rules of section 146(e) (other than paragraph
(2)(B) thereof) shall apply for purposes of this
paragraph.
‘‘(F) POPULATION.—For purposes of this
paragraph, population shall be determined in
accordance with section 146(j).
‘‘(G) COST-OF-LIVING ADJUSTMENT.—
‘‘(i) IN GENERAL.—In the case of a
calendar year after 2002, the $1,000,000
amount in subparagraph (C) shall be in-
creased by an amount equal to—
‘‘(I) such dollar amount, multi-
plied by
‘‘(II) the cost-of-living adjust-
ment determined under section 1(f)(3)
for such calendar year by substituting
‘calendar year 2001’ for ‘calendar
year 1992’ in subparagraph (B) there-
of.
‘‘(ii) ROUNDING.—Any increase under
clause (i) which is not a multiple of $5,000
shall be rounded to the next lowest mul-
tiple of $5,000.
‘‘(4) PORTION
OF
STATE
CEILING
SET-ASIDE
FOR
CERTAIN
INVESTMENT
PROJECTS
INVOLVING
QUALIFIED NONPROFIT ORGANIZATIONS.—
‘‘(A) IN GENERAL.—At least 10 percent of
the State rural investment credit ceiling for any
State for any calendar year shall be allocated to
qualified rural investment projects described in
subparagraph (B).
‘‘(B) INVESTMENT
PROJECTS
INVOLVING
QUALIFIED
NONPROFIT
ORGANIZATIONS.—For
purposes of subparagraph (A), a qualified rural
investment project is described in this subpara-
graph if a qualified nonprofit organization is to
materially participate (within the meaning of
section 469(h)) in the development and oper-
ation of the investment project throughout the
compliance period.
‘‘(C) QUALIFIED
NONPROFIT
ORGANIZA-
TION.—For purposes of this paragraph, the
term ‘qualified nonprofit organization’ means
any organization if—
‘‘(i) such organization is described in
any paragraph of section 501(c) and is ex-
empt from tax under section 501(a),
‘‘(ii) such organization is determined
by the State rural investment credit agency
not to be affiliated with or controlled by a
for-profit organization; and
‘‘(iii) 1 of the exempt purposes of
such organization includes the fostering of
rural investment.
‘‘(D) TREATMENT
OF
CERTAIN
SUBSIDI-
ARIES.—
‘‘(i) IN
GENERAL.—For purposes of
this paragraph, a qualified nonprofit orga-
nization shall be treated as satisfying the
ownership and material participation test
of subparagraph (B) if any qualified cor-
poration in which such organization holds
stock satisfies such test.
‘‘(ii) QUALIFIED CORPORATION.—For
purposes of clause (i), the term ‘qualified
corporation’ means any corporation if 100
percent of the stock of such corporation is
held by 1 or more qualified nonprofit orga-
nizations at all times during the period
such corporation is in existence.
‘‘(E) STATE
MAY
NOT
OVERRIDE
SET-
ASIDE.—Nothing in subparagraph (F) of para-
graph (3) shall be construed to permit a State
not to comply with subparagraph (A) of this
paragraph.
‘‘(F) CREDITS FOR QUALIFIED NONPROFIT
ORGANIZATIONS.—
‘‘(i) ALLOWANCE
OF
CREDIT.—Any
credit which would be allowable under sub-
section (a) with respect to a qualified rural
investment building of a qualified nonprofit
organization if such organization were not
exempt from tax under this chapter shall
be treated as a credit allowable under sub-
part C to such organization.
‘‘(ii) USE
OF
CREDIT.—A qualified
nonprofit organization may assign, trade,
sell, or otherwise transfer any credit allow-
able to such organization under clause (i)
to any taxpayer.
‘‘(iii) CREDIT NOT INCOME.—A trans-
fer under clause (ii) of any credit allowable
under clause (i) shall not result in income
for purposes of section 511.
‘‘(5) SPECIAL RULES.—
‘‘(A) BUILDING MUST BE LOCATED WITH-
IN JURISDICTION OF CREDIT AGENCY.—A rural
investment credit agency may allocate its aggre-
gate rural investment credit dollar amount only
to buildings located in the jurisdiction of the
governmental unit of which such agency is a
part.
‘‘(B) AGENCY ALLOCATIONS IN EXCESS OF
LIMIT.—If the aggregate rural investment cred-
it dollar amounts allocated by a rural invest-
ment credit agency for any calendar year exceed
the portion of the State rural investment credit
ceiling allocated to such agency for such cal-
endar year, the rural investment credit dollar
amounts so allocated shall be reduced (to the
extent of such excess) for buildings in the re-
verse of the order in which the allocations of
such amounts were made.
‘‘(C) CREDIT
REDUCED
IF
ALLOCATED
CREDIT DOLLAR AMOUNT IS LESS THAN CREDIT
WHICH WOULD BE ALLOWABLE WITHOUT RE-
GARD TO SALES CONVENTION, ETC.—
‘‘(i) IN
GENERAL.—The amount of
the credit determined under this section
with respect to any building shall not ex-
ceed the clause (ii) percentage of the
amount of the credit which would (but for
this subparagraph) be determined under
this section with respect to such building.
‘‘(ii) DETERMINATION
OF
PERCENT-
AGE.—For purposes of clause (i), the
clause (ii) percentage with respect to any
building is the percentage which—
‘‘(I) the rural investment credit
dollar amount allocated to such build-
ing bears to
‘‘(II) the credit amount deter-
mined in accordance with clause (iii).
‘‘(iii) DETERMINATION
OF
CREDIT
AMOUNT.—The credit amount determined
in accordance with this clause is the
amount of the credit which would (but for
this subparagraph) be determined under
this section with respect to the building if
this section were applied without regard to
paragraph (2)(A) of subsection (e).
‘‘(D) RURAL INVESTMENT CREDIT AGENCY
TO
SPECIFY
APPLICABLE
PERCENTAGE
AND
MAXIMUM
ELIGIBLE
BASIS.—In allocating a
rural investment credit dollar amount to any
building, the rural investment credit agency
shall specify the applicable percentage and the
maximum eligible basis which may be taken
into account under this section with respect to
such building. The applicable percentage and
maximum eligible basis so specified shall not ex-
ceed the applicable percentage and eligible basis
determined under this section without regard to
this subsection.
‘‘(6) OTHER
DEFINITIONS.—For purposes of
this subsection—
‘‘(A) RURAL INVESTMENT CREDIT AGEN-
CY.—The term ‘rural investment credit agency’
means any agency authorized to carry out this
subsection.
‘‘(B) 
POSSESSIONS
TREATED
AS
STATES.—The term ‘State’ includes a posses-
sion of the United States.
‘‘(h) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) COMPLIANCE PERIOD.—The term ‘compli-
ance period’ means, with respect to any building, the
period of 10 taxable years beginning with the 1st
taxable year of the credit period with respect there-
to.
‘‘(2) NEW BUILDING.—The term ‘new building’
means a building the original use of which begins
with the taxpayer.
‘‘(3) EXISTING BUILDING.—The term ‘existing
building’ means any building which is not a new
building.
‘‘(4) APPLICATION TO ESTATES AND TRUSTS.—
In the case of an estate or trust, the amount of the
credit determined under subsection (a) and any in-
crease in tax under subsection (i) shall be appor-
tioned between the estate or trust and the bene-
ficiaries on the basis of the income of the estate or
trust allocable to each.
‘‘(i) RECAPTURE OF CREDIT.—If—
‘‘(1) as of the close of any taxable year in the
compliance period, the amount of the eligible basis
of any building with respect to the taxpayer is less
than
‘‘(2) the amount of such basis as of the close
of the preceding taxable year,
then the taxpayer’s tax under this chapter for the
taxable year shall be increased by the credit recap-
ture amount determined under rules similar to the
rules of section 42(j).
‘‘(j) CERTIFICATIONS AND OTHER REPORTS TO SEC-
RETARY.—
‘‘(1) CERTIFICATION
WITH
RESPECT
TO
1ST
YEAR OF CREDIT PERIOD.—Following the close of
the 1st taxable year in the credit period with respect
to any qualified rural investment building, the tax-
payer shall certify to the Secretary (at such time
and in such form and in such manner as the Sec-
retary prescribes)—
‘‘(A) the taxable year, and calendar year,
in which such building was first placed in serv-
ice,
‘‘(B) the eligible basis of such building as
of the beginning of the credit period,
‘‘(C) the maximum applicable percentage
and eligible basis permitted to be taken into ac-
count by the appropriate rural investment cred-
it agency under subsection (g),
‘‘(D) the election made under subsection
(f) with respect to the qualified rural invest-
ment project of which such building is a part,
and
‘‘(E) such other information as the Sec-
retary may require.
In the case of a failure to make the certification re-
quired by the preceding sentence on the date pre-
scribed therefor, unless it is shown that such failure
is due to reasonable cause and not to willful neglect,
no credit shall be allowable by reason of subsection
(a) with respect to such building for any taxable
year ending before such certification is made.
‘‘(2) ANNUAL REPORTS TO THE SECRETARY.—
The Secretary may require taxpayers to submit an
information return (at such time and in such form
and manner as the Secretary prescribes) for each
taxable year setting forth—
‘‘(A) the eligible basis for the taxable year
of each qualified rural investment building of
the taxpayer,
‘‘(B) the information described in para-
graph (1)(C) for the taxable year, and
‘‘(C) such other information as the Sec-
retary may require.
The penalty under section 6652(j) shall apply to any
failure to submit the return required by the Sec-
retary under the preceding sentence on the date pre-
scribed therefor.
‘‘(3) ANNUAL REPORTS FROM RURAL INVEST-
MENT CREDIT AGENCIES.—Each agency which allo-
cates any rural investment credit amount to any
building for any calendar year shall submit to the
Secretary (at such time and in such manner as the
Secretary 
shall 
prescribe) 
an 
annual 
report
specifying—
‘‘(A) the amount of rural investment credit
amount allocated to each building for such year,
‘‘(B) sufficient information to identify each
such building and the taxpayer with respect
thereto, and
‘‘(C) such other information as the Sec-
retary may require.
The penalty under section 6652(j) shall apply to any
failure to submit the report required by the pre-
ceding sentence on the date prescribed therefor.
‘‘(k) RESPONSIBILITIES
OF RURAL INVESTMENT
CREDIT AGENCIES.—
‘‘(1) PLANS
FOR
ALLOCATION
OF
CREDIT
AMONG INVESTMENT PROJECTS.—
‘‘(A) IN GENERAL.—Notwithstanding any
other provision of this section, the rural invest-
ment credit dollar amount with respect to any
building shall be zero unless—
‘‘(i) such amount was allocated pursu-
ant to a qualified rural investment plan of
the agency which is approved by the gov-
ernmental unit (in accordance with rules
similar to the rules of section 147(f)(2)
(other than subparagraph (B)(ii) thereof))
of which such agency is a part,
‘‘(ii) such agency notifies the chief ex-
ecutive officer (or the equivalent) of the
local jurisdiction within which the building
is located of such investment project and
provides such individual a reasonable op-
portunity to comment on the investment
project,
‘‘(iii) a comprehensive market study
of the development needs of individuals in
the qualifying county to be served by the
investment project is conducted before the
credit allocation is made and at the devel-
oper’s expense by a disinterested party who
is approved by such agency, and
‘‘(iv) a written explanation is available
to the general public for any allocation of
a rural investment credit dollar amount
which is not made in accordance with es-
tablished priorities and selection criteria of
the rural investment credit agency.
‘‘(B) 
QUALIFIED
RURAL
INVESTMENT
PLAN.—For purposes of this section, the term
‘qualified rural investment plan’ means any
plan—
‘‘(i) which sets forth selection criteria
to be used to determine priorities of the
rural investment credit agency which are
appropriate to qualifying counties,
‘‘(ii) which also gives preference in al-
locating rural investment credit dollar
amounts 
among 
selected 
investment
projects to—
‘‘(I) investment projects that tar-
get those small rural counties with
consistently high rates of net out-mi-
gration,
‘‘(II) investment projects that
link the economic development and job
creation efforts of 2 or more small
rural counties with high rates of net
out-migration, and
‘‘(III) investment projects that
link the economic development and job
creation efforts of 1 or more small
rural counties in the State with high
rates of net out-migration to related
efforts in regions of such State experi-
encing economic growth, and
‘‘(iii) which provides a procedure that
the agency (or an agent or other private
contractor of such agency) will follow in
monitoring for noncompliance with the
provisions of this section and in notifying
the Internal Revenue Service of such non-
compliance which such agency becomes
aware of and in monitoring for noncompli-
ance through regular site visits.
‘‘(C) CERTAIN SELECTION CRITERIA MUST
BE USED.—The selection criteria set forth in a
qualified rural investment plan must include—
‘‘(i) investment project location,
‘‘(ii) technology and transportation in-
frastructure needs, and
‘‘(iii) private development trends.
‘‘(2) CREDIT ALLOCATED TO BUILDING NOT TO
EXCEED AMOUNT NECESSARY TO ASSURE INVEST-
MENT PROJECT FEASIBILITY.—
‘‘(A) IN GENERAL.—The rural investment
credit dollar amount allocated to an investment
project shall not exceed the amount the rural
investment credit agency determines is nec-
essary for the financial feasibility of the invest-
ment project and its viability as a qualified
rural investment project throughout the compli-
ance period.
‘‘(B) AGENCY
EVALUATION.—In making
the determination under subparagraph (A), the
rural investment credit agency shall consider—
‘‘(i) the sources and uses of funds and
the total financing planned for the invest-
ment project,
‘‘(ii) any proceeds or receipts expected
to be generated by reason of tax benefits,
‘‘(iii) the percentage of the rural in-
vestment credit dollar amount used for in-
vestment project costs other than the cost
of intermediaries, and
‘‘(iv) the reasonableness of the devel-
opmental and operational costs of the in-
vestment project.
Clause (iii) shall not be applied so as to impede
the development of investment projects in hard-
to-develop areas.
‘‘(C) DETERMINATION MADE WHEN CRED-
IT AMOUNT APPLIED FOR AND WHEN BUILDING
PLACED IN SERVICE.—
‘‘(i) IN
GENERAL.—A determination
under subparagraph (A) shall be made as
of each of the following times:
‘‘(I) The application for the rural
investment credit dollar amount.
‘‘(II) The allocation of the rural
investment credit dollar amount.
‘‘(III) The date the building is
first placed in service.
‘‘(ii) CERTIFICATION AS TO AMOUNT
OF OTHER SUBSIDIES.—Prior to each de-
termination under clause (i), the taxpayer
shall certify to the rural investment credit
agency the full extent of all Federal, State,
and local subsidies which apply (or which
the taxpayer expects to apply) with respect
to the building.
‘‘(l) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary or appropriate to
carry out the purposes of this section, including
regulations—
‘‘(1) dealing with—
‘‘(A) investment projects which include
more than 1 building or only a portion of a
building, and
‘‘(B) buildings which are sold in portions,
‘‘(2) providing for the application of this section
to short taxable years,
‘‘(3) preventing the avoidance of the rules of
this section, and
‘‘(4) providing the opportunity for rural invest-
ment credit agencies to correct administrative errors
and omissions with respect to allocations and record
keeping within a reasonable period after their dis-
covery, taking into account the availability of regula-
tions and other administrative guidance from the
Secretary.’’.
(b) CURRENT YEAR BUSINESS CREDIT CALCULA-
TION.—Section 38(b) of such Code (relating to current
year business credit) is amended by striking ‘‘plus’’ at the
end of paragraph (14), by striking the period at the end
of paragraph (15) and inserting ‘‘, plus’’, and by adding
at the end the following:
‘‘(16) the rural investment credit determined
under section 42A(a).’’.
(c) LIMITATION ON CARRYBACK.—Subsection (d) of
section 39 of such Code (relating to carryback and
carryforward of unused credits) is amended by adding at
the end the following:
‘‘(11) NO CARRYBACK OF RURAL INVESTMENT
CREDIT BEFORE EFFECTIVE DATE.—No amount of
unused business credit available under section 42A
may be carried back to a taxable year ending the
date of the enactment of this paragraph.’’.
(d) CONFORMING AMENDMENTS.—
(1) Section 55(c)(1) of such Code is amended
by inserting ‘‘or subsection (i) or (j) of section 42A’’
after ‘‘section 42’’.
(2) Subsections (i)(c)(3), (i)(c)(6)(B)(i), and
(k)(1) of section 469 of such Code are each amended
by inserting ‘‘or 42A’’ after ‘‘section 42’’.
(3) Section 772(a) of such Code is amended by
striking ‘‘and’’ at the end of paragraph (10), by re-
designating paragraph (11) as paragraph (12), and
by inserting after paragraph (10) the following:
‘‘(11) the rural investment credit determined
under section 42A, and’’.
(4) Section 774(b)(4) of such Code is amended
by inserting ‘‘, 42A(i),’’ after ‘‘section 42(j)’’.
(e) CLERICAL AMENDMENT.—The table of sections
for subpart D of part IV of subchapter A of chapter 1
of such Code is amended by inserting after the item relat-
ing to section 42 the following:
‘‘Sec. 42A. Rural investment credit.’’.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to expenditures made in taxable
years beginning after December 31, 2001.
TITLE II—RURAL EDUCATION
DEVELOPMENT INITIATIVE
SEC. 201. FINDINGS AND PURPOSE.
(a) FINDINGS.—The Congress finds the following:
(1) While there are rural education initiatives
identified at the State and local level, no Federal
education policy focuses on the specific needs of
rural school districts and schools, especially those
that serve poor students.
(2) The National Center for Educational Statis-
tics (NCES) reports that while 46 percent of our
Nation’s public schools serve rural areas, they only
receive 22 percent of the Nation’s education funds
annually.
(3) A critical problem for rural school districts
involves the hiring and retention of qualified admin-
istrators and certified teachers (especially in special
education, science, and mathematics). Consequently,
teachers in rural schools are almost twice as likely
to provide instruction in two or more subjects than
teachers in urban schools. Rural schools also face
other tough challenges, such as shrinking local tax
bases, high transportation costs, aging buildings,
limited course offerings, and limited resources.
(4) Data from the National Assessment of Edu-
cational Progress (NAEP) consistently shows large
gaps between the achievement of students in high-
poverty schools and those in other schools. High-pov-
erty schools face special challenges in preparing
their students to reach high standards of perform-
ance on State and national assessments.
(b) PURPOSE.—The purpose of this title is to provide
rural school students in the United States with increased
learning opportunities.
SEC. 202. DEFINITIONS.
In this title:
(1) The terms ‘‘elementary school’’, ‘‘local edu-
cational agency’’, and ‘‘State educational agency’’,
and ‘‘poverty line’’ have the meanings given such
terms in section 9101 of the Elementary and Sec-
ondary Education Act of 1965 (20 U.S.C. 7801).
(2) The term ‘‘eligible local educational agency’’
means a local educational agency that serves—
(A) a school-age population, 20 percent or
more of whom are from families with incomes
below the poverty line; and
‘‘(B)(i) only schools designated by the Sec-
retary with a school locale code of 6, 7, or 8;
or
(ii) a school-age population of 800 or
fewer.
(3) The term ‘‘rural area’’ means the area de-
fined by the Secretary using school locale codes 6,
7, and 8.
(4) The term ‘‘school-age population’’ means
the number of students aged 5 through 17.
(5) The term ‘‘school locale code’’ has the
meaning given such term by the Secretary.
(6) The term ‘‘Secretary’’ means the Secretary
of Education.
(7) The term ‘‘specially qualified agency’’
means an eligible local educational agency, located in
a State that does not participate in a program under
this title in a fiscal year, that may apply directly to
the Secretary for a grant in such year under section
203(a)(3).
SEC. 203. RURAL EDUCATION INITIATIVE AUTHORIZED.
(a) GRANTS TO STATES.—
(1) IN GENERAL.—Except as provided in para-
graph (3), from the amount appropriated under sec-
tion 209 and not reserved under subsection (c) for
a fiscal year, the Secretary shall award grants to
State educational agencies that have applications ap-
proved under section 204 to enable such agencies to
award grants to eligible local educational agencies
for local authorized activities described in subsection
(c).
(2) FORMULA.—
(A) IN GENERAL.—Each State educational
agency that receives a grant under this section
shall receive an amount that bears the same re-
lation to the amount of funds appropriated
under section 209 that are not reserved under
subsection (c) for a fiscal year as the number
of students in average daily attendance served
by eligible local education agencies in the State
bears to the number of all such students served
by eligible local education agencies in all States
for that fiscal year.
(B) DATA.—In determining the school-age
population under subparagraph (A) the Sec-
retary shall use the most recent data available
from the Bureau of the Census.
(3) DIRECT AWARDS TO SPECIALLY QUALIFIED
AGENCIES.—If a State educational agency elects not
to participate in the program under this title or does
not have an application approved under section 204,
the Secretary may award, on a competitive basis, the
amount the State educational agency is eligible to
receive under paragraph (2) directly to specially
qualified agencies in the State.
(b) LOCAL AUTHORIZED ACTIVITIES.—Funds made
available under this title may be used for—
(1) local educational technology efforts as de-
scribed in section 2416 of the Elementary and Sec-
ondary Education Act of 1965 (20 U.S.C. 6766);
(2) professional development activities designed
to prepare teachers who are teaching out of their
primary subject area;
(3) academic enrichment programs described in
section 5464 of the Elementary and Secondary Edu-
cation Act of 1965 (20 U.S.C. 7253c);
(4) innovative academic enrichment programs
related to the educational needs of students at-risk
of academic failure, including remedial instruction in
one or more of the core subject areas of English,
mathematics, science, and history; and
(5) activities to recruit and retain highly quali-
fied teachers in special education, mathematics, or
science.
(c) RESERVATION OF FUNDS.—From the amount ap-
propriated under section 209 for a fiscal year, the Sec-
retary shall reserve 1⁄2 of 1 percent to make awards to
elementary or secondary schools operated or supported by
the Bureau of Indian Affairs to carry out the purpose of
this title.
(d) RELATION
TO OTHER FEDERAL FUNDING.—
Funds received under this title by a State educational
agency or a specially qualified agency shall not be taken
into consideration in determining the eligibility for, or
amount of, any other Federal funding awarded to such
agency.
SEC. 204. APPLICATIONS.
Each State educational agency or specially qualified
agency desiring a grant under this title shall submit an
application to the Secretary at such time, in such manner,
and accompanied by such information as the Secretary
may require. Such application shall include specific meas-
urable goals and objectives relating to increased student
academic achievement, decreased student drop-out rates,
or such other factors that the State educational agency
or specially qualified agency may choose to measure.
SEC. 205. STATE DISTRIBUTION OF FUNDS.
(a) AWARD BASIS.—A State educational agency that
receives funds under this title shall award grants to eligi-
ble local educational agencies or provide assistance to
schools described in subsection (b)(2)—
(1) on a competitive basis; or
(2) according to a formula based on the number
of students served by the eligible local educational
agencies or schools (as appropriate) in the State, as
determined by the State.
SEC. 206. ADMINISTRATIVE COSTS.
A State educational agency or specially qualified
agency that receives funds under this title may not use
more than 5 percent of the grant funds for State activities
or administrative costs related to the program.
SEC. 207. REPORTS.
(a) STATE EDUCATIONAL AGENCY REPORTS.—
(1) CONTENTS.—Each State educational agen-
cy that receives a grant under this title shall submit
an annual report to the Secretary describing—
(A) the methods the State educational
agency used to award grants to eligible local
educational agencies under this title;
(B) how eligible local educational agencies
and schools used funds provided under this
title; and
(C) the degree to which progress has been
made toward meeting the goals and objectives
described the application submitted under sec-
tion 204.
(2) AVAILABILITY.—The Secretary shall make
available the annual State reports received under
paragraph (1) for dissemination to the Congress, in-
terested parties (including educators, parents, stu-
dents, and advocacy and civil rights organizations),
and the public.
(b) SPECIALLY QUALIFIED AGENCY REPORTS.—
Each specially qualified agency that receives a grant under
this title shall submit an annual report to the Secretary
describing how such agency used funds received under this
title to coordinate with other Federal, State, and local pro-
grams.
(c) REPORT
BY SECRETARY
TO CONGRESS.—The
Secretary shall prepare and submit to Congress an annual
report which shall describe—
(1) the methods the State educational agency
used to award grants to eligible local educational
agencies and to provide assistance to schools under
this title;
(2) how eligible local educational agencies used
funds provided under this title; and
(3) progress made by State educational agen-
cies and eligible local educational agencies receiving
assistance under this title in meeting specific, an-
nual, measurable performance goals and objectives
established by such agencies for activities assisted
under this title.
SEC. 208. ACCOUNTABILITY.
If, at the end of the third consecutive year in which
a State educational agency or specially qualified agency
receives funds under this title, the Secretary determines
that such agency has not substantially met its perform-
ance goals and objectives described in the application sub-
mitted under section 204, such agency shall be ineligible
to receive additional funds under this title for a period
of one year after the date of such determination.
SEC. 209. AUTHORIZATION OF APPROPRIATIONS.
There are authorized to be appropriated to carry out
this title $100,000,000 for each of fiscal years 2003
through 2006.
TITLE III—NATIONAL PHYSICIAN
AND NURSE SERVICE CORPS
SCHOLARSHIP PROGRAM
SEC. 301. SCHOLARSHIP PROGRAM TO ENCOURAGE PHYSI-
CIANS AND NURSES TO SERVE IN RURAL
AREAS.
Subpart III of part D of title III of the Public Health
Service Act (42 U.S.C. 254l et seq.) is amended by adding
at the end the following:
‘‘SEC. 338M. NATIONAL PHYSICIAN AND NURSE SERVICE
CORPS SCHOLARSHIP PROGRAM.
‘‘(a) PROGRAM AUTHORIZED.—The Secretary shall
establish a National Physician and Nurse Service Corps
Scholarship Program (referred to in this section as the
‘program’) that provides scholarships to individuals seek-
ing medical or nursing education in exchange for service
by such individuals in rural areas (as such areas are deter-
mined by the Secretary).
‘‘(b) PREFERENCE.—In awarding scholarships under
this section, the Secretary shall give preference to appli-
cants with the greatest financial need, and applicants who
agree to serve in health facilities experiencing physician
or nursing shortages in medically underserved areas.
‘‘(c) REQUIREMENTS.—To be eligible to participate
in the program, an individual must—
‘‘(1) be accepted for enrollment, or be enrolled,
in an accredited (as determined by the Secretary)
medical school or an accredited (as that term is de-
fined in section 801) nursing school, to take courses
leading to a degree of doctor of medicine, a bacca-
laureate or associate degree in nursing, or a diploma
in nursing;
‘‘(2) submit an application to participate in the
program; and
‘‘(3) enter into an agreement with the Sec-
retary, at the time of submittal of such application,
to—
‘‘(A) accept payment of a scholarship and
remain enrolled in medical or nursing school;
‘‘(B) maintain an acceptable level of aca-
demic standing; and
‘‘(C) serve as a physician or a nurse for a
period of not less than 4 years in a rural area.
‘‘(d) APPLICATIONS.—
‘‘(1) IN GENERAL.—The application forms for
the program shall include—
‘‘(A) a fair summary of the rights and li-
abilities of an individual whose application is
approved by the Secretary; and
‘‘(B) information respecting meeting a
service obligation and such other information as
may be necessary for the individual to under-
stand the program.
‘‘(2) ACCESSIBILITY.—The application form
and all other information furnished by the Secretary
shall be written so that it may be understood by the
average individual applying to participate in the pro-
gram. The Secretary shall make such application
forms and other information available to individuals
desiring to participate in the program, on a date
sufficiently early to ensure that such individuals
have adequate time to carefully review and evaluate
such forms and information.
‘‘(3) DISTRIBUTION.—The Secretary shall dis-
tribute to medical and nursing schools materials pro-
viding information on the program and shall encour-
age such schools to disseminate the materials to stu-
dents of such schools.
‘‘(e) SCHOLARSHIP.—
‘‘(1) IN GENERAL.—A scholarship provided to a
student for a school year under a written contract
under the program shall consist of—
‘‘(A) payment to, or (in accordance with
paragraph (2)) on behalf of, the student of—
‘‘(i) an amount equal to 1⁄2 of the tui-
tion of the student in such school year; and
‘‘(ii) all other reasonable educational
expenses and support services, including
fees, books, and laboratory expenses in-
curred by the student in such school year;
and
‘‘(B) payment to the student of a stipend
of $400 per month (adjusted in accordance with
paragraph (3)) for each 12 consecutive months
beginning with the first month of the school
year.
‘‘(2) CONTRACT.—The Secretary may contract
with a medical or nursing school, in which a partici-
pant in the program is enrolled, for the payment to
the school of the amounts of tuition and other rea-
sonable educational expenses and support services
described in paragraph (1)(A).
‘‘(3) MONTHLY STIPEND.—The amount of the
monthly stipend, specified in paragraph (1)(B) and
as previously adjusted (if at all) in accordance with
this paragraph, shall be increased by the Secretary
as the Secretary determines to be reasonable.
‘‘(f) BREACH OF AGREEMENT.—
‘‘(1) IN GENERAL.—In the case of an individual
who enters into an agreement under this section to
provide services as a physician or a nurse in consid-
eration for receiving a scholarship to attend a med-
ical or nursing school, such individual is liable to the
Federal Government for the amount of the scholar-
ship, and for interest on such amount at the max-
imum legal prevailing rate, if the individual—
‘‘(A) fails to maintain an acceptable level
of academic standing at the medical or nursing
school;
‘‘(B) is dismissed from the medical or
nursing school for disciplinary reasons;
‘‘(C) voluntarily terminates enrollment at
the medical or nursing school; or
‘‘(D) fails to provide services in accordance
with the agreement entered into pursuant to
subsection (c)(3)(C), including the applicable
period of obligated service.
‘‘(2) WAIVER OR SUSPENSION OF LIABILITY.—
The Secretary shall provide for the waiver or sus-
pension of liability under an agreement entered into
pursuant to subsection (c)(3) if compliance by the
individual with the agreement is impossible, or would
involve extreme hardship to the individual, or if en-
forcement of the agreement with respect to the indi-
vidual would be unconscionable.
‘‘(3) DATE CERTAIN FOR RECOVERY.—Subject
to paragraph (2), any amount that the Federal Gov-
ernment is entitled to recover under paragraph (1)
shall be paid to the United States not later than the
expiration of the 3-year period beginning on the date
the United States becomes so entitled.
‘‘(4) AVAILABILITY.—Amounts recovered under
paragraph (1) shall be available for the purposes of
the program, and shall remain available for such
purposes until expended.
‘‘(g) AUTHORIZATION OF APPROPRIATIONS.—For the
purpose of payments under agreements entered into under
subsection (a), there are authorized to be appropriated
$10,000,000 for each of the fiscal years 2003 through
2005.’’.
SEC. 302. LOAN REPAYMENT FOR NURSES SERVING IN A
NURSING HOME, A HOSPICE, OR A HOME
HEALTH AGENCY.
Section 846(a)(3) of the Public Health Service Act
(42 U.S.C. 297n) is amended by inserting ‘‘in a nursing
home, in a hospice, in a home health agency,’’ after ‘‘in
a public hospital,’’.
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