‘‘SEC. 45S. RURAL MICROBUSINESS INVESTMENT CREDIT. 
‘‘(a) IN GENERAL.—For purposes of section 38, the 
amount of the rural microbusiness investment credit deter-
mined under this section for any taxable year with respect 
to a rural microbusiness is equal to 35 percent of the 
qualified new investments in the rural microbusiness for 
the taxable year. 
‘‘(b) LIMITATIONS.— 
‘‘(1) 
PER
BUSINESS
LIMITATIONS.—The 
amount allowed as a credit under subsection (a) with 
respect to any rural microbusiness for a taxable year 
shall not exceed— 
‘‘(A) $10,000, reduced (but not below 
zero) by 
‘‘(B) the amount allowed under subsection 
(a) to the rural microbusiness for all preceding 
taxable years. 
‘‘(2) 
PER
TAXPAYER
LIMITATIONS.—The 
amount allowed as a credit under subsection (a) with 
respect to any taxpayer with respect to all rural 
microbusinesses of the taxpayer for a taxable year 
shall not exceed— 
‘‘(A) $10,000, reduced (but not below 
zero) by 
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‘‘(B) the amount allowed under subsection 
(a) to the taxpayer with respect to rural micro-
businesses for all preceding taxable years. 
‘‘(c) DEFINITIONS.—For purposes of this section— 
‘‘(1) QUALIFIED NEW INVESTMENT.—The term 
‘qualified new investment’ means the excess of— 
‘‘(A) qualified expenditures paid or in-
curred for the taxable year, over 
‘‘(B) the greater of— 
‘‘(i) qualified expenditures paid or in-
curred for the preceding taxable year, or 
‘‘(ii) the average annual qualified ex-
penditures paid or incurred over the pre-
ceding three taxable years. 
If the rural microbusiness was not in existence for 
the entire 3-year period referred to in clause (ii) of 
subparagraph (B), subparagraph (B) shall be ap-
plied without regard to so much of such subpara-
graph as precedes such clause (ii) and any taxable 
years during such 3-year period for which the rural 
microbusiness was not in existence shall be taken 
into account as taxable years during which there 
were no qualified expenditures. 
‘‘(2) QUALIFIED EXPENDITURES.— 
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‘‘(A) IN
GENERAL.—The term ‘qualified 
expenditures’ means any amount which is paid 
or incurred with respect to a rural microbusi-
ness. Such term includes costs for capital plant 
and equipment, inventory expenses, and wages. 
‘‘(B) EXCEPTION.—Such term does not in-
clude— 
‘‘(i) any interest cost, 
‘‘(ii) the cost of any vehicle which is 
not a qualified nonpersonal use vehicle (as 
defined in section 274(i)), and 
‘‘(iii) the cost of any compensation or 
benefits to the taxpayer claiming the cred-
it, including the taxpayer’s spouse and de-
pendents. 
‘‘(3) RURAL MICROBUSINESS.— 
‘‘(A) IN
GENERAL.—The term ‘rural 
microbusiness’ means any trade or business if— 
‘‘(i) such trade or business is operated 
as a proprietorship, partnership, trust (to 
the extent that the trust is a pass-thru en-
tity), S corporation, or other pass-thru en-
tity, 
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‘‘(ii) each of the owners of such trade 
or business, with respect to the taxable 
year for which the credit is claimed— 
‘‘(I) materially participates (as 
determined under rules similar to the 
rules of section 469(h)) in such trade 
or business, and 
‘‘(II) in the case of any trade or 
business substantially all of the activ-
ity of which is in agricultural produc-
tion, is a first-time farmer (as defined 
in section 147(c)(2)(C)), 
‘‘(iii) such trade or business is carried 
on, and physically located, in a distressed 
rural area during the taxable year for 
which the credit is claimed, 
‘‘(iv) such trade or business employs 
not more than 5 full time (or full-time 
equivalent) employees during the taxable 
year for which the credit is claimed, and 
‘‘(v) which meets the gross revenue 
test under subparagraph (D) for the first 
taxable year in which the credit under sub-
section (a) is allowable with respect to the 
trade or business. 
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‘‘(B) EXCEPTIONS.—Such term shall not 
include— 
‘‘(i) any trade or business which in-
cludes, in whole or in part, any private or 
commercial golf course, country club, mas-
sage parlor, hot tub facility, suntan facil-
ity, racetrack or other facility used for 
gambling, or any store the principal busi-
ness of which is the sale of alcoholic bev-
erages for consumption off premises, or 
‘‘(ii) any trade or business with re-
spect to which records are required under 
section 2257 of title 18, United States 
Code, to be maintained with respect to any 
performer. 
‘‘(C) GROSS REVENUE TEST.— 
‘‘(i) IN GENERAL.—A trade or busi-
ness meets the gross revenue test of this 
subparagraph for any taxable year if the 
average annual gross revenue of the trade 
or business for the 3-taxable year period 
ending with the taxable year does not ex-
ceed $1,000,000. 
‘‘(ii) AGGREGATION RULES.—All per-
sons treated as a single employer under 
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subsection (a) or (b) or section 52 or sub-
section (m) or (o) of section 414 shall be 
treated as a trade or business for purposes 
of clause (i). 
‘‘(iii) SPECIAL RULES FOR ENTITIES 
NOT
IN
EXISTENCE
FOR
ENTIRE
3-YEAR 
PERIOD, ETC.—Rules similar to the rules 
of subparagraphs (A), (B), and (D) of sec-
tion 448(c)(3) shall apply for purposes of 
this subparagraph. 
‘‘(D) SELF-EMPLOYED INDIVIDUALS.—For 
purposes of this paragraph, if, with respect to 
a trade or business, an individual is treated as 
an employee under section 401(c), such indi-
vidual shall be treated as an employee of such 
trade or business for purposes of the preceding 
sentence. 
‘‘(E) 
FULL-TIME
EQUIVALENT
EM-
PLOYEE.—For purposes of this paragraph— 
‘‘(i) IN
GENERAL.—The term ‘full- 
time equivalent employee’ means a number 
of employees equal to the number deter-
mined by dividing— 
‘‘(I) the total number of hours of 
service for which wages were paid by 
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the employer to employees during the 
taxable year, by 
‘‘(II) 2,080. 
Such number shall be rounded to the next 
lowest whole number if not otherwise a 
whole number. 
‘‘(ii) EXCESS
HOURS
NOT
COUNT-
ED.—If an employee works in excess of 
2,080 hours of service during any taxable 
year, such excess shall not be taken into 
account under clause (i). 
‘‘(iii) HOURS OF SERVICE.—The Sec-
retary, in consultation with the Secretary 
of Labor, shall prescribe such regulations, 
rules, and guidance as may be necessary to 
determine the hours of service of an em-
ployee, including rules for the application 
of this paragraph to employees who are not 
compensated on an hourly basis. 
‘‘(4) DISTRESSED RURAL AREA.— 
‘‘(A) IN GENERAL.—The term ‘distressed 
rural area’ means any qualified area in the 
United States— 
‘‘(i) that has lost at least 5 percent of 
its population over the last 10 years, 
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‘‘(ii) that lost at least 10 percent if its 
population over the last 20 years, 
‘‘(iii) that has median family income 
below 85 percent of the national median 
family income, 
‘‘(iv) that has a poverty rate that ex-
ceeds 12.5 percent, or 
‘‘(v) where average unemployment in 
the preceding year exceeds 120 percent of 
the national average. 
‘‘(B) QUALIFIED AREA.—For purposes of 
subparagraph (A), the term ‘qualified area’ 
means— 
‘‘(i) any area other than— 
‘‘(I) a city or town that has a 
population of greater than 50,000 in-
habitants, and 
‘‘(II) any urbanized area contig-
uous and adjacent to a city or town 
described in subclause (I), and 
‘‘(ii) any county in which— 
‘‘(I) there is no city or town that 
has a population of greater than 
100,000 inhabitants, 
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‘‘(II) there are no urbanized 
areas contiguous and adjacent to a 
city or town described in subclause 
(I), 
‘‘(III) there is not more than one 
city or town that has a population of 
greater than 50,000 inhabitants, and 
‘‘(IV) the average unemployment 
in the preceding year exceeds 140 per-
cent of the national average. 
‘‘(C) RELEVANT
SOURCES
OF
INFORMA-
TION.—In determining whether an area is a 
distressed rural area under this paragraph, 
such determination shall be made in accordance 
with the most recent information from the Bu-
reau of the Census, the Bureau of Labor Statis-
tics, or other government entity with relevant 
information. 
‘‘(5) RELATED
PERSONS.—A person shall be 
treated as related to another person if the relation-
ship between such persons would result in the dis-
allowance of losses under section 267 or 707(b) (but, 
in applying section 267(b) and (c) for purposes of 
this section, paragraph (4) of section 267(c) shall be 
treated as providing that the family of an individual 
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shall include only his spouse, ancestors, and lineal 
descendants). 
‘‘(d) DENIAL OF DOUBLE BENEFIT.—No deduction 
or credit shall be allowed under any other provision of this 
chapter for any amount taken into account in determining 
the credit under this section. 
‘‘(e) OTHER RULES.— 
‘‘(1) MARRIED COUPLE MUST FILE JOINT RE-
TURN.—Rules similar to the rules of paragraphs (2), 
(3), and (4) of section 21(e) shall apply for purposes 
of this section. 
‘‘(2) DENIAL OF CREDIT TO DEPENDENTS.—No 
credit shall be allowed under this section to any indi-
vidual with respect to whom a deduction is allowed 
under section 151 is allowable to another taxpayer 
for a taxable year beginning in the calendar year in 
which such individual’s calendar year begins.’’. 
(b) CREDIT ALLOWED AS PART OF GENERAL BUSI-
NESS CREDIT.—Section 38(b) of such Code (defining cur-
rent year business credit) is amended by striking ‘‘plus’’ 
at the end of paragraph (35), by striking the period at 
the end of paragraph (36) and inserting ‘‘, plus’’, and by 
adding at the end the following new paragraph: 
‘‘(37) the rural microbusiness investment credit 
determined under section 45S(a).’’. 
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(c) CARRYOVER OF UNUSED CREDIT.—Subsection 
(a) of section 39 of such Code is amended by adding at 
the end the following new paragraph: 
‘‘(5) 5-YEAR
CARRYBACK
FOR
RURAL
MICRO-
BUSINESS
INVESTMENT
CREDIT.—Notwithstanding 
subsection (d), in the case of the rural microbusiness 
investment credit— 
‘‘(A) this section shall be applied sepa-
rately from the business credit and the mar-
ginal oil and gas well production credit (other 
than the rural microbusiness investment credit), 
‘‘(B) paragraph (1) shall be applied by 
substituting ‘each of the 5 taxable years’ for 
‘the taxable year’ in subparagraph (A) thereof, 
and 
‘‘(C) paragraph (2) shall be applied— 
‘‘(i) by substituting ‘25 taxable years’ 
for ‘21 taxable years’ in subparagraph (A) 
thereof, and 
‘‘(ii) by substituting ‘24 taxable years’ 
for ‘20 taxable years’ in subparagraph (B) 
thereof.’’. 
(d) CONFORMING AMENDMENT.—The table of sec-
tions for subpart D of part IV of subchapter A of chapter 
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1 of such Code is amended by adding at the end the fol-
lowing new item: 
‘‘Sec. 45S. Rural microbusiness investment credit.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to expenditures made in taxable 
years beginning after the date of the enactment of this 
Act. 
Æ 
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