II 

109TH CONGRESS 

1ST SESSION S. 675 

To reward the hard work and risk of individuals who choose to live in 

and help preserve America’s small, rural towns, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MARCH 17, 2005 

Mr. DORGAN (for himself, Mr. HAGEL, Mr. BROWNBACK, Mr. JOHNSON, Mr. 

DURBIN, Mr. BURNS, Mr. CONRAD, Mr. DAYTON, and Mr. HARKIN) introduced the following bill; which was read twice and referred to the Committee on Finance 

A BILL 

To reward the hard work and risk of individuals who choose 

to live in and help preserve America’s small, rural towns, 

and for other purposes. 

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; ETC. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘New Homestead Act of 2005’’. 

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment 

9 to, or repeal of, a section or other provision, the reference 
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1 shall be considered to be made to a section or other provi2 sion of the Internal Revenue Code of 1986. 

3 (c) TABLE OF CONTENTS.—The table of contents for 

4 this Act is as follows: 

Sec. 1. Short title; etc. 

TITLE I—NEW HOMESTEAD OPPORTUNITIES 

Sec. 101. Loans for leadership initiative. 

Sec. 102. Credit for certain rural homebuyers. 

Sec. 103. Capital loss deduction allowed with respect to sale or exchange of 

principal residence in certain rural areas. 

Sec. 104. Individual homestead accounts. 

TITLE II—INCENTIVES FOR MAIN STREET BUSINESSES 

Sec. 201. Rural investment tax credit. 

Sec. 202. Qualified rural small business investment credit. 

Sec. 203. Accelerated depreciation for rural investment property. 

TITLE III—NEW HOMESTEAD VENTURE CAPITAL FUND 

Sec. 301. New homestead venture capital fund. 

5 TITLE I—NEW HOMESTEAD 

6 OPPORTUNITIES 

7 SEC. 101. LOANS FOR LEADERSHIP INITIATIVE. 

8 (a) DEFINITIONS.—In this section: 

9 (1) DEGREE.—The term ‘‘degree’’ means an as10 sociate’s or bachelor’s degree awarded by an institu11 tion of higher education. 

12 (2) INSTITUTION OF HIGHER EDUCATION.—The 

13 term ‘‘institution of higher education’’ has the 

14 meaning given the term in section 101 of the Higher 

15 Education Act of 1965 (20 U.S.C. 1001). 

16 (3) QUALIFYING COUNTY.—The term ‘‘quali17 fying county’’ means any county which— 
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1 (A) is outside a metropolitan statistical 

2 area (defined as such by the Office of Manage3 ment and Budget), and 

4 (B) during the 20-year period ending with 

5 the calendar year preceding the date of enact6 ment of this Act, has a net out-migration of in7 habitants from the county of at least 10 percent 

8 of the population of the county at the beginning 

9 of such period. 

10 (4) SECRETARY.—The term ‘‘Secretary’’ means 

11 the Secretary of Education. 

12 (b) PROGRAM.— 

13 (1) IN GENERAL.—The Secretary shall carry 

14 out a program of assuming the obligation to repay, 

15 pursuant to subsection (c), a loan made, insured, or 

16 guaranteed under part B, D, or E of title IV of the 

17 Higher Education Act of 1965 (20 U.S.C. 1071 et 

18 seq., 20 U.S.C. 1087a et seq., and 20 U.S.C. 

19 1087aa et seq.), excluding loans made under section 

20 428B of such Act or comparable loans made under 

21 part D of such Act, for any borrower who— 

22 (A) completes a degree; 

23 (B) resides in a qualifying county; and 

24 (C) is employed in a qualifying county. 
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1 (2) REGULATIONS.—The Secretary is author2 ized to prescribe such regulations as may be nec3 essary to carry out the provisions of this section. 

4 (c) LOAN REPAYMENT.— 

5 (1) IN GENERAL.—The Secretary shall assume 

6 the obligation to repay, after each of the first 5 

7 years of the residency and employment described in 

8 subparagraphs (B) and (C) of subsection (b)(1) that 

9 occur after the date of enactment of this section, 10 

10 percent of the total amount of all loans made to a 

11 student under the provisions of the Higher Edu12 cation Act of 1965 as described in subsection (b)(1), 

13 up to a maximum amount of $2,000 each year. 

14 (2) CONSTRUCTION.—Nothing in this section 

15 shall be construed to authorize the refunding of any 

16 repayment of a loan made under part B, D, or E 

17 of title IV of the Higher Education Act of 1965. 

18 (3) INTEREST.—If a portion of a loan is repaid 

19 by the Secretary under this section for any year, the 

20 proportionate amount of interest on such loan which 

21 accrues for such year shall be repaid by the Sec22 retary so long as the total amount repaid by the 

23 Secretary in any 1 year does not exceed $2,000. 

24 (d) REPAYMENT TO ELIGIBLE LENDERS.—The Sec25 retary shall pay to each eligible lender or holder for each 
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1 fiscal year an amount equal to the aggregate amount of 

2 loans which are subject to repayment pursuant to this sec3 tion for such year. 

4 (e) APPLICATION FOR REPAYMENT.— 

5 (1) IN GENERAL.—An eligible borrower desiring 

6 loan repayment under this section shall submit a 

7 complete and accurate application to the Secretary 

8 at such time, in such manner, and containing such 

9 information as the Secretary may require. 

10 (2) CONDITIONS.—An eligible borrower may 

11 apply for loan repayment under this section after 

12 completing each year of qualifying residency and em13 ployment. The eligible borrower shall receive forbear14 ance while engaged in qualifying residency and em15 ployment unless the borrower is in deferment while 

16 so engaged. 

17 (f) DEFINITION OF ELIGIBLE BORROWER.—In this 

18 section the term ‘‘eligible borrower’’ means any borrower 

19 who is not in default on any of the borrower’s student 

20 loans under part B, D, or E of title IV of the Higher 

21 Education Act of 1965. 

22 (g) AUTHORIZATION OF APPROPRIATIONS.— 

23 (1) LOAN REPAYMENT.—There are authorized 

24 to be appropriated to carry out this section such 

25 sums as may be necessary. 
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1 (2) PERKINS LOAN FUNDS.—There are author2 ized to be appropriated such sums as may be nec3 essary for Federal capital contributions to student 

4 loan funds established under part E of title IV of 

5 the Higher Education Act of 1965. 

6 (h) REPAYMENT EXCLUDED FROM GROSS IN7 COME.—Section 108(f)(1) (relating to student loans) is 

8 amended by inserting ‘‘or pursuant to section 101 of the 

9 New Homestead Act of 2005’’ after ‘‘employers’’. 

10 SEC. 102. CREDIT FOR CERTAIN RURAL HOMEBUYERS. 

11 (a) IN GENERAL.—Subpart A of part IV of sub12 chapter A of chapter 1 (relating to nonrefundable personal 

13 credits) is amended by inserting before section 26 the fol14 lowing new section: 

15 ‘‘SEC. 25C. PURCHASE OF RESIDENCES BY CERTAIN RURAL 

16 HOMEBUYERS. 

17 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in18 dividual who purchases a qualified residence in a quali19 fying county during any taxable year, there shall be al20 lowed as a credit against the tax imposed by this chapter 

21 for the taxable year an amount equal to the lesser of— 

22 ‘‘(1) 10 percent of the purchase price of the 

23 residence, or 

24 ‘‘(2) $5,000. 

25 ‘‘(b) LIMITATIONS.— 
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1 ‘‘(1) LIMITATION BASED ON AMOUNT OF

2 TAX.—The credit allowed under subsection (a) for 

3 any taxable year shall not exceed the excess of— 

4 ‘‘(A) the sum of the regular tax liability 

5 (as defined in section 26(b)) plus the tax im6 posed by section 55, over 

7 ‘‘(B) the sum of the credits allowable 

8 under this subpart (other than this section and 

9 section 23) and section 27 for the taxable year. 

10 ‘‘(2) MARRIED INDIVIDUALS FILING JOINTLY.— 

11 In the case of a husband and wife who file a joint 

12 return, the credit under this section is allowable only 

13 if the residence is a qualified residence with respect 

14 to both the husband and wife, and the amount speci15 fied under subsection (a)(2) shall apply to the joint 

16 return. 

17 ‘‘(3) MARRIED INDIVIDUALS FILING SEPA18 RATELY.—In the case of a married individual filing 

19 a separate return, subsection (a)(2) shall be applied 

20 by substituting ‘$2,500’ for ‘$5,000’. 

21 ‘‘(4) OTHER TAXPAYERS.—If 2 or more individ22 uals who are not married purchase a qualified resi23 dence, the amount of the credit allowed under sub24 section (a) shall be allocated among such individuals 

25 in such manner as the Secretary may prescribe, ex-
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1 cept that the total amount of the credits allowed to 

2 all such individuals shall not exceed $5,000. 

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

4 ‘‘(1) QUALIFIED RESIDENCE.—The term ‘quali5 fied residence’ has the same meaning as when used 

6 in section 163(h). 

7 ‘‘(2) QUALIFYING COUNTY.—The term ‘quali8 fying county’ means any county which— 

9 ‘‘(A) is outside a metropolitan statistical 

10 area (defined as such by the Office of Manage11 ment and Budget), and 

12 ‘‘(B) during the 20-year period ending 

13 with the calendar year preceding the date of the 

14 enactment of this section, has a net out-migra15 tion of inhabitants from the county of at least 

16 10 percent of the population of the county at 

17 the beginning of such period. 

18 ‘‘(3) PURCHASE AND PURCHASE PRICE.—The 

19 terms ‘purchase’ and ‘purchase price’ have the 

20 meanings provided by section 1400C(e). 

21 ‘‘(d) CARRYFORWARD OF UNUSED CREDIT.—If the 

22 credit allowable under subsection (a) for any taxable year 

23 exceeds the limitation imposed by subsection (b)(1) for 

24 such taxable year reduced by the sum of the credits allow25 able under this subpart (other than this section and sec-
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1 tion 23), such excess shall be carried to the succeeding 

2 taxable year and added to the credit allowable under sub3 section (a) for such taxable year. 

4 ‘‘(e) REPORTING.—If the Secretary requires informa5 tion reporting under section 6045 by a person described 

6 in subsection (e)(2) thereof to verify the eligibility of tax7 payers for the credit allowable by this section, the excep8 tion provided by section 6045(e)(5) shall not apply. 

9 ‘‘(f) RECAPTURE OF CREDIT IN CASE OF CERTAIN

10 SALES.— 

11 ‘‘(1) IN GENERAL.—Except as provided in para12 graph (5), if the taxpayer disposes of a qualified res13 idence with respect to the purchase of which a credit 

14 was allowed under subsection (a) at any time within 

15 5 years after the date the taxpayer acquired the 

16 property, then the tax imposed under this chapter 

17 for the taxable year in which the disposition occurs 

18 is increased by the credit recapture amount. 

19 ‘‘(2) CREDIT RECAPTURE AMOUNT.—For pur20 poses of paragraph (1), the credit recapture amount 

21 is an amount equal to the sum of— 

22 ‘‘(A) the applicable recapture percentage of 

23 the amount of the credit allowed to the tax24 payer under this section, plus 
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1 ‘‘(B) interest at the overpayment rate es2 tablished under section 6621 on the amount de3 termined under subparagraph (A) for each 

4 prior taxable year for the period beginning on 

5 the due date for filing the return for the prior 

6 taxable year involved. 

7 No deduction shall be allowed under this chapter for 

8 interest described in subparagraph (B). 

9 ‘‘(3) APPLICABLE RECAPTURE PERCENTAGE.— 

10 ‘‘(A) IN GENERAL.—For purposes of this 

11 subsection, the applicable recapture percentage 

12 shall be determined from the following table: 

The applicable 

recapture 

‘‘If the sale occurs in: percentage is: 

Year 1 ........................................................................ 100

Year 2 ........................................................................ 80

Year 3 ........................................................................ 60

Year 4 ........................................................................ 40

Year 5 ........................................................................ 20

Years 6 and thereafter .............................................. 0.

13 ‘‘(B) YEARS.—For purposes of subpara14 graph (A), year 1 shall begin on the first day 

15 of the taxable year in which the purchase of the 

16 qualified residence described in subsection (a) 

17 occurs. 

18 ‘‘(4) NO CREDITS AGAINST TAX.—Any increase 

19 in tax under this subsection shall not be treated as 

20 a tax imposed by this chapter for purposes of deter-
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1 mining the amount of any credit under this chapter 

2 or for purposes of section 55. 

3 ‘‘(5) DEATH OF OWNER; CASUALTY LOSS; IN4 VOLUNTARY CONVERSION; ETC.—The provisions of 

5 paragraph (1) do not apply to— 

6 ‘‘(A) a disposition of a qualified residence 

7 made on account of the death of any individual 

8 having a legal or equitable interest therein oc9 curring during the 5-year period to which ref10 erence is made under paragraph (1), 

11 ‘‘(B) a disposition of the old qualified resi12 dence if it is substantially or completely de13 stroyed by a casualty described in section 

14 165(c)(3) or compulsorily or involuntarily con15 verted (within the meaning of section 1033(a)), 

16 or 

17 ‘‘(C) a disposition pursuant to a settlement 

18 in a divorce or legal separation proceeding 

19 where the qualified residence is sold or the 

20 other spouse retains such residence. 

21 ‘‘(g) BASIS ADJUSTMENT.—For purposes of this sub22 title, if a credit is allowed under this section with respect 

23 to the purchase of any residence, the basis of such resi24 dence shall be reduced by the amount of the credit so al25 lowed.’’. 
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1 (b) CONFORMING AMENDMENTS.— 

2 (1) Subsection (a) of section 1016 (relating to 

3 general rule for adjustments to basis) is amended by 

4 striking ‘‘and’’ at the end of paragraph (30), by 

5 striking the period at the end of paragraph (31) and 

6 inserting ‘‘, and’’, and by adding at the end the fol7 lowing new paragraph: 

8 ‘‘(32) in the case of a residence with respect to 

9 which a credit was allowed under section 25C, to the 

10 extent provided in section 25C(g).’’. 

11 (2) Section 24(b)(3)(B) is amended by striking 

12 ‘‘23 and 25B’’ and inserting ‘‘23, 25B, and 25C’’. 

13 (3) Section 25(e)(1)(C) is amended by inserting 

14 ‘‘25C,’’ after ‘‘25B,’’. 

15 (4) Section 25B(g) is amended by striking ‘‘sec16 tion 23’’ and inserting ‘‘sections 23 and 25C’’. 

17 (5) Section 26(a)(1) is amended by striking 

18 ‘‘and 25B’’ and inserting ‘‘25B, and 25C’’. 

19 (6) Section 1400C(d) is amended by striking 

20 ‘‘and 25B’’ and inserting ‘‘25B, and 25C’’. 

21 (7) The table of sections for subpart A of part 

22 IV of subchapter A of chapter 1 is amended by in23 serting before the item relating to section 26 the fol24 lowing new item: 

‘‘Sec. 25C. Purchase of residences by certain rural homebuyers.’’. 
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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to purchases after the date of the 

3 enactment of this Act, in taxable years ending after such 

4 date. 

5 SEC. 103. CAPITAL LOSS DEDUCTION ALLOWED WITH RE6 SPECT TO SALE OR EXCHANGE OF PRINCIPAL 

7 RESIDENCE IN CERTAIN RURAL AREAS. 

8 (a) IN GENERAL.—Subsection (c) of section 165 (re9 lating to limitation on losses of individuals) is amended— 

10 (1) by striking ‘‘and’’ at the end of paragraph 

11 (2), 

12 (2) by striking the period at the end of para13 graph (3) and inserting ‘‘; and’’, and 

14 (3) by adding at the end the following new 

15 paragraph: 

16 ‘‘(4) losses arising from the sale or exchange of 

17 the principal residence (within the meaning of sec18 tion 121) of the taxpayer located in a qualifying 

19 county (as defined in section 223(b)(2)), but only if 

20 the principal residence was acquired by the taxpayer 

21 after the date of enactment of this paragraph.’’. 

22 (b) CONFORMING AMENDMENT.—Section 67(b)(3) is 

23 amended by striking ‘‘paragraph (2) or (3)’’ and inserting 

24 ‘‘paragraph (2), (3), or (4)’’. 
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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to sales and exchanges after the 

3 date of the enactment of this Act, in taxable years ending 

4 after such date. 

5 SEC. 104. INDIVIDUAL HOMESTEAD ACCOUNTS. 

6 (a) IN GENERAL.—Subchapter F of chapter 1 (relat7 ing to exempt organizations) is amended by adding at the 

8 end the following new part: 

9 ‘‘PART IX—INDIVIDUAL HOMESTEAD ACCOUNTS 

‘‘Sec. 530A. Individual homestead accounts. 

10 ‘‘SEC. 530A. INDIVIDUAL HOMESTEAD ACCOUNTS. 

11 ‘‘(a) GENERAL RULE.—An individual homestead ac12 count shall be exempt from taxation under this subtitle. 

13 Notwithstanding the preceding sentence, any individual 

14 homestead account shall be subject to the taxes imposed 

15 by section 511 (relating to imposition of tax on unrelated 

16 business income of charitable, etc., organizations). 

17 ‘‘(b) INDIVIDUAL HOMESTEAD ACCOUNT.—For pur18 poses of this title, the term ‘individual homestead account’ 

19 means a trust created or organized in the United States 

20 for the exclusive benefit of a qualified individual or his 

21 beneficiaries, but only if the written governing instrument 

22 creating the trust meets the following requirements: 

23 ‘‘(1) Except in the case of a qualified rollover 

24 (as defined in subsection (f)(7))— 
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1 ‘‘(A) no contribution will be accepted un2 less it is in cash, 

3 ‘‘(B) contributions will not be accepted for 

4 the taxable year in excess of $2,500 (deter5 mined without regard to any contribution made 

6 under subsection (d)), and 

7 ‘‘(C) contributions will not be accepted for 

8 any taxable year following the fifth taxable year 

9 in which the qualified individual has contributed 

10 to any individual homestead account. 

11 ‘‘(2) The requirements of paragraphs (2) 

12 through (6) of section 408(a) are met. 

13 ‘‘(c) QUALIFIED INDIVIDUAL; QUALIFYING COUN14 TY.—For purposes of this section— 

15 ‘‘(1) QUALIFIED INDIVIDUAL.—The term ‘quali16 fied individual’ means, for any taxable year, an indi17 vidual who is a bona fide resident of a qualifying 

18 county. 

19 ‘‘(2) QUALIFYING COUNTY.—The term ‘quali20 fying county’ means any county which— 

21 ‘‘(A) is outside a metropolitan statistical 

22 area (defined as such by the Office of Manage23 ment and Budget), and 

24 ‘‘(B) during the 20-year period ending 

25 with the calendar year preceding the date of the 
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1 enactment of this section, has a net out-migra2 tion of inhabitants from the county of at least 

3 10 percent of the population of the county at 

4 the beginning of such period. 

5 ‘‘(d) MATCHING CONTRIBUTIONS TO INDIVIDUAL

6 HOMESTEAD ACCOUNTS.— 

7 ‘‘(1) IN GENERAL.—Not less than once each 

8 taxable year, the Secretary shall deposit (to the ex9 tent provided in appropriation Acts) into an indi10 vidual Homestead account of each qualified indi11 vidual an amount equal to the applicable percentage 

12 of the sum of the amounts deposited into all of the 

13 individual homestead accounts of such individual 

14 during such taxable year (determined without regard 

15 to any amount contributed under this subsection). 

16 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 

17 of this subsection, the applicable percentage with re18 spect to any qualified individual for any taxable year 

19 shall be determined in accordance with the following 

20 tables: 

21 ‘‘(A) In the case of a married individual 

22 (as defined in section 7703) filing a joint re23 turn: 

‘‘If modified adjusted gross 

income is: 

The applicable percentage is: 

$30,000 or less ................................................................................... 50

Over $30,000 but not over $60,000 .................................................. 25
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‘‘If modified adjusted gross 

income is: 

The applicable percentage is: 

Over $60,000 but not over $100,000 ................................................ 12.5

Over $100,000 ................................................................................... zero. 

1 ‘‘(B) In the case of a head of household 

2 (as defined in section 2(b)): 

‘‘If modified adjusted gross 

income is: 

The applicable percentage is: 

$22,500 or less ................................................................................... 50

Over $22,500 but not over $45,000 .................................................. 25

Over $45,000 but not over $75,000 .................................................. 12.5

Over $75,000 ..................................................................................... zero. 

3 ‘‘(C) In the case of any other individual: 

‘‘If modified adjusted gross 

income is: 

The applicable percentage is: 

$15,000 or less ................................................................................... 50

Over $15,000 but not over $30,000 .................................................. 25

Over $30,000 but not over $50,000 .................................................. 12.5

Over $50,000 ..................................................................................... zero. 

4 For purposes of this paragraph, the term ‘modified 

5 adjusted gross income’ has the meaning given such 

6 term by section 86(b)(2). 

7 ‘‘(3) EXCLUSION FROM INCOME.—Except as 

8 otherwise provided in this section, gross income shall 

9 not include any amount deposited into an individual 

10 homestead account under paragraph (1). 

11 ‘‘(4) FORFEITURE OF MATCHING CONTRIBU12 TIONS IN THE CASE OF CERTAIN DISTRIBUTIONS.— 

13 In the event of a distribution from an individual 

14 homestead account before the date described in sub15 section (f)(1)(A) (other than a distribution described 

16 in subsection (e)(2)(A)), the account holder shall 

17 forfeit the corresponding matching contributions and 
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1 interest earned on the matching contributions, un2 less such distribution is recontributed to such ac3 count within 6 months of such distribution. 

4 ‘‘(e) TAX TREATMENT OF DISTRIBUTIONS.— 

5 ‘‘(1) INCLUSION OF AMOUNTS IN GROSS IN6 COME.—Except as otherwise provided in this sub7 section, any amount paid or distributed out of an in8 dividual homestead account shall be includible in the 

9 gross income of the payee or distributee, as the case 

10 may be, in the manner as provided in section 72. 

11 For purposes of the preceding sentence, distributions 

12 which are includible in gross income shall be treated 

13 as first attributable to amounts contributed under 

14 subsection (d) to the extent thereof. 

15 ‘‘(2) EXCLUSION OF CATASTROPHIC MEDICAL

16 EXPENSE DISTRIBUTIONS IN FIRST FIVE YEARS AND

17 QUALIFIED INDIVIDUAL HOMESTEAD DISTRIBUTIONS

18 THEREAFTER.—Paragraph (1) shall not apply to— 

19 ‘‘(A) any distribution described in section 

20 72(t)92)(B) before the date described in sub21 section (f)(1)(A), but only to the extent such 

22 distribution does not exceed the balance in the 

23 account as of the date of such distribution, re24 duced by any matching contribution under sub25 section (d), and 
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1 ‘‘(B) any qualified individual homestead 

2 distribution. 

3 ‘‘(f) QUALIFIED INDIVIDUAL HOMESTEAD DISTRIBU4 TION.—For purposes of this section— 

5 ‘‘(1) IN GENERAL.—The term ‘qualified indi6 vidual homestead distribution’ means any amount 

7 paid or distributed out of an individual homestead 

8 account which would otherwise be includible in gross 

9 income, to the extent that such payment or distribu10 tion— 

11 ‘‘(A) is paid or distributed after the 5-tax12 able year period beginning with the first taxable 

13 year in which the qualified individual made a 

14 contribution to the individual homestead ac15 count (including any predecessor account), and 

16 ‘‘(B) is used exclusively to pay qualified in17 dividual homestead expenses for the qualified 

18 individual or the spouse or dependent (as de19 fined in section 152) of such individual. 

20 ‘‘(2) QUALIFIED INDIVIDUAL HOMESTEAD EX21 PENSES.—The term ‘qualified individual homestead 

22 expenses’ means any of the following: 

23 ‘‘(A) Qualified higher education expenses. 

24 ‘‘(B) Qualified first-time homebuyer costs. 
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1 ‘‘(C) Qualified business capitalization 

2 costs. 

3 ‘‘(D) Qualified medical expenses. 

4 ‘‘(E) Qualified rollovers. 

5 ‘‘(3) QUALIFIED HIGHER EDUCATION EX6 PENSES.— 

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

8 higher education expenses’ has the meaning 

9 given such term by section 72(t)(7), determined 

10 by treating postsecondary vocational edu11 cational schools as eligible educational institu12 tions. 

13 ‘‘(B) POSTSECONDARY VOCATIONAL EDU14 CATION SCHOOL.—The term ‘postsecondary vo15 cational educational school’ means an area vo16 cational education school (as defined in sub17 paragraph (C) or (D) of section 521(4) of the 

18 Carl D. Perkins Vocational and Applied Tech19 nology Education Act (20 U.S.C. 2471(4))) 

20 which is in any State (as defined in section 

21 521(33) of such Act), as such sections are in 

22 effect on the date of the enactment of this sec23 tion. 

24 ‘‘(C) COORDINATION WITH OTHER BENE25 FITS.—The amount of qualified higher edu-
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1 cation expenses for any taxable year shall be re2 duced as provided in section 25A(g)(2). 

3 ‘‘(4) QUALIFIED FIRST-TIME HOMEBUYER

4 COSTS.—The term ‘qualified first-time homebuyer 

5 costs’ means qualified acquisition costs (as defined 

6 in section 72(t)(8) without regard to subparagraph 

7 (B) thereof) with respect to a principal residence 

8 (within the meaning of section 121) located in a 

9 qualifying county for a qualified first-time home10 buyer (as defined in section 72(t)(8)). 

11 ‘‘(5) QUALIFIED BUSINESS CAPITALIZATION

12 COSTS.— 

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

14 business capitalization costs’ means qualified 

15 expenditures for the capitalization of a qualified 

16 business pursuant to a qualified plan. 

17 ‘‘(B) QUALIFIED EXPENDITURES.—The 

18 term ‘qualified expenditures’ means expendi19 tures included in a qualified plan, including 

20 capital, plant, equipment, working capital, and 

21 inventory expenses. 

22 ‘‘(C) QUALIFIED BUSINESS.—The term 

23 ‘qualified business’ means any trade or business 

24 located in a qualifying county other than any 

25 trade or business— 
22 

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1 ‘‘(i) which consists of the operation of 

2 any facility described in section 

3 144(c)(6)(B), or 

4 ‘‘(ii) which contravenes any law. 

5 Rules similar to the rules under subsection (b) 

6 or (c) of section 1397C shall apply to any quali7 fied business under this section. 

8 ‘‘(D) QUALIFIED PLAN.—The term ‘quali9 fied plan’ means a business plan which meets 

10 such requirements as the Secretary may specify. 

11 ‘‘(6) QUALIFIED MEDICAL EXPENSES.—The 

12 term ‘qualified medical expenses’ means any amount 

13 paid during the taxable year, not compensated for by 

14 insurance or otherwise, for medical care (as defined 

15 in section 213(d)) of the taxpayer, his spouse, or his 

16 dependent (as defined in section 152). 

17 ‘‘(7) QUALIFIED ROLLOVERS.—The term ‘quali18 fied rollover’ means any amount paid from an indi19 vidual homestead account of a taxpayer into another 

20 such account established for the benefit of— 

21 ‘‘(A) such taxpayer, or 

22 ‘‘(B) any qualified individual who is— 

23 ‘‘(i) the spouse of such taxpayer, or 

24 ‘‘(ii) any dependent (as defined in sec25 tion 152) of the taxpayer. 
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1 Rules similar to the rules of section 408(d)(3) shall 

2 apply for purposes of this paragraph. 

3 ‘‘(g) TAX TREATMENT OF ACCOUNTS.— 

4 ‘‘(1) LOSS OF EXEMPTION IN CASE OF PROHIB5 ITED TRANSACTIONS.—For purposes of this section, 

6 rules similar to the rules of section 408(e) shall 

7 apply. 

8 ‘‘(2) OTHER RULES TO APPLY.—Rules similar 

9 to the rules of paragraphs (4), (5), and (6) of sec10 tion 408(d) shall apply for purposes of this section. 

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

12 For purposes of this section— 

13 ‘‘(1) ALL ACCOUNTS TREATED AS ONE AC14 COUNT.—All individual homestead accounts of a 

15 qualified individual shall be treated as 1 account. 

16 ‘‘(2) TIME WHEN CONTRIBUTIONS DEEMED

17 MADE.—A taxpayer shall be deemed to have made a 

18 contribution to an individual homestead account on 

19 the last day of the preceding taxable year if the con20 tribution is made on account of such taxable year 

21 and is made not later than the time prescribed by 

22 law for filing the return for such taxable year (not 

23 including extensions thereof). 

24 ‘‘(3) CUSTODIAL ACCOUNTS.—Rules similar to 

25 the rules of section 408(h) shall apply. 
24 

•S 675 IS 

1 ‘‘(4) REPORTS.—The trustee of an individual 

2 homestead account shall make such reports regard3 ing such account to the Secretary and to the indi4 vidual for whom the account is maintained with re5 spect to contributions (and the years to which they 

6 relate), distributions, and such other matters as the 

7 Secretary may require under regulations. The re8 ports required by this paragraph— 

9 ‘‘(A) shall be filed at such time and in 

10 such manner as the Secretary prescribes in 

11 such regulations, and 

12 ‘‘(B) shall be furnished to individuals— 

13 ‘‘(i) not later than January 31 of the 

14 calendar year following the calendar year 

15 to which such reports relate, and 

16 ‘‘(ii) in such manner as the Secretary 

17 prescribes in such regulations. 

18 ‘‘(5) INVESTMENT IN COLLECTIBLES TREATED

19 AS DISTRIBUTIONS.—Rules similar to the rules of 

20 section 408(m) shall apply. 

21 ‘‘(i) DESIGNATION OF EARNED INCOME TAX CREDIT

22 PAYMENTS FOR DEPOSIT TO INDIVIDUAL HOMESTEAD

23 ACCOUNT.— 

24 ‘‘(1) IN GENERAL.—With respect to the return 

25 of any qualified individual for the taxable year of the 
25 

•S 675 IS 

1 tax imposed by this chapter, such individual may 

2 designate that a specified portion (not less than $1) 

3 of any overpayment of tax for such taxable year 

4 which is attributable to the earned income tax credit 

5 shall be deposited by the Secretary into an individual 

6 homestead account of such individual. The Secretary 

7 shall so deposit such portion designated under this 

8 subsection. 

9 ‘‘(2) MANNER AND TIME OF DESIGNATION.—A 

10 designation under paragraph (1) may be made with 

11 respect to any taxable year— 

12 ‘‘(A) at the time of filing the return of the 

13 tax imposed by this chapter for such taxable 

14 year, or 

15 ‘‘(B) at any other time (after the time of 

16 filing the return of the tax imposed by this 

17 chapter for such taxable year) specified in regu18 lations prescribed by the Secretary. 

19 Such designation shall be made in such manner as 

20 the Secretary prescribes by regulations. 

21 ‘‘(3) PORTION ATTRIBUTABLE TO EARNED IN22 COME TAX CREDIT.—For purposes of this sub23 section, an overpayment for any taxable year shall 

24 be treated as attributable to the earned income tax 

25 credit to the extent that such overpayment does not 
26 

•S 675 IS 

1 exceed the credit allowed to the taxpayer under sec2 tion 32 for such taxable year. 

3 ‘‘(4) OVERPAYMENTS TREATED AS RE4 FUNDED.—For purposes of this title, any portion of 

5 an overpayment of tax designated under paragraph 

6 (1) shall be treated as being refunded to the tax7 payer as of the last date prescribed for filing the re8 turn of tax imposed by this chapter (determined 

9 without regard to extensions) or, if later, the date 

10 the return is filed. 

11 ‘‘(j) PENALTY FOR DISTRIBUTIONS NOT USED FOR

12 QUALIFIED INDIVIDUAL HOMESTEAD EXPENSES.— 

13 ‘‘(1) IN GENERAL.—If any amount is distrib14 uted from an individual homestead account and is 

15 not used exclusively to pay qualified individual 

16 homestead expenses for the holder of the account or 

17 the spouse or dependent (as defined in section 152) 

18 of such holder, the tax imposed by this chapter for 

19 the taxable year of such distribution shall be in20 creased by 10 percent of such amount which is in21 cludible in gross income. For purposes of the pre22 ceding sentence, distributions which are includible in 

23 gross income shall be treated as first attributable to 

24 amounts contributed under subsection (d) to the ex25 tent thereof. 
27 

•S 675 IS 

1 ‘‘(2) EXCEPTION FOR CERTAIN DISTRIBU2 TIONS.—Paragraph (1) shall not apply to distribu3 tions which are— 

4 ‘‘(A) made on or after the date on which 

the account holder attains age 591 5 ⁄2, 

6 ‘‘(B) made to a beneficiary (or the estate 

7 of the account holder) on or after the death of 

8 the account holder, 

9 ‘‘(C) attributable to the account holder’s 

10 being disabled within the meaning of section 

11 72(m)(7), or 

12 ‘‘(D) described in subsection (e)(2)(A). 

13 ‘‘(k) APPLICATION OF SECTION.—This section shall 

14 apply to amounts paid to an individual homestead account 

15 for any taxable year beginning after the date of the enact16 ment of the New Homestead Act of 2005.’’. 

17 (b) TAX ON EXCESS CONTRIBUTIONS.— 

18 (1) TAX IMPOSED.—Subsection (a) of section 

19 4973 is amended by striking ‘‘or’’ at the end of 

20 paragraph (4), by redesignating paragraph (5) as 

21 paragraph (6), and by inserting after paragraph (4) 

22 the following new paragraph: 

23 ‘‘(5) an individual homestead account (within 

24 the meaning of section 530A(b)), or’’. 
28 

•S 675 IS 

1 (2) EXCESS CONTRIBUTIONS.—Section 4973 is 

2 amended by adding at the end the following sub3 section: 

4 ‘‘(h) INDIVIDUAL HOMESTEAD ACCOUNTS.—For pur5 poses of this section, in the case of individual homestead 

6 accounts, the term ‘excess contributions’ means the sum 

7 of— 

8 ‘‘(1) the excess (if any) of— 

9 ‘‘(A) the amount contributed for the tax10 able year to the accounts (other than a quali11 fied rollover, as defined in section 530A(f)(7), 

12 or a contribution under section 530A(d)), over 

13 ‘‘(B) the amount allowable under section 

14 530A for such contributions, and 

15 ‘‘(2) the amount determined under this sub16 section for the preceding taxable year reduced by the 

17 sum of— 

18 ‘‘(A) the distributions out of the accounts 

19 for the taxable year which were included in the 

20 gross income of the payee under section 

21 530A(e)(1), 

22 ‘‘(B) the distributions out of the accounts 

23 for the taxable year to which rules similar to 

24 the rules of section 408(d)(5) apply by reason 

25 of section 530A(g)(2), and 
29 

•S 675 IS 

1 ‘‘(C) the excess (if any) of the maximum 

2 amount allowable as a contribution under sec3 tion 530A for the taxable year over the amount 

4 contributed to the account for the taxable year 

5 (other than a contribution under section 

6 530A(d)). 

7 For purposes of this subsection, any contribution which 

8 is distributed from the individual homestead account in 

9 a distribution to which rules similar to the rules of section 

10 408(d)(4) apply by reason of section 530A(g)(2) shall be 

11 treated as an amount not contributed.’’. 

12 (c) TAX ON PROHIBITED TRANSACTIONS.—Section 

13 4975 is amended— 

14 (1) by adding at the end of subsection (c) the 

15 following paragraph: 

16 ‘‘(7) SPECIAL RULE FOR INDIVIDUAL HOME17 STEAD ACCOUNTS.—An individual for whose benefit 

18 an individual homestead account is established and 

19 any contributor to such account shall be exempt 

20 from the tax imposed by this section with respect to 

21 any transaction concerning such account (which 

22 would otherwise be taxable under this section) if, 

23 with respect to such transaction, the account ceases 

24 to be an individual homestead account by reason of 
30 

•S 675 IS 

1 the application of section 530A(g)(1) to such ac2 count.’’, and 

3 (2) in subsection (e)(1), by striking ‘‘or’’ at the 

4 end of subparagraph (F), by redesignating subpara5 graph (G) as subparagraph (H), and by inserting 

6 after subparagraph (F) the following new subpara7 graph: 

8 ‘‘(G) an individual homestead account de9 scribed in section 530A(b), or’’. 

10 (d) INFORMATION RELATING TO CERTAIN TRUSTS

11 AND ANNUITY PLANS.—Subsection (c) of section 6047 is 

12 amended— 

13 (1) by inserting ‘‘or section 530A’’ after ‘‘sec14 tion 219’’, and 

15 (2) by inserting ‘‘, of any individual homestead 

16 account described in section 530A(b),’’, after ‘‘sec17 tion 408(a)’’. 

18 (e) INSPECTION OF APPLICATIONS FOR TAX EXEMP19 TION.—Clause (i) of section 6104(a)(1)(B) is amended by 

20 inserting ‘‘an individual homestead account described in 

21 section 530A(b),’’ after ‘‘section 408(a),’’. 

22 (f) FAILURE TO PROVIDE REPORTS ON INDIVIDUAL

23 HOMESTEAD ACCOUNTS.—Paragraph (2) of section 

24 6693(a) is amended by striking ‘‘and’’ at the end of sub25 paragraph (D), by striking the period and inserting ‘‘, 
31 

•S 675 IS 

1 and’’ at the end of subparagraph (E), and by inserting 

2 after subparagraph (E) the following new subparagraph: 

3 ‘‘(F) section 530A(h)(4) (relating to indi4 vidual homestead accounts).’’. 

5 (g) CLERICAL AMENDMENT.—The table of parts for 

6 subchapter F of chapter 1 is amended by adding at the 

7 end the following new item: 

‘‘PART IX. INDIVIDUAL HOMESTEAD ACCOUNTS.’’. 

8 TITLE II—INCENTIVES FOR MAIN 

9 STREET BUSINESSES 

10 SEC. 201. RURAL INVESTMENT TAX CREDIT. 

11 (a) IN GENERAL.—Subpart D of part IV of sub12 chapter A of chapter 1 (relating to business related cred13 its) is amended by adding at the end the following new 

14 section: 

15 ‘‘SEC. 42A. RURAL INVESTMENT CREDIT. 

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

17 amount of the rural investment credit determined under 

18 this section for any taxable year in the credit period shall 

19 be an amount equal to the applicable percentage of the 

20 eligible basis of each qualified rural investment building. 

21 ‘‘(b) APPLICABLE PERCENTAGE: 70 PERCENT

22 PRESENT VALUE CREDIT FOR NEW BUILDINGS; 30 PER23 CENT PRESENT VALUE CREDIT FOR EXISTING BUILD24 INGS.—For purposes of this section— 
32 

•S 675 IS 

1 ‘‘(1) IN GENERAL.—The term ‘applicable per2 centage’ means the appropriate percentage pre3 scribed by the Secretary for the earlier of— 

4 ‘‘(A) the first month of the credit period 

5 with respect to a rural investment building, or 

6 ‘‘(B) at the election of the taxpayer, the 

7 month in which the taxpayer and the rural in8 vestment credit agency enter into an agreement 

9 with respect to such building (which is binding 

10 on such agency, the taxpayer, and all successors 

11 in interest) as to the rural investment credit 

12 dollar amount to be allocated to such building. 

13 A month may be elected under subparagraph (B) 

14 only if the election is made not later than the 5th 

15 day after the close of such month. Such an election, 

16 once made, shall be irrevocable. 

17 ‘‘(2) METHOD OF PRESCRIBING PERCENT18 AGES.—The percentages prescribed by the Secretary 

19 for any month shall be percentages which will yield 

20 over a 10-year period amounts of credit under sub21 section (a) which have a present value equal to— 

22 ‘‘(A) 70 percent of the eligible basis of a 

23 new building, and 

24 ‘‘(B) 30 percent of the eligible basis of an 

25 existing building. 
33 

•S 675 IS 

1 ‘‘(3) METHOD OF DISCOUNTING.—The present 

2 value under paragraph (2) shall be determined— 

3 ‘‘(A) as of the last day of the 1st year of 

4 the 10-year period referred to in paragraph (2), 

5 ‘‘(B) by using a discount rate equal to 72 

6 percent of the average of the annual Federal 

7 mid-term rate and the annual Federal long8 term rate applicable under section 1274(d)(1) 

9 to the month applicable under subparagraph 

10 (A) or (B) of paragraph (1) and compounded 

11 annually, and 

12 ‘‘(C) by assuming that the credit allowable 

13 under this section for any year is received on 

14 the last day of such year. 

15 ‘‘(c) ELIGIBLE BASIS; QUALIFIED RURAL INVEST16 MENT BUILDING.—For purposes of this section— 

17 ‘‘(1) ELIGIBLE BASIS.— 

18 ‘‘(A) IN GENERAL.—The eligible basis of 

19 any qualified rural investment building for any 

20 taxable year shall be determined under rules 

21 similar to the rules under section 42(d), except 

22 that— 

23 ‘‘(i) the determination of the adjusted 

24 basis of any building shall be made as of 

25 the beginning of the credit period, and 
34 

•S 675 IS 

1 ‘‘(ii) such basis shall include develop2 ment costs properly attributable to such 

3 building. 

4 ‘‘(B) DEVELOPMENT COSTS.—For pur5 poses of subparagraph (A)(ii), the term ‘devel6 opment costs’ includes— 

7 ‘‘(i) site preparation costs, 

8 ‘‘(ii) State and local impact fees, 

9 ‘‘(iii) reasonable development costs, 

10 ‘‘(iv) professional fees related to basis 

11 items, 

12 ‘‘(v) construction financing costs re13 lated to basis items other than land, and 

14 ‘‘(vi) on-site and adjacent improve15 ments required by State and local govern16 ments. 

17 ‘‘(2) QUALIFIED RURAL INVESTMENT BUILD18 ING.—The term ‘qualified rural investment building’ 

19 means any building which is part of a qualified rural 

20 investment project at all times during the period— 

21 ‘‘(A) beginning on the 1st day in the com22 pliance period on which such building is part of 

23 such an investment project, and 

24 ‘‘(B) ending on the last day of the compli25 ance period with respect to such building. 
35 

•S 675 IS 

1 ‘‘(d) REHABILITATION EXPENDITURES TREATED AS

2 SEPARATE NEW BUILDING.—Rehabilitation expenditures 

3 paid or incurred by the taxpayer with respect to any build4 ing shall be treated for purposes of this section as a sepa5 rate new building under the rules of section 42(e). 

6 ‘‘(e) DEFINITION AND SPECIAL RULES RELATING TO

7 CREDIT PERIOD.— 

8 ‘‘(1) CREDIT PERIOD DEFINED.—For purposes 

9 of this section, the term ‘credit period’ means, with 

10 respect to any building, the period of 10 taxable 

11 years beginning with the taxable year in which the 

12 building is first placed in service. 

13 ‘‘(2) SPECIAL RULE FOR 1ST YEAR OF CREDIT

14 PERIOD.— 

15 ‘‘(A) IN GENERAL.—The credit allowable 

16 under subsection (a) with respect to any build17 ing for the 1st taxable year of the credit period 

18 shall be determined by multiplying such credit 

19 by the fraction— 

20 ‘‘(i) the numerator of which is the 

21 number of full months of such year during 

22 which such building was in service, and 

23 ‘‘(ii) the denominator of which is 12. 

24 ‘‘(B) DISALLOWED 1ST YEAR CREDIT AL25 LOWED IN 11TH YEAR.—Any reduction by rea-
36 

•S 675 IS 

1 son of subparagraph (A) in the credit allowable 

2 (without regard to subparagraph (A)) for the 

3 1st taxable year of the credit period shall be al4 lowable under subsection (a) for the 1st taxable 

5 year following the credit period. 

6 ‘‘(3) CREDIT PERIOD FOR EXISTING BUILDINGS

7 NOT TO BEGIN BEFORE REHABILITATION CREDIT

8 ALLOWED.—The credit period for an existing build9 ing shall not begin before the 1st taxable year of the 

10 credit period for rehabilitation expenditures with re11 spect to the building. 

12 ‘‘(f) QUALIFIED RURAL INVESTMENT PROJECT; 

13 QUALIFYING COUNTY.—For purposes of this section— 

14 ‘‘(1) QUALIFIED RURAL INVESTMENT

15 PROJECT.—The term ‘qualified rural investment 

16 project’ means any investment project of 1 or more 

17 qualified rural investment buildings located in a 

18 qualifying county (and, if necessary to the project, 

19 any contiguous county) and selected by the State ac20 cording to its qualified rural investment plan. 

21 ‘‘(2) QUALIFYING COUNTY.—The term ‘quali22 fying county’ means any county which— 

23 ‘‘(A) is outside a metropolitan statistical 

24 area (defined as such by the Office of Manage25 ment and Budget), and 
37 

•S 675 IS 

1 ‘‘(B) during the 20-year period ending 

2 with the calendar year preceding the date of the 

3 enactment of this section, has a net out-migra4 tion of inhabitants from the county of at least 

5 10 percent of the population of the county at 

6 the beginning of such period. 

7 ‘‘(g) LIMITATION ON AGGREGATE CREDIT ALLOW8 ABLE WITH RESPECT TO INVESTMENT PROJECTS LO9 CATED IN A STATE.— 

10 ‘‘(1) CREDIT MAY NOT EXCEED CREDIT

11 AMOUNT ALLOCATED TO BUILDING.—The amount of 

12 the credit determined under this section for any tax13 able year with respect to any building shall not ex14 ceed the rural investment credit dollar amount allo15 cated to such building under rules similar to the 

16 rules of section 42(h)(1). 

17 ‘‘(2) ALLOCATED CREDIT AMOUNT TO APPLY

18 TO ALL TAXABLE YEARS ENDING DURING OR AFTER

19 CREDIT ALLOCATION YEAR.—Any rural investment 

20 credit dollar amount allocated to any building for 

21 any calendar year— 

22 ‘‘(A) shall apply to such building for all 

23 taxable years in the credit period ending during 

24 or after such calendar year, and 
38 

•S 675 IS 

1 ‘‘(B) shall reduce the aggregate rural in2 vestment credit dollar amount of the allocating 

3 agency only for such calendar year. 

4 ‘‘(3) RURAL INVESTMENT CREDIT DOLLAR

5 AMOUNT FOR AGENCIES.— 

6 ‘‘(A) IN GENERAL.—The aggregate rural 

7 investment credit dollar amount which a rural 

8 investment credit agency may allocate for any 

9 calendar year is the portion of the State rural 

10 investment credit ceiling allocated under this 

11 paragraph for such calendar year to such agen12 cy. 

13 ‘‘(B) STATE CEILING INITIALLY ALLO14 CATED TO STATE RURAL INVESTMENT CREDIT

15 AGENCIES.—Except as provided in subpara16 graphs (D) and (E), the State rural investment 

17 credit ceiling for each calendar year shall be al18 located to the rural investment credit agency of 

19 such State. If there is more than 1 rural invest20 ment credit agency of a State, all such agencies 

21 shall be treated as a single agency. 

22 ‘‘(C) STATE RURAL INVESTMENT CREDIT

23 CEILING.—The State rural investment credit 

24 ceiling applicable to any State and any calendar 

25 year shall be an amount equal to the sum of— 
39 

•S 675 IS 

1 ‘‘(i) the unused State rural investment 

2 credit ceiling (if any) of such State for the 

3 preceding calendar year, 

4 ‘‘(ii) $1,000,000 for each qualifying 

5 county in the State, 

6 ‘‘(iii) the amount of State rural in7 vestment credit ceiling returned in the cal8 endar year, plus 

9 ‘‘(iv) the amount (if any) allocated 

10 under subparagraph (D) to such State by 

11 the Secretary. 

12 For purposes of clause (i), the unused State 

13 rural investment credit ceiling for any calendar 

14 year is the excess (if any) of the sum of the 

15 amounts described in clauses (ii) through (iv) 

16 over the aggregate rural investment credit dol17 lar amount allocated for such year. For pur18 poses of clause (iii), the amount of State rural 

19 investment credit ceiling returned in the cal20 endar year equals the rural investment credit 

21 dollar amount previously allocated within the 

22 State to any investment project which fails to 

23 meet the 10 percent test under section 

24 42(h)(1)(E)(ii) on a date after the close of the 

25 calendar year in which the allocation was made 
40

•S 675 IS 

1 or which does not become a qualified rural in2 vestment project within the period required by 

3 this section or the terms of the allocation or to 

4 any investment project with respect to which an 

5 allocation is canceled by mutual consent of the 

6 rural investment credit agency and the alloca7 tion recipient. 

8 ‘‘(D) UNUSED RURAL INVESTMENT CREDIT

9 CARRYOVERS ALLOCATED AMONG CERTAIN

10 STATES.— 

11 ‘‘(i) IN GENERAL.—The unused rural 

12 investment credit carryover of a State for 

13 any calendar year shall be assigned to the 

14 Secretary for allocation among qualified 

15 States for the succeeding calendar year. 

16 ‘‘(ii) UNUSED RURAL INVESTMENT

17 CREDIT CARRYOVER.—For purposes of this 

18 subparagraph, the unused rural investment 

19 credit carryover of a State for any calendar 

20 year is the excess (if any) of the unused 

21 State rural investment credit ceiling for 

22 such year (as defined in subparagraph 

23 (C)(i)) over the excess (if any) of— 
41 

•S 675 IS 

1 ‘‘(I) the unused State rural in2 vestment credit ceiling for the year 

3 preceding such year, over 

4 ‘‘(II) the aggregate rural invest5 ment credit dollar amount allocated 

6 for such year. 

7 ‘‘(iii) FORMULA FOR ALLOCATION OF

8 UNUSED RURAL INVESTMENT CREDIT

9 CARRYOVERS AMONG QUALIFIED

10 STATES.—The amount allocated under this 

11 subparagraph to a qualified State for any 

12 calendar year shall be the amount deter13 mined by the Secretary to bear the same 

14 ratio to the aggregate unused rural invest15 ment credit carryovers of all States for the 

16 preceding calendar year as such State’s 

17 population for the calendar year bears to 

18 the population of all qualified States for 

19 the calendar year. For purposes of the pre20 ceding sentence, population shall be deter21 mined in accordance with section 146(j). 

22 ‘‘(iv) QUALIFIED STATE.—For pur23 poses of this subparagraph, the term 

24 ‘qualified State’ means, with respect to a 

25 calendar year, any State— 
42 

•S 675 IS 

1 ‘‘(I) which allocated its entire 

2 State rural investment credit ceiling 

3 for the preceding calendar year, and 

4 ‘‘(II) for which a request is made 

5 (not later than May 1 of the calendar 

6 year) to receive an allocation under 

7 clause (iii). 

8 ‘‘(E) STATE MAY PROVIDE FOR DIF9 FERENT ALLOCATION.—Rules similar to the 

10 rules of section 146(e) (other than paragraph 

11 (2)(B) thereof) shall apply for purposes of this 

12 paragraph. 

13 ‘‘(F) POPULATION.—For purposes of this 

14 paragraph, population shall be determined in 

15 accordance with section 146(j). 

16 ‘‘(G) COST-OF-LIVING ADJUSTMENT.— 

17 ‘‘(i) IN GENERAL.—In the case of a 

18 calendar year after 2005, the $1,000,000 

19 amount in subparagraph (C) shall be in20 creased by an amount equal to— 

21 ‘‘(I) such dollar amount, multi22 plied by 

23 ‘‘(II) the cost-of-living adjust24 ment determined under section 1(f 

25 )(3) for such calendar year by sub-
43 

•S 675 IS 

1 stituting ‘calendar year 2004’ for ‘cal2 endar year 1992’ in subparagraph (B) 

3 thereof. 

4 ‘‘(ii) ROUNDING.—Any increase under 

5 clause (i) which is not a multiple of $5,000 

6 shall be rounded to the next lowest mul7 tiple of $5,000. 

8 ‘‘(4) PORTION OF STATE CEILING SET-ASIDE

9 FOR CERTAIN INVESTMENT PROJECTS INVOLVING

10 QUALIFIED NONPROFIT ORGANIZATIONS.— 

11 ‘‘(A) IN GENERAL.—At least 10 percent of 

12 the State rural investment credit ceiling for any 

13 State for any calendar year shall be allocated to 

14 qualified rural investment projects described in 

15 subparagraph (B). 

16 ‘‘(B) INVESTMENT PROJECTS INVOLVING

17 QUALIFIED NONPROFIT ORGANIZATIONS.—For 

18 purposes of subparagraph (A), a qualified rural 

19 investment project is described in this subpara20 graph if a qualified nonprofit organization is to 

21 materially participate (within the meaning of 

22 section 469(h)) in the development and oper23 ation of the investment project throughout the 

24 compliance period. 
44 

•S 675 IS 

1 ‘‘(C) QUALIFIED NONPROFIT ORGANIZA2 TION.—For purposes of this paragraph, the 

3 term ‘qualified nonprofit organization’ means 

4 any organization if— 

5 ‘‘(i) such organization is described in 

6 any paragraph of section 501(c) and is ex7 empt from tax under section 501(a), 

8 ‘‘(ii) such organization is determined 

9 by the State rural investment credit agency 

10 not to be affiliated with or controlled by a 

11 for-profit organization, and 

12 ‘‘(iii) 1 of the exempt purposes of 

13 such organization includes the fostering of 

14 rural investment. 

15 ‘‘(D) TREATMENT OF CERTAIN SUBSIDI16 ARIES.— 

17 ‘‘(i) IN GENERAL.—For purposes of 

18 this paragraph, a qualified nonprofit orga19 nization shall be treated as satisfying the 

20 ownership and material participation test 

21 of subparagraph (B) if any qualified cor22 poration in which such organization holds 

23 stock satisfies such test. 

24 ‘‘(ii) QUALIFIED CORPORATION.—For 

25 purposes of clause (i), the term ‘qualified 
45 

•S 675 IS 

1 corporation’ means any corporation if 100 

2 percent of the stock of such corporation is 

3 held by 1 or more qualified nonprofit orga4 nizations at all times during the period 

5 such corporation is in existence. 

6 ‘‘(E) STATE MAY NOT OVERRIDE SET7 ASIDE.—Nothing in subparagraph (F) of para8 graph (3) shall be construed to permit a State 

9 not to comply with subparagraph (A) of this 

10 paragraph. 

11 ‘‘(F) CREDITS FOR QUALIFIED NONPROFIT

12 ORGANIZATIONS.— 

13 ‘‘(i) ALLOWANCE OF CREDIT.—Any 

14 credit which would be allowable under sub15 section (a) with respect to a qualified rural 

16 investment building of a qualified nonprofit 

17 organization if such organization were not 

18 exempt from tax under this chapter shall 

19 be treated as a credit allowable under sub20 part C to such organization. 

21 ‘‘(ii) USE OF CREDIT.—A qualified 

22 nonprofit organization may assign, trade, 

23 sell, or otherwise transfer any credit allow24 able to such organization under subpara25 graph (A) to any taxpayer. 
46 

•S 675 IS 

1 ‘‘(iii) CREDIT NOT INCOME.—A trans2 fer under subparagraph (B) of any credit 

3 allowable under subparagraph (A) shall not 

4 result in income for purposes of section 

5 511. 

6 ‘‘(5) SPECIAL RULES.— 

7 ‘‘(A) BUILDING MUST BE LOCATED WITH8 IN JURISDICTION OF CREDIT AGENCY.—A rural 

9 investment credit agency may allocate its aggre10 gate rural investment credit dollar amount only 

11 to buildings located in the jurisdiction of the 

12 governmental unit of which such agency is a 

13 part. 

14 ‘‘(B) AGENCY ALLOCATIONS IN EXCESS OF

15 LIMIT.—If the aggregate rural investment cred16 it dollar amounts allocated by a rural invest17 ment credit agency for any calendar year exceed 

18 the portion of the State rural investment credit 

19 ceiling allocated to such agency for such cal20 endar year, the rural investment credit dollar 

21 amounts so allocated shall be reduced (to the 

22 extent of such excess) for buildings in the re23 verse of the order in which the allocations of 

24 such amounts were made. 
47 

•S 675 IS 

1 ‘‘(C) CREDIT REDUCED IF ALLOCATED

2 CREDIT DOLLAR AMOUNT IS LESS THAN CREDIT

3 WHICH WOULD BE ALLOWABLE WITHOUT RE4 GARD TO SALES CONVENTION, ETC.— 

5 ‘‘(i) IN GENERAL.—The amount of 

6 the credit determined under this section 

7 with respect to any building shall not ex8 ceed the clause (ii) percentage of the 

9 amount of the credit which would (but for 

10 this subparagraph) be determined under 

11 this section with respect to such building. 

12 ‘‘(ii) DETERMINATION OF PERCENT13 AGE.—For purposes of clause (i), the 

14 clause (ii) percentage with respect to any 

15 building is the percentage which— 

16 ‘‘(I) the rural investment credit 

17 dollar amount allocated to such build18 ing bears to 

19 ‘‘(II) the credit amount deter20 mined in accordance with clause (iii). 

21 ‘‘(iii) DETERMINATION OF CREDIT

22 AMOUNT.—The credit amount determined 

23 in accordance with this clause is the 

24 amount of the credit which would (but for 

25 this subparagraph) be determined under 
48 

•S 675 IS 

1 this section with respect to the building if 

2 this section were applied without regard to 

3 paragraph (2)(A) of subsection (e). 

4 ‘‘(D) RURAL INVESTMENT CREDIT AGENCY

5 TO SPECIFY APPLICABLE PERCENTAGE AND

6 MAXIMUM ELIGIBLE BASIS.—In allocating a 

7 rural investment credit dollar amount to any 

8 building, the rural investment credit agency 

9 shall specify the applicable percentage and the 

10 maximum eligible basis which may be taken 

11 into account under this section with respect to 

12 such building. The applicable percentage and 

13 maximum eligible basis so specified shall not ex14 ceed the applicable percentage and eligible basis 

15 determined under this section without regard to 

16 this subsection. 

17 ‘‘(6) OTHER DEFINITIONS.—For purposes of 

18 this subsection— 

19 ‘‘(A) RURAL INVESTMENT CREDIT AGEN20 CY.—The term ‘rural investment credit agency’ 

21 means any agency authorized to carry out this 

22 subsection. 

23 ‘‘(B) POSSESSIONS TREATED AS STATES.— 

24 The term ‘State’ includes a possession of the 

25 United States. 
49 

•S 675 IS 

1 ‘‘(7) PORTION OF STATE CEILING SET-ASIDE

2 FOR QUALIFIED RURAL SMALL BUSINESS INVEST3 MENT CREDITS.—Not more than 20 percent of the 

4 State rural investment credit ceiling for any State 

5 for any calendar year may be allocated to qualified 

6 rural small business investment credits under section 

7 42B. 

8 ‘‘(h) DEFINITIONS AND SPECIAL RULES.—For pur9 poses of this section— 

10 ‘‘(1) COMPLIANCE PERIOD.—The term ‘compli11 ance period’ means, with respect to any building, the 

12 period of 10 taxable years beginning with the 1st 

13 taxable year of the credit period with respect there14 to. 

15 ‘‘(2) NEW BUILDING.—The term ‘new building’ 

16 means a building the original use of which begins 

17 with the taxpayer. 

18 ‘‘(3) EXISTING BUILDING.—The term ‘existing 

19 building’ means any building which is not a new 

20 building. 

21 ‘‘(4) APPLICATION TO ESTATES AND TRUSTS.— 

22 In the case of an estate or trust, the amount of the 

23 credit determined under subsection (a) and any in24 crease in tax under subsection (i) shall be appor25 tioned between the estate or trust and the bene-
50 

•S 675 IS 

1 ficiaries on the basis of the income of the estate or 

2 trust allocable to each. 

3 ‘‘(i) RECAPTURE OF CREDIT.—If— 

4 ‘‘(1) as of the close of any taxable year in the 

5 compliance period, the amount of the eligible basis 

6 of any building with respect to the taxpayer is less 

7 than 

8 ‘‘(2) the amount of such basis as of the close 

9 of the preceding taxable year, then the taxpayer’s 

10 tax under this chapter for the taxable year shall be 

11 increased by the credit recapture amount determined 

12 under rules similar to the rules of section 42(j). 

13 ‘‘(j) CERTIFICATIONS AND OTHER REPORTS TO SEC14 RETARY.— 

15 ‘‘(1) CERTIFICATION WITH RESPECT TO 1ST

16 YEAR OF CREDIT PERIOD.—Following the close of 

17 the 1st taxable year in the credit period with respect 

18 to any qualified rural investment building, the tax19 payer shall certify to the Secretary (at such time 

20 and in such form and in such manner as the Sec21 retary prescribes)— 

22 ‘‘(A) the taxable year, and calendar year, 

23 in which such building was first placed in serv24 ice, 
51 

•S 675 IS 

1 ‘‘(B) the eligible basis of such building as 

2 of the beginning of the credit period, 

3 ‘‘(C) the maximum applicable percentage 

4 and eligible basis permitted to be taken into ac5 count by the appropriate rural investment cred6 it agency under subsection (g), 

7 ‘‘(D) the election made under subsection 

8 (f) with respect to the qualified rural invest9 ment project of which such building is a part, 

10 and 

11 ‘‘(E) such other information as the Sec12 retary may require. 

13 In the case of a failure to make the certification re14 quired by the preceding sentence on the date pre15 scribed therefor, unless it is shown that such failure 

16 is due to reasonable cause and not to willful neglect, 

17 no credit shall be allowable by reason of subsection 

18 (a) with respect to such building for any taxable 

19 year ending before such certification is made. 

20 ‘‘(2) ANNUAL REPORTS TO THE SECRETARY.— 

21 The Secretary may require taxpayers to submit an 

22 information return (at such time and in such form 

23 and manner as the Secretary prescribes) for each 

24 taxable year setting forth— 
52 

•S 675 IS 

1 ‘‘(A) the eligible basis for the taxable year 

2 of each qualified rural investment building of 

3 the taxpayer, 

4 ‘‘(B) the information described in para5 graph (1)(C) for the taxable year, and 

6 ‘‘(C) such other information as the Sec7 retary may require. 

8 The penalty under section 6652(j) shall apply to any 

9 failure to submit the return required by the Sec10 retary under the preceding sentence on the date pre11 scribed therefor. 

12 ‘‘(3) ANNUAL REPORTS FROM RURAL INVEST13 MENT CREDIT AGENCIES.—Each agency which allo14 cates any rural investment credit amount to any 

15 building for any calendar year shall submit to the 

16 Secretary (at such time and in such manner as the 

17 Secretary shall prescribe) an annual report speci18 fying— 

19 ‘‘(A) the amount of rural investment credit 

20 amount allocated to each building for such year, 

21 ‘‘(B) sufficient information to identify each 

22 such building and the taxpayer with respect 

23 thereto, and 

24 ‘‘(C) such other information as the Sec25 retary may require. 
53 

•S 675 IS 

1 The penalty under section 6652(j) shall apply to any 

2 failure to submit the report required by the pre3 ceding sentence on the date prescribed therefor. 

4 ‘‘(k) RESPONSIBILITIES OF RURAL INVESTMENT

5 CREDIT AGENCIES.— 

6 ‘‘(1) PLANS FOR ALLOCATION OF CREDIT

7 AMONG INVESTMENT PROJECTS.— 

8 ‘‘(A) IN GENERAL.—Notwithstanding any 

9 other provision of this section, the rural invest10 ment credit dollar amount with respect to any 

11 building shall be zero unless— 

12 ‘‘(i) such amount was allocated pursu13 ant to a qualified rural investment plan of 

14 the agency which is approved by the gov15 ernmental unit (in accordance with rules 

16 similar to the rules of section 147(f)(2) 

17 (other than subparagraph (B)(ii) thereof)) 

18 of which such agency is a part, 

19 ‘‘(ii) such agency notifies the chief ex20 ecutive officer (or the equivalent) of the 

21 local jurisdiction within which the building 

22 is located of such investment project and 

23 provides such individual a reasonable op24 portunity to comment on the investment 

25 project, 
54 

•S 675 IS 

1 ‘‘(iii) a comprehensive market study 

2 of the development needs of individuals in 

3 the qualifying county to be served by the 

4 investment project is conducted before the 

5 credit allocation is made and at the devel6 oper’s expense by a disinterested party who 

7 is approved by such agency, and 

8 ‘‘(iv) a written explanation is available 

9 to the general public for any allocation of 

10 a rural investment credit dollar amount 

11 which is not made in accordance with es12 tablished priorities and selection criteria of 

13 the rural investment credit agency. 

14 ‘‘(B) QUALIFIED RURAL INVESTMENT

15 PLAN.—For purposes of this section, the term 

16 ‘qualified rural investment plan’ means any 

17 plan— 

18 ‘‘(i) which sets forth selection criteria 

19 to be used to determine priorities of the 

20 rural investment credit agency which are 

21 appropriate to qualifying counties, 

22 ‘‘(ii) which also gives preference in al23 locating rural investment credit dollar 

24 amounts among selected investment 

25 projects to— 
55 

•S 675 IS 

1 ‘‘(I) investment projects that tar2 get those small rural counties with 

3 consistently high rates of net out-mi4 gration, 

5 ‘‘(II) investment projects that 

6 link the economic development and job 

7 creation efforts of 2 or more small 

8 rural counties with high rates of net 

9 out-migration, and 

10 ‘‘(III) investment projects that 

11 link the economic development and job 

12 creation efforts of 1 or more small 

13 rural counties in the State with high 

14 rates of net out-migration to related 

15 efforts in regions of such State experi16 encing economic growth, and 

17 ‘‘(iii) which provides a procedure that 

18 the agency (or an agent or other private 

19 contractor of such agency) will follow in 

20 monitoring for noncompliance with the 

21 provisions of this section and in notifying 

22 the Internal Revenue Service of such non23 compliance which such agency becomes 

24 aware of and in monitoring for noncompli25 ance through regular site visits. 
56 

•S 675 IS 

1 ‘‘(C) CERTAIN SELECTION CRITERIA MUST

2 BE USED.—The selection criteria set forth in a 

3 qualified rural investment plan must include— 

4 ‘‘(i) investment project location, 

5 ‘‘(ii) technology and transportation in6 frastructure needs, and 

7 ‘‘(iii) private development trends. 

8 ‘‘(2) CREDIT ALLOCATED TO BUILDING NOT TO

9 EXCEED AMOUNT NECESSARY TO ASSURE INVEST10 MENT PROJECT FEASIBILITY.— 

11 ‘‘(A) IN GENERAL.—The rural investment 

12 credit dollar amount allocated to an investment 

13 project shall not exceed the amount the rural 

14 investment credit agency determines is nec15 essary for the financial feasibility of the invest16 ment project and its viability as a qualified 

17 rural investment project throughout the compli18 ance period. 

19 ‘‘(B) AGENCY EVALUATION.—In making 

20 the determination under subparagraph (A), the 

21 rural investment credit agency shall consider— 

22 ‘‘(i) the sources and uses of funds and 

23 the total financing planned for the invest24 ment project, 
57 

•S 675 IS 

1 ‘‘(ii) any proceeds or receipts expected 

2 to be generated by reason of tax benefits, 

3 ‘‘(iii) the percentage of the rural in4 vestment credit dollar amount used for in5 vestment project costs other than the cost 

6 of intermediaries, and 

7 ‘‘(iv) the reasonableness of the devel8 opmental and operational costs of the in9 vestment project. 

10 Clause (iii) shall not be applied so as to impede 

11 the development of investment projects in hard12 to-develop areas. 

13 ‘‘(C) DETERMINATION MADE WHEN CRED14 IT AMOUNT APPLIED FOR AND WHEN BUILDING

15 PLACED IN SERVICE.— 

16 ‘‘(i) IN GENERAL.—A determination 

17 under subparagraph (A) shall be made as 

18 of each of the following times: 

19 ‘‘(I) The application for the rural 

20 investment credit dollar amount. 

21 ‘‘(II) The allocation of the rural 

22 investment credit dollar amount. 

23 ‘‘(III) The date the building is 

24 first placed in service. 
58 

•S 675 IS 

1 ‘‘(ii) CERTIFICATION AS TO AMOUNT

2 OF OTHER SUBSIDIES.—Prior to each de3 termination under clause (i), the taxpayer 

4 shall certify to the rural investment credit 

5 agency the full extent of all Federal, State, 

6 and local subsidies which apply (or which 

7 the taxpayer expects to apply) with respect 

8 to the building. 

9 ‘‘(l) REGULATIONS.—The Secretary shall prescribe 

10 such regulations as may be necessary or appropriate to 

11 carry out the purposes of this section, including regula12 tions— 

13 ‘‘(1) dealing with— 

14 ‘‘(A) investment projects which include 

15 more than 1 building or only a portion of a 

16 building, 

17 ‘‘(B) buildings which are sold in portions, 

18 ‘‘(2) providing for the application of this section 

19 to short taxable years, 

20 ‘‘(3) preventing the avoidance of the rules of 

21 this section, and 

22 ‘‘(4) providing the opportunity for rural invest23 ment credit agencies to correct administrative errors 

24 and omissions with respect to allocations and record 

25 keeping within a reasonable period after their dis-
59 

•S 675 IS 

1 covery, taking into account the availability of regula2 tions and other administrative guidance from the 

3 Secretary.’’. 

4 (b) CURRENT YEAR BUSINESS CREDIT CALCULA5 TION.—Section 38(b) (relating to current year business 

6 credit) is amended by striking ‘‘plus’’ at the end of para7 graph (18), by striking the period at the end of paragraph 

8 (19) and inserting ‘‘, plus’’, and by adding at the end the 

9 following new paragraph: 

10 ‘‘(20) the rural investment credit determined 

11 under section 42A(a).’’. 

12 (c) CONFORMING AMENDMENTS.— 

13 (1) Section 55(c)(1) is amended by inserting 

14 ‘‘or subsection (i) or (j) of section 42A’’ after ‘‘sec15 tion 42’’. 

16 (2) Subsections (i)(c)(3), (i)(c)(6)(B)(i), and 

17 (k)(1) of section 469 are each amended by inserting 

18 ‘‘or 42A’’ after ‘‘section 42’’. 

19 (3) Section 772(a) is amended by striking 

20 ‘‘and’’ at the end of paragraph (10), by redesig21 nating paragraph (11) as paragraph (12), and by in22 serting after paragraph (10) the following new para23 graph: 

24 ‘‘(11) the rural investment credit determined 

25 under section 42A, and’’. 
60 

•S 675 IS 

1 (4) Section 774(b)(4) is amended by inserting 

2 ‘‘, 42A(i),’’ after ‘‘section 42(j)’’. 

3 (d) CLERICAL AMENDMENT.—The table of sections 

4 for subpart D of part IV of subchapter A of chapter 1 

5 is amended by inserting after the item relating to section 

6 42 the following new item: 

‘‘Sec. 42A. Rural investment credit.’’. 

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

8 this section shall apply to expenditures made in taxable 

9 years beginning after the date of the enactment of this 

10 Act. 

11 SEC. 202. QUALIFIED RURAL SMALL BUSINESS INVEST12 MENT CREDIT. 

13 (a) IN GENERAL.—Subpart D of part IV of sub14 chapter A of chapter 1 (relating to business related cred15 its), as amended by this Act, is amended by adding at 

16 the end the following new section: 

17 ‘‘SEC. 42B. QUALIFIED RURAL SMALL BUSINESS INVEST18 MENT CREDIT. 

19 ‘‘(a) IN GENERAL.—For purposes of section 38, in 

20 the case of a qualified rural small business, the amount 

21 of the qualified rural small business investment credit de22 termined under this section for any taxable year is equal 

23 to 30 percent of the qualified expenditures for the taxable 

24 year of such business. 

25 ‘‘(b) DOLLAR LIMITATION.— 
61 

•S 675 IS 

1 ‘‘(1) IN GENERAL.—The credit allowable under 

2 subsection (a) for any taxable year shall not exceed 

3 the lesser of— 

4 ‘‘(A) $5,000, or 

5 ‘‘(B) the amount when added to the aggre6 gate credits allowable to the taxpayer under 

7 subsection (a) for all preceding taxable years 

8 does not exceed $25,000. 

9 ‘‘(2) NO DOUBLE CREDIT ALLOWED.—In the 

10 case of any qualified rural small business which 

11 places in service a qualified rural investment build12 ing with respect to which a rural investment credit 

13 is allowed under section 42A for any taxable year, 

14 paragraph (1)(A) shall be applied with respect to 

15 such taxable year by substituting ‘zero’ for ‘$5,000’. 

16 ‘‘(c) QUALIFIED RURAL SMALL BUSINESS.—For 

17 purposes of this section, the term ‘qualified rural small 

18 business’ means any person if such person— 

19 ‘‘(1) employed not more than 5 full-time em20 ployees during the taxable year, 

21 ‘‘(2) materially and substantially participates in 

22 management, 

23 ‘‘(3) is located is a qualifying county, and 

24 ‘‘(4) submitted a qualified business plan with 

25 respect to which the rural investment credit agency 
62 

•S 675 IS 

1 with jurisdiction over such qualifying county has al2 located a portion of the State rural investment ceil3 ing for such taxable year under section 42A(g)(7). 

4 For purposes of paragraph (1), an employee shall be con5 sidered full-time if such employee is employed at least 30 

6 hours per week for 20 or more calendar weeks in the tax7 able year. 

8 ‘‘(d) QUALIFIED EXPENDITURES.—For purposes of 

9 this section— 

10 ‘‘(1) IN GENERAL.—The term ‘qualified expend11 itures’ means expenditures normally associated with 

12 starting or expanding a business and included in a 

13 qualified business plan, including costs for capital, 

14 plant and equipment, inventory expenses, and wages, 

15 but not including interest costs. 

16 ‘‘(2) ONLY CERTAIN EXPENDITURES INCLUDED

17 FOR EXISTING BUSINESSES.—In the case of a quali18 fied rural small business with respect to which a 

19 credit under subsection (a) was allowed for a pre20 ceding taxable year, such term shall include only so 

21 much of the expenditures described in paragraph (1) 

22 for the taxable year as exceed the aggregate of such 

23 expenditures for the preceding taxable year. 
63 

•S 675 IS 

1 ‘‘(e) QUALIFIED BUSINESS PLAN.—For purposes of 

2 this section, the term ‘qualified business plan’ means a 

3 business plan which— 

4 ‘‘(1) has been approved by the rural investment 

5 credit agency with jurisdiction over the qualifying 

6 county in which the qualified rural small business is 

7 located pursuant to such agency’s rural investment 

8 plan, and 

9 ‘‘(2) meets such requirements as the agency 

10 may specify. 

11 ‘‘(f) DENIAL OF DOUBLE BENEFIT.—In the case of 

12 the amount of the credit determined under this section— 

13 ‘‘(1) no deduction or credit shall be allowed for 

14 such amount under any other provision of this chap15 ter, and 

16 ‘‘(2) no increase in the adjusted basis of any 

17 property shall result from such amount. 

18 ‘‘(g) DEFINITIONS AND SPECIAL RULES.—For pur19 poses of this section— 

20 ‘‘(1) any term which is used in this section 

21 which is used in section 42A shall have the meaning 

22 given such term by section 42A, and 

23 ‘‘(2) rules similar to the rules under subsections 

24 (j)(2), (j)(3), and (k) of section 42A shall apply.’’. 
64 

•S 675 IS 

1 (b) CURRENT YEAR BUSINESS CREDIT CALCULA2 TION.—Section 38(b) (relating to current year business 

3 credit), as amended by this Act, is amended by striking 

4 ‘‘plus’’ at the end of paragraph (19), by striking the period 

5 at the end of paragraph (20) and inserting ‘‘, plus’’, and 

6 by adding at the end the following new paragraph: 

7 ‘‘(21) the qualified rural small business invest8 ment credit determined under section 42B(a).’’. 

9 (c) CLERICAL AMENDMENT.—The table of sections 

10 for subpart D of part IV of subchapter A of chapter 1, 

11 as amended by this Act, is amended by inserting after the 

12 item relating to section 42A the following new item: 

‘‘Sec. 42B. Qualified rural small business investment credit.’’. 

13 (d) EFFECTIVE DATE.—The amendments made by 

14 this section shall apply to expenditures made in taxable 

15 years beginning after the date of the enactment of this 

16 Act. 

17 SEC. 203. ACCELERATED DEPRECIATION FOR RURAL IN18 VESTMENT PROPERTY. 

19 (a) IN GENERAL.—Section 168 is amended by adding 

20 at the end the following new subsection: 

21 ‘‘(l) PROPERTY IN RURAL INVESTMENT PROJECTS.— 

22 ‘‘(1) IN GENERAL.—For purposes of subsection 

23 (a), the applicable recovery period for qualified rural 

24 investment property shall be determined in accord-
65 

•S 675 IS 

1 ance with the table contained in paragraph (2) in 

2 lieu of the table contained in subsection (c). 

3 ‘‘(2) APPLICABLE RECOVERY PERIOD FOR

4 RURAL INVESTMENT PROPERTY.—For purposes of 

5 paragraph (1)— 

The applicable 

‘‘In the case of: recovery period is: 

3-year property ................................................................. 2 years

5-year property ................................................................. 3 years

7-year property ................................................................. 4 years

10-year property ............................................................... 6 years

15-year property ............................................................... 9 years

20-year property ............................................................... 12 years

Nonresidential real property ............................................ 22 years. 

6 ‘‘(3) DEDUCTION ALLOWED IN COMPUTING

7 MINIMUM TAX.—For purposes of determining alter8 native minimum taxable income under section 55, 

9 the deduction under subsection (a) for property to 

10 which paragraph (1) applies shall be determined 

11 under this section without regard to any adjustment 

12 under section 56. 

13 ‘‘(4) QUALIFIED RURAL INVESTMENT PROP14 ERTY DEFINED.—For purposes of this subsection— 

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

16 rural investment property’ means property 

17 which is property described in the table in para18 graph (2) and which is— 

19 ‘‘(i) used by the taxpayer predomi20 nantly in the active conduct of a trade or 
66 

•S 675 IS 

1 business within a qualified rural invest2 ment project, 

3 ‘‘(ii) not used or located outside the 

4 qualified rural investment project on a reg5 ular basis, 

6 ‘‘(iii) not acquired (directly or indi7 rectly) by the taxpayer from a person who 

8 is related to the taxpayer (within the 

9 meaning of section 465(b)(3)(C)), and 

10 ‘‘(iv) not property (or any portion 

11 thereof) placed in service for purposes of 

12 operating any facility described in section 

13 144(c)(6)(B). 

14 ‘‘(B) EXCEPTION FOR ALTERNATIVE DE15 PRECIATION PROPERTY.—The term ‘qualified 

16 rural investment property’ does not include any 

17 property to which the alternative depreciation 

18 system under subsection (g) applies, deter19 mined— 

20 ‘‘(i) without regard to subsection 

21 (g)(7) (relating to election to use alter22 native depreciation system), and 

23 ‘‘(ii) after the application of section 

24 280F(b) (relating to listed property with 

25 limited business use). 
67 

•S 675 IS 

1 ‘‘(C) SPECIAL RULE FOR INFRASTRUCTURE

2 INVESTMENT.— 

3 ‘‘(i) IN GENERAL.—Subparagraph 

4 (A)(ii) shall not apply to qualified infra5 structure property located outside of the 

6 qualified rural investment project if the 

7 purpose of such property is to connect with 

8 qualified infrastructure property located 

9 within such project. 

10 ‘‘(ii) QUALIFIED INFRASTRUCTURE

11 PROPERTY.—For purposes of this subpara12 graph, the term ‘qualified infrastructure 

13 property’ means qualified rural investment 

14 property (determined without regard to 

15 subparagraph (A)(ii)) which— 

16 ‘‘(I) benefits the qualifying coun17 ty infrastructure, 

18 ‘‘(II) is available to the general 

19 public, and 

20 ‘‘(III) is placed in service in con21 nection with the taxpayer’s active con22 duct of a trade or business within a 

23 qualified rural investment project. 
68 

•S 675 IS 

1 Such term includes, but is not limited to, 

2 roads, power lines, water systems, railroad 

3 spurs, and communications facilities. 

4 ‘‘(5) DEFINITIONS.—For purposes of this sub5 section, any term used in this section which is used 

6 in section 42A shall have the meaning given such 

7 term by section 42A.’’. 

8 (b) EFFECTIVE DATE.—The amendment made by 

9 this section shall apply to property placed in service after 

10 the date of the enactment of this Act, in taxable years 

11 ending after such date. 

12 TITLE III—NEW HOMESTEAD 

13 VENTURE CAPITAL FUND 

14 SEC. 301. NEW HOMESTEAD VENTURE CAPITAL FUND. 

15 The Consolidated Farm and Rural Development Act 

16 (7 U.S.C. 1921 et seq.) is amended by adding at the end 

17 the following new subtitle: 

18 ‘‘Subtitle G—New Homestead 

19 Venture Capital Fund 

20 ‘‘SEC. 383A. SHORT TITLE. 

21 ‘‘This subtitle may be cited as the ‘New Homestead 

22 Venture Capital Fund Act’. 

23 ‘‘SEC. 383B. DEFINITIONS. 

24 ‘‘In this subtitle: 
69 

•S 675 IS 

1 ‘‘(1) AUTHORIZED PRIVATE INVESTOR.—The 

2 term ‘authorized private investor’ means an indi3 vidual, legal entity, or affiliate or subsidiary of an 

4 individual or legal entity that— 

5 ‘‘(A) is eligible to receive a loan guarantee 

6 under this title; 

7 ‘‘(B) is eligible to receive a loan guarantee 

8 under the Rural Electrification Act of 1936 (7 

9 U.S.C. 901 et seq.); 

10 ‘‘(C) is created under the National Con11 sumer Cooperative Bank Act (12 U.S.C. 3011 

12 et seq.); 

13 ‘‘(D) is an insured depository institution 

14 subject to section 383D(b)(2); 

15 ‘‘(E) is a Farm Credit System institution 

16 described in section 1.2(a) of the Farm Credit 

17 Act of 1971 (12 U.S.C. 2002(a)); or 

18 ‘‘(F) is determined by the Board to be an 

19 appropriate investor in the Fund. 

20 ‘‘(2) BOARD.—The term ‘Board’ means the 

21 board of directors of the Fund established under 

22 section 383F. 

23 ‘‘(3) FUND.—The term ‘Fund’ means the New 

24 Homestead Venture Capital Fund established under 

25 section 383C. 
70 

•S 675 IS 

1 ‘‘(4) GROUP OF SIMILAR AUTHORIZED PRIVATE

2 INVESTORS.—The term ‘group of similar authorized 

3 private investors’ means any 1 of the following: 

4 ‘‘(A) Insured depository institutions with 

5 total assets of more than $250,000,000. 

6 ‘‘(B) Insured depository institutions with 

7 total assets equal to or less than $250,000,000. 

8 ‘‘(C) Farm Credit System institutions de9 scribed in section 1.2(a) of the Farm Credit Act 

10 of 1971 (12 U.S.C. 2002(a)). 

11 ‘‘(D) Cooperative financial institutions 

12 (other than Farm Credit System institutions). 

13 ‘‘(E) Authorized private investors, other 

14 than those described in subparagraphs (A) 

15 through (D). 

16 ‘‘(F) Other nonprofit organizations, includ17 ing credit unions. 

18 ‘‘(5) INSURED DEPOSITORY INSTITUTION.—The 

19 term ‘insured depository institution’ means any bank 

20 or savings association the deposits of which are in21 sured under the Federal Deposit Insurance Act (12 

22 U.S.C. 1811 et seq.). 

23 ‘‘(6) QUALIFYING COUNTY.—The term ‘quali24 fying county’ means any county that— 
71 

•S 675 IS 

1 ‘‘(A) is located outside a metropolitan sta2 tistical area (as defined by the Office of Man3 agement and Budget); and 

4 ‘‘(B) during the 20-year period ending 

5 with the fiscal year preceding the applicable fis6 cal year for which assistance is made available 

7 under section 383E, has a net outmigration of 

8 inhabitants from the county of at least 10 per9 cent of the population of the county at the be10 ginning of the period. 

11 ‘‘(7) RURAL BUSINESS.—The term ‘rural busi12 ness’ means a rural cooperative, a value-added agri13 cultural enterprise, or any other enterprise that is or 

14 will be located in a qualifying county. 

15 ‘‘SEC. 383C. ESTABLISHMENT OF THE FUND. 

16 ‘‘(a) IN GENERAL.— 

17 ‘‘(1) AUTHORITY TO ESTABLISH.—Upon certifi18 cation by the Secretary that, to the maximum extent 

19 practicable, the parties proposing to establish a fund 

20 provide a broad representation of all of the groups 

21 of similar authorized private investors described in 

22 subparagraphs (A) through (F) of section 383B(4), 

23 the parties so certified may establish, a non-Federal 

24 entity under State law, to purchase shares of, and 

25 manage a fund to be known as the ‘New Homestead 
72 

•S 675 IS 

1 Venture Capital Fund’, to generate and provide eq2 uity capital to rural businesses. 

3 ‘‘(2) OWNERSHIP.— 

4 ‘‘(A) IN GENERAL.—To the maximum ex5 tent practicable, equity ownership of the Fund 

6 shall be distributed among authorized private 

7 investors representing all of the groups of simi8 lar authorized private investors described in 

9 subparagraphs (A) through (F) of section 

10 383B(4). 

11 ‘‘(B) EXCLUSION OF GROUPS.—No group 

12 of similar authorized private investors shall be 

13 excluded from equity ownership of the Fund 

14 during any period during which the Fund is in 

15 existence if an authorized private investor rep16 resentative of the group is able and willing to 

17 invest in the Fund. 

18 ‘‘(b) PURPOSE.—The purpose of the Fund is to 

19 strengthen the economies of qualifying counties by— 

20 ‘‘(1) making needed investments in qualifying 

21 counties to reverse the devastating impact of chronic 

22 outmigration and to help the qualifying counties re23 build and grow; 

24 ‘‘(2) providing equity funding for existing and 

25 startup rural businesses with high potential for job 
73 

•S 675 IS 

1 creation that are or will be located in qualifying 

2 counties; 

3 ‘‘(3) offering the funding described in para4 graph (2) to rural businesses, many of which have 

5 difficulty obtaining equity capital; 

6 ‘‘(4) authorizing use of the funding described in 

7 paragraph (2) only after State and local govern8 ments match a significant portion of the funding; 

9 ‘‘(5) requiring a portion of the funding de10 scribed in paragraph (2) to be used for technical and 

11 other similar assistance to rural businesses; and 

12 ‘‘(6) providing incentives to greater participa13 tion by authorized private investors through provi14 sion of guarantees of up to 60 percent of the invest15 ments of the authorized private investors in quali16 fying counties. 

17 ‘‘(c) ARTICLES OF INCORPORATION AND BY-LAWS.— 

18 The articles of incorporation and by-laws of the Fund shall 

19 set forth purposes of the Fund that are consistent with 

20 the purposes described in subsection (b). 

21 ‘‘SEC. 383D. INVESTMENT IN THE FUND. 

22 ‘‘(a) IN GENERAL.—The Secretary shall— 

23 ‘‘(1) subject to subsection (b)(1), make avail24 able to the Fund $200,000,000 for each of fiscal 

25 years 2006 through 2015; 
74 

•S 675 IS 

1 ‘‘(2) subject to subsection (c), guarantee a por2 tion of each investment made by an authorized pri3 vate investor in the Fund; and 

4 ‘‘(3) subject to subsection (d), guarantee the re5 payment of principal of, and accrued interest on, de6 bentures issued by the Fund to authorized private 

7 investors. 

8 ‘‘(b) NON-FEDERAL FUNDS.— 

9 ‘‘(1) IN GENERAL.—Under subsection (a)(1), 

10 the Secretary shall make an amount available to the 

11 Fund for a fiscal year only after— 

12 ‘‘(A) at least $50,000,000 has been in13 vested in the Fund for the fiscal year by au14 thorized private investors in accordance with 

15 this subtitle and the terms and conditions set 

16 forth in the by-laws of the Fund; and 

17 ‘‘(B) at least $50,000,000 has been in18 vested in the Fund for the fiscal year by State 

19 and local governments. 

20 ‘‘(2) INSURED DEPOSITORY INSTITUTIONS.— 

21 ‘‘(A) IN GENERAL.—Subject to subpara22 graphs (B) and (C)— 

23 ‘‘(i) an insured depository institution 

24 may be an authorized private investor in 

25 the Fund; and 
75 

•S 675 IS 

1 ‘‘(ii) an investment in the Fund may 

2 be considered to be part of the record of 

3 an institution in meeting the credit needs 

4 of the community in which the institution 

5 is located under any applicable Federal 

6 law. 

7 ‘‘(B) INVESTMENT LIMIT.—The total in8 vestment in the Fund of an insured depository 

9 institution shall not exceed 5 percent of the in10 stitution’s capital and surplus. 

11 ‘‘(C) REGULATORY AUTHORITY.—An ap12 propriate Federal banking agency may, by regu13 lation or order, impose on any insured deposi14 tory institution investing in the Fund, any safe15 guard, limitation, or condition (including an in16 vestment limit that is lower than the investment 

17 limit under subparagraph (B)) that the Federal 

18 banking agency considers to be appropriate to 

19 ensure that the institution operates— 

20 ‘‘(i) in a financially sound manner; 

21 and 

22 ‘‘(ii) in compliance with all applicable 

23 law. 

24 ‘‘(c) GUARANTEE OF PRIVATE INVESTMENTS.— 
76 

•S 675 IS 

1 ‘‘(1) IN GENERAL.—The Secretary shall guar2 antee, under terms and conditions determined by the 

3 Secretary— 

4 ‘‘(A) except as provided in subparagraph 

5 (B), 40 percent of any loss of the principal of 

6 each investment made by an authorized private 

7 investor in the Fund; and 

8 ‘‘(B) 60 percent of any loss of the prin9 cipal of each investment made by an authorized 

10 private investor in the Fund if the investment 

11 is used for a manufacturing or high-technology 

12 business. 

13 ‘‘(2) MAXIMUM TOTAL GUARANTEE.—The ag14 gregate potential liability of the Secretary with re15 spect to all guarantees under paragraph (1) shall 

16 not apply to more than $500,000,000 in private in17 vestments in the Fund. 

18 ‘‘(3) REDEMPTION OF GUARANTEE.— 

19 ‘‘(A) DATE.—An authorized private inves20 tor in the Fund may redeem a guarantee under 

21 paragraph (1), with respect to the total invest22 ments in the Fund and the total losses of the 

23 authorized private investor as of the date of re24 demption— 
77 

•S 675 IS 

1 ‘‘(i) on the date that is 5 years after 

2 the date of the initial investment of the au3 thorized private investor; or 

4 ‘‘(ii) annually thereafter. 

5 ‘‘(B) EFFECT OF REDEMPTION.—On re6 demption of a guarantee under subparagraph 

7 (A)— 

8 ‘‘(i) the shares in the Fund of the au9 thorized private investor shall be redeemed; 

10 and 

11 ‘‘(ii) the authorized private investor 

12 shall be prohibited from making any future 

13 investment in the Fund. 

14 ‘‘(d) DEBENTURES.— 

15 ‘‘(1) IN GENERAL.—The Fund may, at the dis16 cretion of the Board, raise additional capital through 

17 the issuance of debentures and through other means 

18 determined to be appropriate by the Board. 

19 ‘‘(2) GUARANTEE OF DEBT BY SECRETARY.— 

20 ‘‘(A) IN GENERAL.—The Secretary shall 

21 guarantee 100 percent of the principal of, and 

22 accrued interest on, debentures issued by the 

23 Fund that are approved by the Secretary. 

24 ‘‘(B) MAXIMUM DEBT GUARANTEED BY

25 SECRETARY.—The outstanding value of deben-
78 

•S 675 IS 

1 tures issued by the Fund and guaranteed by 

2 the Secretary shall not exceed the lesser of— 

3 ‘‘(i) the amount equal to twice the 

4 value of the assets held by the Fund; or 

5 ‘‘(ii) $500,000,000. 

6 ‘‘(C) RECAPTURE OF GUARANTEE PAY7 MENTS.—If the Secretary makes a payment on 

8 a debenture issued by the Fund as a result of 

9 a guarantee of the Secretary under this para10 graph, the Secretary shall have priority over 

11 other creditors for repayment of the debenture. 

12 ‘‘(3) AUTHORIZED PRIVATE INVESTORS.—An 

13 authorized private investor may purchase debentures 

14 issued by the Fund. 

15 ‘‘SEC. 383E. INVESTMENTS AND OTHER ACTIVITIES OF THE 

16 FUND. 

17 ‘‘(a) INVESTMENTS.— 

18 ‘‘(1) IN GENERAL.— 

19 ‘‘(A) TYPES.—Subject to subparagraphs 

20 (B) and (C), the Fund may— 

21 ‘‘(i) make equity investments in a 

22 rural business that meets the requirements 

23 of paragraph (6) and such other require24 ments as the Board may establish; and 
79 

•S 675 IS 

1 ‘‘(ii) extend credit to such rural busi2 ness in— 

3 ‘‘(I) the form of mezzanine debt, 

4 convertible debt, or subordinated debt; 

5 or 

6 ‘‘(II) any other form of near-eq7 uity debt. 

8 ‘‘(B) LIMITATIONS ON EQUITY INVEST9 MENTS.—After the initial equity investment in 

10 a rural business described in subparagraph 

11 (A)(i), the Fund may not make additional eq12 uity investments in such rural business if the 

13 additional equity investments would result in 

14 the Fund owning more than 30 percent of the 

15 equity of such rural business. 

16 ‘‘(C) LIMITATION ON NONEQUITY INVEST17 MENTS.—Except in the case of a project to as18 sist a rural cooperative, the total amount of 

19 nonequity investments described in subpara20 graph (A)(ii) that may be provided by the Fund 

21 shall not exceed 20 percent of the total invest22 ments of the Fund in the project. 

23 ‘‘(2) PROCEDURES.—The Fund shall implement 

24 procedures to ensure that— 
80 

•S 675 IS 

1 ‘‘(A) the financing arrangements of the 

2 Fund meet the Fund’s primary focus of pro3 viding equity capital; and 

4 ‘‘(B) the Fund does not compete with con5 ventional sources of credit. 

6 ‘‘(3) DIVERSITY OF PROJECTS.—The Fund— 

7 ‘‘(A) shall seek to make equity investments 

8 in a variety of viable projects for rural busi9 nesses, with a significant share of invest10 ments— 

11 ‘‘(i) in manufacturing or high-tech12 nology businesses of diverse sizes; 

13 ‘‘(ii) in smaller projects in rural com14 munities of diverse sizes; and 

15 ‘‘(iii) in cooperative and noncoopera16 tive businesses; and 

17 ‘‘(B) shall be managed in a manner that 

18 diversifies the risks to the Fund among a vari19 ety of projects. 

20 ‘‘(4) LIMITATION ON RURAL BUSINESSES AS21 SISTED.—The Fund shall not invest in any rural 

22 business that— 

23 ‘‘(A) is primarily retail in nature (as deter24 mined by the Board), other than a purchasing 

25 cooperative, or 
81 

•S 675 IS 

1 ‘‘(B) consists of the operation of any facil2 ity described in section 144(c)(6)(B). 

3 ‘‘(5) INTEREST RATE LIMITATIONS.—Returns 

4 on investments in and by the Fund, and returns on 

5 the extension of credit by participants in projects as6 sisted by the Fund, shall not be subject to any State 

7 or Federal law establishing a maximum allowable in8 terest rate. 

9 ‘‘(6) REQUIREMENTS FOR RECIPIENTS.— 

10 ‘‘(A) OTHER INVESTMENTS.—Any recipi11 ent of amounts from the Fund shall make or 

12 obtain a significant investment from a source of 

13 capital other than the Fund. 

14 ‘‘(B) SPONSORSHIP.—To be considered for 

15 an equity investment from the Fund, a rural 

16 business investment project shall be sponsored 

17 by a regional, State, or local sponsoring or en18 dorsing organization such as— 

19 ‘‘(i) a financial institution; 

20 ‘‘(ii) a development organization; or 

21 ‘‘(iii) any other established entity en22 gaging or assisting in rural business devel23 opment, including a rural cooperative. 

24 ‘‘(b) TECHNICAL ASSISTANCE.—The Board shall use 

25 not less than 2 percent of capital provided by the Federal 
82 

•S 675 IS 

1 Government to provide technical assistance to rural busi2 nesses seeking an equity investment from the Fund. 

3 ‘‘(c) ANNUAL AUDIT.— 

4 ‘‘(1) IN GENERAL.—The Board shall authorize 

5 an annual audit of the financial statements of the 

6 Fund by a nationally recognized auditing firm using 

7 generally accepted accounting procedures. 

8 ‘‘(2) AVAILABILITY OF AUDIT RESULTS.—The 

9 results of the audit required by paragraph (1) shall 

10 be made available to investors in the Fund. 

11 ‘‘(d) ANNUAL REPORT.—The Board shall prepare 

12 and make available to the public an annual report that— 

13 ‘‘(1) describes the projects funded with amounts 

14 from the Fund; 

15 ‘‘(2) specifies the recipients of amounts from 

16 the Fund; 

17 ‘‘(3) specifies the co-investors in all projects 

18 that receive amounts from the Fund; and 

19 ‘‘(4) meets the reporting requirements, if any, 

20 of the State under the law of which the Fund is es21 tablished. 

22 ‘‘(e) OTHER AUTHORITIES.— 

23 ‘‘(1) IN GENERAL.—The Board may exercise 

24 such other authorities as are necessary to carry out 

25 this subtitle. 
83 

•S 675 IS 

1 ‘‘(2) OVERSIGHT.—The Secretary shall enter 

2 into a contract with the Administrator of the Small 

3 Business Administration under which the Adminis4 trator of the Small Business Administration shall be 

5 responsible for the routine duties of the Secretary in 

6 regard to the Fund. 

7 ‘‘SEC. 383F. GOVERNANCE OF THE FUND. 

8 ‘‘(a) IN GENERAL.—The Fund shall be governed by 

9 a board of directors that represents all of the authorized 

10 private investors in the Fund and the Federal Government 

11 and that consists of— 

12 ‘‘(1) a designee of the Secretary; 

13 ‘‘(2) 2 members who are appointed by the Sec14 retary and are not Federal employees, including— 

15 ‘‘(A) 1 member with expertise in venture 

16 capital investment; and 

17 ‘‘(B) 1 member with expertise in coopera18 tive development; 

19 ‘‘(3) 1 member who is appointed by the Sec20 retary and is a State government representative 

21 from among States with the highest rates of out22 migration from qualifying counties; and 

23 ‘‘(4) 7 members who are elected by the author24 ized private investors with investments in the Fund, 

25 of whom not less than 1 member shall be a rural 
84 

•S 675 IS 

1 community banker from an insured depository insti2 tution with total assets equal to or less than 

3 $250,000,000 with an investment in the Fund. 

4 ‘‘(b) LIMITATION ON VOTING CONTROL.—No indi5 vidual investor or group of similar authorized private in6 vestors may control more than 25 percent of the votes on 

7 the Board. 

8 ‘‘SEC. 383G. AUTHORIZATION OF APPROPRIATIONS. 

9 ‘‘There are authorized to be appropriated such sums 

10 as are necessary to carry out this subtitle.’’. 

Æ