDY BY THE COMPTROLLER GENERAL ON IMPLEMENTATION OF 
              COMMERCIAL REAL ESTATE GUIDANCE.

    The Comptroller General shall conduct a study on the 
implementation, by any Federal banking agency, of examiner guidance on 
concentrations in commercial real estate lending, including the impact 
on--
            (1) local economies;
            (2) the regulatory burden on banks
            (3) community bank portfolios; and
            (4) community banks' market share.

TITLE III--TAX RELIEF FOR BANK DEPOSITORS, RURAL BANKS, MUNICIPALITIES, 
BANKS ORGANIZED AS LIMITED LIABILITY COMPANIES, INDIVIDUAL SAVERS, AND 
                            SMALL BUSINESSES

SEC. 301. REDUCED RATE AND DEFERRAL OF INCOME RECOGNITION ON LONG-TERM 
              CERTIFICATES OF DEPOSIT.

    (a) Deferral of Income Recognition.--Section 451 of the Internal 
Revenue Code of 1986 (relating to general rule for taxable year of 
inclusion) is amended by adding at the end the following new 
subsection:
    ``(j) Certificates of Deposits Held by Cash Basis Individuals.--In 
the case of an individual on the cash receipts and disbursements method 
of accounting who holds a nonnegotiable certificate of deposit, 
interest income which is not made available for withdrawal before 
maturity of the certificate without penalty shall not be includible in 
gross income before the certificate is redeemed or matures.''.
    (b) Interest Income on Long-Term Certificates of Deposit.--
Subparagraph (A) of section 1(h)(11) of such Code is amended by 
striking ``increased by'' and all that follows and inserting:
                ``increased by--
                            ``(i) qualified dividend income, and
                            ``(ii) interest income on any nonnegotiable 
                        certificate of deposit--
                                    ``(I) with a fixed maturity date 
                                which is 1 year or more from the date 
                                of issue, and
                                    ``(II) the interest on which is not 
                                made available for withdrawal before 
                                maturity without penalty.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 302. EXCLUSION FOR INTEREST ON LOANS SECURED BY AGRICULTURAL REAL 
              PROPERTY.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items specifically excluded 
from gross income) is amended by inserting after section 139A the 
following new section:

``SEC. 139B. INTEREST ON LOANS SECURED BY AGRICULTURAL REAL PROPERTY.

    ``(a) Exclusion.--Gross income shall not include interest received 
by a qualified lender on any qualified real estate loan.
    ``(b) Definitions.--For purposes of this section:
            ``(1) Qualified lender.--The term `qualified lender' means 
        any bank or savings association the deposits of which are 
        insured under the Federal Deposit Insurance Act (12 U.S.C. 1811 
        et seq.).
            ``(2) Qualified real estate loan.--The term `qualified real 
        estate loan' means any loan secured by agricultural real estate 
        or by a leasehold mortgage (with a status as a lien) on 
        agricultural real estate. For purposes of the preceding 
        sentence, the determination of whether property securing such 
        loan is agricultural real estate shall be made as of the time 
        the interest income on such loan is accrued.
            ``(3) Agricultural real estate.--The term `agricultural 
        real estate' means--
                    ``(A) real property used for the production of 1 or 
                more agricultural products, and
                    ``(B) any single family residence--
                            ``(i) which is the principal residence 
                        (within the meaning of section 121) of its 
                        occupant,
                            ``(ii) which is located in a rural area (as 
                        determined by the Secretary of Agriculture), 
                        which is not within a Metropolitan Statistical 
                        Area (as defined by the Office of Management 
                        and Budget) and which has a population 
                        (determined on the basis of the most recent 
                        decennial census for which data are available) 
                        of 2,500 or less, and
                            ``(iii) which is purchased or improved with 
                        the proceeds of the qualified real estate loan.
    ``(c) Coordination With Section 265.--Qualified real estate loans 
shall be treated as obligations described in section 265(a)(2) the 
interest on which is wholly exempt from the taxes imposed by this 
subtitle.''.
    (b) Clerical Amendment.--The table of sections for such part III is 
amended by inserting after the item relating to section 139A the 
following new item:

``Sec. 139B. Interest on loans secured by agricultural real 
                            property.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 303. UPDATE IN CAP ON QUALIFIED SMALL ISSUE BONDS.

    (a) In General.--Clause (i) of section 144(a)(4)(A) of the Internal 
Revenue Code of 1986 (relating to general rule for $10,000,000 limit in 
certain cases) is amended by striking ``$10,000,000'' and inserting 
``$30,000,000''.
    (b) Adjustment of Cap for Inflation.--Subsection (a) of section 144 
of such Code (relating to qualified small issue bond) is amended by 
redesignating paragraph (12) as paragraph (13) and by inserting after 
paragraph (11) the following new paragraph:
            ``(12) Inflation adjustment.--In the case of a calendar 
        year after 2007, the $30,000,000 amount contained in paragraph 
        (4)(A)(i) shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for such calendar year by 
                substituting `calendar year 2006' for `calendar year 
                1992' in subparagraph (B) thereof.
        Any increase under the preceding sentence which is not a 
        multiple of $100,000 shall be rounded to the next lowest 
        multiple of $100,000.''.
    (c) Conforming Amendment.--Paragraph (4) of section 144(a) of such 
Code is amended in the heading by striking ``$10,000,000'' and 
inserting ``$30,000,000''.
    (d) Effective Date.--The amendments made by this section shall 
apply to--
            (1) obligations issued after the date of the enactment of 
        this Act, and
            (2) capital expenditures made after such date with respect 
        to obligations issued on or before such date.

SEC. 304. LIMITED LIABILITY COMPANY TAX TREATMENT FOR FDIC-INSURED 
              LIMITED LIABILITY COMPANIES.

    (a) In General.--Paragraph (2) of section 7701(a) of the Internal 
Revenue Code of 1986 (defining partnership and partner) is amended to 
read as follows:
            ``(2) Partner and partnership.--
                    ``(A) In general.--The term `partnership' includes 
                a syndicate, group, pool, joint venture, or other 
                unincorporated organization, through or by means of 
                which any business, financial operation, or venture is 
                carried on, and which is not, within the meaning of 
                this title, a trust or estate or a corporation; and the 
                term `partner' includes a member in such a syndicate, 
                group, pool, joint venture, or organization.
                    ``(B) Election by certain banks to be taxed as 
                partnerships.--
                            ``(i) In general.--An eligible corporation 
                        may elect to be treated as a partnership for 
                        purposes of this title.
                            ``(ii) Tax treatment.--In the case of an 
                        eligible corporation making an election under 
                        clause (i)--
                                    ``(I) no gain or loss shall be 
                                recognized to the corporation or the 
                                shareholders by reason of an election 
                                under clause (i), and
                                    ``(II) section 1374 shall apply to 
                                the entity after such election.
                            ``(iii) Eligible corporation.--The term 
                        `eligible corporation' means any of the 
                        following entities which would (but for this 
                        subparagraph) be treated as a C corporation for 
                        purposes of this title:
                                    ``(I) Any bank (as defined in 
                                section 581).
                                    ``(II) Any bank holding company (as 
                                defined in section 2(a) of the Bank 
                                Holding Company Act of 1956 (12 U.S.C. 
                                1841(a))).
                                    ``(III) Any savings association (as 
                                defined in section 3(b) of the Federal 
                                Deposit Insurance Act (12 U.S.C. 
                                1813)).
                                    ``(IV) Any savings and loan holding 
                                company (as defined in section 
                                10(a)(1)(D) of the Home Owners Loan 
                                Act).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.

SEC. 305. REPEAL OF INDIVIDUAL ALTERNATIVE MINIMUM TAX.

    (a) In General.--Section 55(a) of the Internal Revenue Code of 1986 
(relating to alternative minimum tax imposed) is amended by adding at 
the end the following new flush sentence:
``Except in the case of a corporation, no tax shall be imposed by this 
section for any taxable year beginning after December 31, 2007, and the 
tentative minimum tax of any taxpayer other than a corporation for any 
such taxable year shall be zero for purposes of this title.''.
    (b) Modification of Limitation on Use of Credit for Prior Year 
Minimum Tax Liability.--Subsection (c) of section 53 of the Internal 
Revenue Code of 1986 (relating to credit for prior year minimum tax 
liability) is amended to read as follows:
    ``(c) Limitation.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        credit allowable under subsection (a) for any taxable year 
        shall not exceed the excess (if any) of--
                    ``(A) the regular tax liability of the taxpayer for 
                such taxable year reduced by the sum of the credits 
                allowable under subparts A, B, D, E, and F of this 
                part, over
                    ``(B) the tentative minimum tax for the taxable 
                year.
            ``(2) Taxable years beginning after 2007.--In the case of 
        any taxable year beginning after 2007, the credit allowable 
        under subsection (a) to a taxpayer other than a corporation for 
        any taxable year shall not exceed 90 percent of the regular tax 
        liability of the taxpayer for such taxable year reduced by the 
        sum of the credits allowable under subparts A, B, D, E, and F 
        of this part.''.
    (c) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2007.

SEC. 306. YOUNG SAVERS ACCOUNTS.

    (a) In General.--Section 408A of the Internal Revenue Code of 1986 
(relating to Roth IRAs) is amended by adding at the end the following 
new subsection:
    ``(g) Special Rules for Roth IRAs for Children.--
            ``(1) General rule.--A Roth IRA maintained for the benefit 
        of an individual who has not attained age 25 before the close 
        of the taxable year shall be maintained under this section, as 
        modified by this subsection.
            ``(2) Contribution limits.--
                    ``(A) In general.--For so long as a Roth IRA is 
                subject to this subsection, contributions to such Roth 
                IRA shall be subject to this paragraph and not to 
                subsection (c)(2), and subsection (c)(3) shall not 
                apply.
                    ``(B) Limit.--The aggregate amount of contributions 
                for any taxable year to all child Roth IRAs maintained 
                for the benefit of an individual under this subsection 
                shall not exceed the maximum amount allowable as a 
                deduction under subsection (b)(1) of section 219 for 
                such taxable year (computed without regard to 
                subsections (b)(1)(B), (d)(1), and (g) of such 
                section).''.
    (b) Enforcement of Contribution Limits.--Paragraphs (1)(B) and 
(2)(B) of section 4973(f) of such Code are each amended by striking 
``and (c)(3)'' and inserting ``, (c)(3), and (f)(2)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

SEC. 307. SECTION 179 EXPENSING FOR SMALL BUSINESS.

    Subsections (b)(1), (b)(2), (b)(5), (c)(2), and (d)(1)(A)(ii) of 
section 179(b) (relating to election to expense certain depreciable 
business assets) are each amended by striking ``and before 2010''.

     TITLE IV--TAX RELIEF FOR COMMUNITY BANKS AND HOLDING COMPANIES

SEC. 401. LIMITED TAX CREDIT.

    (a) C Corporations.--Section 11 of the Internal Revenue Code of 
1986 (relating to tax imposed) is amended by adding at the end the 
following new subsection:
    ``(e) Reduction of Tax on Community Banks.--
            ``(1) In general.--In the case of a C corporation which is 
        a community bank, the aggregate tax imposed by this section, 
        section 55, and section 1201 shall be 80 percent of the 
        aggregate tax which would (but for this subsection) be imposed 
        by such sections.
            ``(2) Maximum reduction.--The reduction in tax by reason of 
        this subsection shall not exceed $250,000. Corporations treated 
        as 1 corporation under section 1202(d)(3) shall be so treated 
        under this subsection, and the limitation under the preceding 
        sentence shall be allocated among such corporations in such 
        manner as the Secretary shall prescribe.
            ``(3) Increased benefit for banks operating in distressed 
        areas, etc.--
                    ``(A) In general.--In the case of a bank operating 
                in an area referred to in subparagraph (B)--
                            ``(i) paragraph (1) shall be applied by 
                        substituting `50 percent' for `80 percent', and
                            ``(ii) paragraph (2) shall be applied by 
                        substituting `$500,000' for `$250,000'.
                    ``(B) Areas described.--The areas referred to in 
                this subparagraph are--
                            ``(i) empowerment zones and enterprise 
                        communities designated under section 1391,
                            ``(ii) renewal communities designated under 
                        section 1400E,
                            ``(iii) low-income communities (as defined 
                        in section 45D(e)), and
                            ``(iv) distressed communities (within the 
                        meaning of section 233 of the Bank Enterprise 
                        Act of 1991 (12 U.S.C. 1834a(b)).
            ``(4) Community bank.--For purposes of this section, the 
        term `community bank' means any of the following entities the 
        gross assets of which (determined under the rules of section 
        1202(d)) are $5,000,000,000 or less:
                    ``(A) Any bank (as defined in section 581).
                    ``(B) Any bank holding company (as defined in 
                section 2(a) of the Bank Holding Company Act of 1956 
                (12 U.S.C. 1841(a))).
                    ``(C) Any savings association (as defined in 
                section 3(b) of the Federal Deposit Insurance Act (12 
                U.S.C. 1813)).
                    ``(D) Any savings and loan holding company (as 
                defined in section 10(a)(1)(D) of the Home Owners Loan 
                Act).''.
    (b) S Corporations.--Subsection (a) of section 1366 of such Code is 
amended by adding at the end the following new paragraph:
            ``(3) Reduction of tax on community banks.--
                    ``(A) In general.--In the case of an S corporation 
                which is a community bank (as defined in section 
                11(e)(4)), the net amount required to be taken into 
                account by shareholders (without regard to this 
                paragraph) shall be reduced by the lesser of--
                            ``(i) 20 percent of such net amount, or
                            ``(ii) $1,250,000.
                    ``(B) Increased benefit for banks operating in 
                distressed areas, etc.--In the case of a bank operating 
                in an area referred to in section 11(e)(3)(B)--
                            ``(i) subparagraph (A)(i) shall be applied 
                        by substituting `50 percent' for `20 percent', 
                        and
                            ``(ii) subparagraph (A)(ii) shall be 
                        applied by substituting `$2,500,000' for 
                        `$1,250,000'.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 402. COMMUNITY BANK RELIEF FROM MINIMUM TAX.

    (a) In General.--Section 55 of the Internal Revenue Code of 1986 
(relating to alternative minimum tax imposed) is amended by adding at 
the end the following new subsection:
    ``(f) Exemption for Community Banks.--
            ``(1) In general.--The tentative minimum tax of a community 
        bank (as defined in section 11(e)(4)) shall be zero.
            ``(2) Certain rules to apply.--Rules similar to the rules 
        of paragraphs (2) through (5) of subsection (e) shall apply for 
        purposes of this subsection.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

              TITLE V--SMALL BUSINESS SUBCHAPTER S REFORMS

SEC. 501. INCREASING SHAREHOLDER LIMIT FOR SUBCHAPTER S TO 150.

    (a) In General.--Section 1361(b)(1)(A) of the Internal Revenue Code 
of 1986 (defining small business corporation) is amended by striking 
``100'' and inserting ``150''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2007.

SEC. 502. ISSUANCE OF PREFERRED STOCK PERMITTED FOR SUBCHAPTER S 
              CORPORATIONS.

    (a) In General.--Section 1361 of such Code (defining S corporation) 
is amended by adding at the end the following new subsection:
    ``(f) Treatment of Qualified Preferred Stock.--
            ``(1) In general.--For purposes of this subchapter--
                    ``(A) qualified preferred stock shall not be 
                treated as a second class of stock, and
                    ``(B) no person shall be treated as a shareholder 
                of the corporation by reason of holding qualified 
                preferred stock.
            ``(2) Qualified preferred stock defined.--For purposes of 
        this subsection, the term `qualified preferred stock' means 
        stock which meets the requirements of subparagraphs (A), (B), 
        and (C) of section 1504(a)(4). Stock shall not fail to be 
        treated as qualified preferred stock merely because it is 
        convertible into other stock.
            ``(3) Distributions.--A distribution (not in part or full 
        payment in exchange for stock) made by the corporation with 
        respect to qualified preferred stock shall be includible as 
        ordinary income of the holder and deductible to the corporation 
        as an expense in computing taxable income under section 1363(b) 
        in the year such distribution is received.''.
    (b) Conforming Amendments.--
            (1) Paragraph (1) of section 1361(b) of such Code is 
        amended by inserting ``, except as provided in subsection 
        (f),'' before ``which does not''.
            (2) Subsection (a) of section 1366 of such Code is amended 
        by adding at the end the following new paragraph:
            ``(3) Allocation with respect to qualified preferred 
        stock.--The holders of qualified preferred stock (as defined in 
        section 1361(f)) shall not, with respect to such stock, be 
        allocated any of the items described in paragraph (1).''.
            (3) Clause (ii) of section 354(a)(2)(C) of such Code is 
        amended--
                    (A) in the header by inserting ``and s 
                corporations'' after ``corporations''; and
                    (B) by striking subclause (I) and inserting the 
                following:
                                    ``(I) In general.--Clause (i) shall 
                                not apply in the case of a 
                                recapitalization under section 
                                368(a)(I)(E) of a family-owned 
                                corporation or S corporation.''.
            (4) Subsection (a) of section 1373 of such Code is amended 
        by striking ``and'' at the end of paragraph (1), by striking 
        the period at the end of paragraph (2) and inserting ``, and'', 
        and by adding at the end the following new paragraph:
            ``(3) no amount of an expense deductible under this 
        subchapter by reason of section 1361(f)(3) shall be apportioned 
        or allocated to such income.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

SEC. 503. TREATMENT OF QUALIFYING DIRECTOR SHARES.

    (a) In General.--Section 1361 of the Internal Revenue Code of 1986 
(defining S corporation), as amended by section 502(a), is amended by 
adding at the end the following new subsection:
    ``(g) Treatment of Qualifying Director Shares.--
            ``(1) In general.--For purposes of this subchapter--
                    ``(A) qualifying director shares shall not be 
                treated as a second class of stock, and
                    ``(B) no person shall be treated as a shareholder 
                of the corporation by reason of holding qualifying 
                director shares.
            ``(2) Qualifying director shares defined.--For purposes of 
        this subsection, the term `qualifying director shares' means 
        any shares of stock in a bank (as that term is defined in 
        section 581) or in a bank holding company registered as such 
        with the Federal Reserve System--
                    ``(A) which are held by an individual solely by 
                reason of status as a director of such bank or company 
                or its controlled subsidiary, and
                    ``(B) which are subject to an agreement pursuant to 
                which the holder is required to dispose of the shares 
                of stock upon termination of the holder's status as a 
                director at the same price as the individual acquired 
                such shares of stock.
            ``(3) Distributions.--A distribution (not in part or full 
        payment in exchange for stock) made by the corporation with 
        respect to qualifying director shares shall be includible as 
        ordinary income of the holder and deductible to the corporation 
        as an expense in computing taxable income under section 1363(b) 
        in the year such distribution is received.''.
    (b) Conforming Amendments.--
            (1) Section 1361(b)(1) of the Internal Revenue Code of 
        1986, as amended by section 502(b), is amended by striking 
        ``subsection (f)'' and inserting ``subsections (f) and (g)''.
            (2) Section 1366(a) of such Code, as amended by section 
        502(b), is amended by adding at the end the following new 
        paragraph:
            ``(4) Allocation with respect to qualifying director 
        shares.--The holders of qualifying director shares (as that 
        term is defined in section 1361(g)) shall not, with respect to 
        such shares of stock, be allocated any of the items described 
        in paragraph (1).''.
            (3) Section 1373(a) of such Code, as amended by section 
        502(b), is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (2);
                    (B) by striking the period at the end of paragraph 
                (3) and inserting ``, and'';
                    (C) and adding at the end the following new 
                paragraph:
            ``(4) no amount of an expense deductible under this 
        subchapter by reason of section 1361(g)(3) shall be apportioned 
        or allocated to such income.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

SEC. 504. RECAPTURE OF BAD DEBT RESERVES.

    Notwithstanding section 481 of the Internal Revenue Code of 1986, 
with respect to any S corporation election made by any bank in taxable 
years beginning after December 31, 1996, such bank may recognize built-
in gains from changing its accounting method for recognizing bad debts 
from the reserve method under section 585 or 593 of such Code to the 
charge-off method under section 166 of such Code either in the taxable 
year ending with or beginning with such an election.

             TITLE VI--SMALL BUSINESS LENDING ENHANCEMENTS

SEC. 601. REDUCED FEES FOR SECTION 7(A) LOANS.

    Section 7(a) of the Small Business Act (15 U.S.C. 636(a)) is 
amended--
            (1) in paragraph (23)(C)--
                    (A) in the matter preceding clause (i), by striking 
                ``may be reduced,'' and all that follows through 
                ``guarantees--'' and inserting ``may be reduced--''; 
                and
                    (B) in clause (i), by striking ``, to the maximum 
                extent possible''; and
            (2) by adding at the end the following new paragraph:
            ``(32) Fee reduction.--Amounts appropriated or otherwise 
        made available to the Administrator for the purpose of fee 
        reduction shall be used by the Administrator to reduce the fee 
        percentages in effect under paragraphs (18)(A) and (23)(A), to 
        the maximum extent possible.''.

SEC. 602. LOW DOCUMENTATION LOAN PROGRAM MADE MANDATORY.

    Section 7(a) of the Small Business Act (15 U.S.C. 636(a)) (as 
amended by section 601 of this title) is amended--
            (1) in paragraph (25), by striking subparagraph (C); and
            (2) by inserting after paragraph (32) (as added by section 
        601(2) of this title) the following new paragraph:
            ``(33) Low documentation loan program.--
                    ``(A) In general.--The Administrator shall carry 
                out a low documentation loan program for loans of 
                $250,000 or less only through lenders with significant 
                experience in making small business loans.
                    ``(B) Regulations.--Not later than 45 days after 
                the date of the enactment of this paragraph, the 
                Administrator shall prescribe regulations defining the 
                experience necessary for participation as a lender in 
                the low documentation loan program.''.

SEC. 603. EFFECTIVE DATE.

    The amendments made by sections 601 and 602 shall apply for fiscal 
years beginning with fiscal year 2008.
                                 <all>
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