I
107TH CONGRESS
2D SESSION
H. R. 5579
To promote rural development, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 8, 2002
Mr. SHUSTER introduced the following bill; which was referred to the Com-
mittee on Ways and Means, and in addition to the Committees on Edu-
cation and the Workforce, and Energy and Commerce, for a period to
be subsequently determined by the Speaker, in each case for consider-
ation of such provisions as fall within the jurisdiction of the committee
concerned
A BILL
To promote rural development, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Rural Development
Act of 2002’’.
TITLE I—RURAL INVESTMENT
TAX CREDIT
SEC. 101. RURAL INVESTMENT TAX CREDIT.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to business related credits) is amended by
adding at the end the following:
‘‘SEC. 42A. RURAL INVESTMENT CREDIT.
‘‘(a) IN GENERAL.—For purposes of section 38, the
amount of the rural investment credit determined under
this section for any taxable year in the credit period shall
be an amount equal to the applicable percentage of the
eligible basis of each qualified rural investment building.
‘‘(b) APPLICABLE
PERCENTAGE: 
PERCENT
PRESENT VALUE CREDIT FOR NEW BUILDINGS; 50 PER-
CENT PRESENT VALUE CREDIT FOR EXISTING BUILD-
INGS.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘applicable per-
centage’ means the appropriate percentage pre-
scribed by the Secretary for the earlier of—
‘‘(A) the first month of the credit period
with respect to a rural investment building, or
‘‘(B) at the election of the taxpayer, the
month in which the taxpayer and the rural in-
vestment credit agency enter into an agreement
with respect to such building (which is binding
on such agency, the taxpayer, and all successors
in interest) as to the rural investment credit
dollar amount to be allocated to such building.
A month may be elected under subparagraph (B)
only if the election is made not later than the 5th
day after the close of such month. Such an election,
once made, shall be irrevocable.
‘‘(2) METHOD
OF
PRESCRIBING
PERCENT-
AGES.—The percentages prescribed by the Secretary
for any month shall be percentages which will yield
over a 10-year period amounts of credit under sub-
section (a) which have a present value equal to—
‘‘(A) 50 percent of the eligible basis of a
new building, and
‘‘(B) 50 percent of the eligible basis of an
existing building.
‘‘(3) METHOD OF DISCOUNTING.—The present
value under paragraph (2) shall be determined—
‘‘(A) as of the last day of the 1st year of
the 10-year period referred to in paragraph (2),
‘‘(B) by using a discount rate equal to 72
percent of the average of the annual Federal
mid-term rate and the annual Federal long-
term rate applicable under section 1274(d)(1)
to the month applicable under subparagraph
(A) or (B) of paragraph (1) and compounded
annually, and
‘‘(C) by assuming that the credit allowable
under this section for any year is received on
the last day of such year.
‘‘(c) ELIGIBLE BASIS; QUALIFIED RURAL INVEST-
MENT BUILDING.—For purposes of this section—
‘‘(1) ELIGIBLE BASIS.—
‘‘(A) IN GENERAL.—The eligible basis of
any qualified rural investment building for any
taxable year shall be determined under rules
similar to the rules under section 42(d), except
that—
‘‘(i) the determination of the adjusted
basis of any building shall be made as of
the beginning of the credit period, and
‘‘(ii) such basis shall include develop-
ment costs properly attributable to such
building.
‘‘(B) DEVELOPMENT
COSTS.—For pur-
poses of subparagraph (A)(ii), the term ‘devel-
opment costs’ includes—
‘‘(i) site preparation costs,
‘‘(ii) State and local impact fees,
‘‘(iii) reasonable development costs,
‘‘(iv) professional fees related to basis
items,
‘‘(v) construction financing costs re-
lated to basis items other than land, and
‘‘(vi) on-site and adjacent improve-
ments required by State and local govern-
ments.
‘‘(2) QUALIFIED
RURAL
INVESTMENT
BUILD-
ING.—The term ‘qualified rural investment building’
means any building which is part of a qualified rural
investment project at all times during the period—
‘‘(A) beginning on the 1st day in the com-
pliance period on which such building is part of
such an investment project, and
‘‘(B) ending on the last day of the compli-
ance period with respect to such building.
‘‘(d) REHABILITATION EXPENDITURES TREATED AS
SEPARATE NEW BUILDING.—Rehabilitation expenditures
paid or incurred by the taxpayer with respect to any build-
ing shall be treated for purposes of this section as a sepa-
rate new building under the rules of section 42(e).
‘‘(e) DEFINITION AND SPECIAL RULES RELATING TO
CREDIT PERIOD.—
‘‘(1) CREDIT PERIOD DEFINED.—For purposes
of this section, the term ‘credit period’ means, with
respect to any building, the period of 10 taxable
years beginning with the taxable year in which the
building is first placed in service.
‘‘(2) SPECIAL RULE FOR 1ST YEAR OF CREDIT
PERIOD.—
‘‘(A) IN GENERAL.—The credit allowable
under subsection (a) with respect to any build-
ing for the 1st taxable year of the credit period
shall be determined by multiplying such credit
by the fraction—
‘‘(i) the numerator of which is the
number of full months of such year during
which such building was in service, and
‘‘(ii) the denominator of which is 12.
‘‘(B) DISALLOWED 1ST YEAR CREDIT AL-
LOWED IN 11TH YEAR.—Any reduction by rea-
son of subparagraph (A) in the credit allowable
(without regard to subparagraph (A)) for the
1st taxable year of the credit period shall be al-
lowable under subsection (a) for the 1st taxable
year following the credit period.
‘‘(3) CREDIT PERIOD FOR EXISTING BUILDINGS
NOT
TO
BEGIN
BEFORE
REHABILITATION
CREDIT
ALLOWED.—The credit period for an existing build-
ing shall not begin before the 1st taxable year of the
credit period for rehabilitation expenditures with re-
spect to the building.
‘‘(f) QUALIFIED
RURAL
INVESTMENT
PROJECT;
QUALIFYING COUNTY.—For purposes of this section—
‘‘(1) 
QUALIFIED
RURAL
INVESTMENT
PROJECT.—The term ‘qualified rural investment
project’ means any investment project of 1 or more
qualified rural investment buildings located in a
qualifying county (and, if necessary to the project,
any contiguous county) and selected by the State ac-
cording to its qualified rural investment plan.
‘‘(2) QUALIFYING COUNTY.—The term ‘quali-
fying county’ means any county which—
‘‘(A) is outside a metropolitan statistical
area (defined as such by the Office of Manage-
ment and Budget), and
‘‘(B) during the 20-year period ending
with the calendar year preceding the date of the
enactment of this section, has a net out-migra-
tion of inhabitants from the county of at least
10 percent of the population of the county at
the beginning of such period.
‘‘(g) LIMITATION ON AGGREGATE CREDIT ALLOW-
ABLE WITH RESPECT TO INVESTMENT PROJECTS LO-
CATED IN A STATE.—
paragraph for such calendar year to such agen-
cy.
‘‘(B) STATE
CEILING
INITIALLY
ALLO-
CATED TO STATE RURAL INVESTMENT CREDIT
AGENCIES.—Except as provided in subpara-
graphs (D) and (E), the State rural investment
credit ceiling for each calendar year shall be al-
located to the rural investment credit agency of
such State. If there is more than 1 rural invest-
ment credit agency of a State, all such agencies
shall be treated as a single agency.
‘‘(C) STATE RURAL INVESTMENT CREDIT
CEILING.—The State rural investment credit
ceiling applicable to any State and any calendar
year shall be an amount equal to the sum of—
‘‘(i) the unused State rural investment
credit ceiling (if any) of such State for the
preceding calendar year,
‘‘(ii) $1,000,000 for each qualifying
county in the State,
‘‘(iii) the amount of State rural in-
vestment credit ceiling returned in the cal-
endar year, plus
‘‘(iv) the amount (if any) allocated
under subparagraph (D) to such State by
the Secretary.
For purposes of clause (i), the unused State
rural investment credit ceiling for any calendar
year is the excess (if any) of the sum of the
amounts described in clauses (ii) through (iv)
over the aggregate rural investment credit dol-
lar amount allocated for such year. For pur-
poses of clause (iii), the amount of State rural
investment credit ceiling returned in the cal-
endar year equals the rural investment credit
dollar amount previously allocated within the
State to any investment project which fails to
meet the 10 percent test under section
42(h)(1)(E)(ii) on a date after the close of the
calendar year in which the allocation was made
or which does not become a qualified rural in-
vestment project within the period required by
this section or the terms of the allocation or to
any investment project with respect to which an
allocation is canceled by mutual consent of the
rural investment credit agency and the alloca-
tion recipient.
‘‘(D) UNUSED RURAL INVESTMENT CREDIT
CARRYOVERS
ALLOCATED
AMONG
CERTAIN
STATES.—
‘‘(i) IN GENERAL.—The unused rural
investment credit carryover of a State for
any calendar year shall be assigned to the
Secretary for allocation among qualified
States for the succeeding calendar year.
‘‘(ii) UNUSED
RURAL
INVESTMENT
CREDIT CARRYOVER.—For purposes of this
subparagraph, the unused rural investment
credit carryover of a State for any calendar
year is the excess (if any) of the unused
State rural investment credit ceiling for
such year (as defined in subparagraph
(C)(i)) over the excess (if any) of —
‘‘(I) the unused State rural in-
vestment credit ceiling for the year
preceding such year, over
‘‘(II) the aggregate rural invest-
ment credit dollar amount allocated
for such year.
‘‘(iii) FORMULA FOR ALLOCATION OF
UNUSED
RURAL
INVESTMENT
CREDIT
CARRYOVERS
AMONG
QUALIFIED
STATES.—The amount allocated under this
subparagraph to a qualified State for any
calendar year shall be the amount deter-
mined by the Secretary to bear the same
ratio to the aggregate unused rural invest-
ment credit carryovers of all States for the
preceding calendar year as such State’s
population for the calendar year bears to
the population of all qualified States for
the calendar year. For purposes of the pre-
ceding sentence, population shall be deter-
mined in accordance with section 146(j).
‘‘(iv) QUALIFIED
STATE.—For pur-
poses of this subparagraph, the term
‘qualified State’ means, with respect to a
calendar year, any State—
‘‘(I) which allocated its entire
State rural investment credit ceiling
for the preceding calendar year, and
‘‘(II) for which a request is made
(not later than May 1 of the calendar
year) to receive an allocation under
clause (iii).
‘‘(E) STATE
MAY
PROVIDE
FOR
DIF-
FERENT
ALLOCATION.—Rules similar to the