vidual for whom the account is maintained with re-
spect to contributions (and the years to which they
relate), distributions, and such other matters as the
Secretary may require under regulations. The re-
ports required by this paragraph—
‘‘(A) shall be filed at such time and in
such manner as the Secretary prescribes in
such regulations; and
‘‘(B) shall be furnished to individuals—
‘‘(i) not later than January 31 of the
calendar year following the calendar year
to which such reports relate; and
‘‘(ii) in such manner as the Secretary
prescribes in such regulations.
‘‘(5) INVESTMENT IN COLLECTIBLES TREATED
AS DISTRIBUTIONS.—Rules similar to the rules of
section 408(m) shall apply.
‘‘(i) DESIGNATION OF EARNED INCOME TAX CREDIT
PAYMENTS FOR DEPOSIT TO INDIVIDUAL HOMESTEAD
ACCOUNT.—
‘‘(1) IN GENERAL.—With respect to the return
of any qualified individual for the taxable year of the
tax imposed by this chapter, such individual may
designate that a specified portion (not less than $1)
of any overpayment of tax for such taxable year
which is attributable to the earned income tax credit
shall be deposited by the Secretary into an individual
homestead account of such individual. The Secretary
shall so deposit such portion designated under this
subsection.
‘‘(2) MANNER AND TIME OF DESIGNATION.—A
designation under paragraph (1) may be made with
respect to any taxable year—
‘‘(A) at the time of filing the return of the
tax imposed by this chapter for such taxable
year, or
‘‘(B) at any other time (after the time of
filing the return of the tax imposed by this
chapter for such taxable year) specified in regu-
lations prescribed by the Secretary.
Such designation shall be made in such manner as
the Secretary prescribes by regulations.
‘‘(3) PORTION ATTRIBUTABLE TO EARNED IN-
COME
TAX
CREDIT.—For purposes of this sub-
section, an overpayment for any taxable year shall
be treated as attributable to the earned income tax
credit to the extent that such overpayment does not
exceed the credit allowed to the taxpayer under sec-
tion 32 for such taxable year.
‘‘(4) 
OVERPAYMENTS
TREATED
AS
RE-
FUNDED.—For purposes of this title, any portion of
an overpayment of tax designated under paragraph
(1) shall be treated as being refunded to the tax-
payer as of the last date prescribed for filing the re-
turn of tax imposed by this chapter (determined
without regard to extensions) or, if later, the date
the return is filed.
‘‘(j) PENALTY FOR DISTRIBUTIONS NOT USED FOR
QUALIFIED INDIVIDUAL HOMESTEAD EXPENSES.—
‘‘(1) IN GENERAL.—If any amount is distrib-
uted from an individual homestead account and is
not used exclusively to pay qualified individual
homestead expenses for the holder of the account or
the spouse or dependent (as defined in section 152)
of such holder, the tax imposed by this chapter for
the taxable year of such distribution shall be in-
creased by 10 percent of such amount which is in-
cludible in gross income. For purposes of the pre-
ceding sentence, distributions which are includable
in gross income shall be treated as first attributable
to amounts contributed under subsection (d) to the
extent thereof.
‘‘(2) EXCEPTION
FOR
CERTAIN
DISTRIBU-
TIONS.—Paragraph (1) shall not apply to distribu-
tions which are—
‘‘(A) made on or after the date on which
the account holder attains age 591⁄2,
‘‘(B) made to a beneficiary (or the estate
of the account holder) on or after the death of
the account holder,
‘‘(C) attributable to the account holder’s
being disabled within the meaning of section
72(m)(7), or
‘‘(D) described in subsection (e)(2)(A).
‘‘(k) APPLICATION OF SECTION.—This section shall
apply to amounts paid to an individual homestead account
for any taxable year beginning after the date of the enact-
ment of the New Homestead Act of 2003.’’.
(b) TAX ON EXCESS CONTRIBUTIONS.—
(1) TAX IMPOSED.—Subsection (a) of section
4973 is amended by striking ‘‘or’’ at the end of
paragraph (3), adding ‘‘or’’ at the end of paragraph
(4), and inserting after paragraph (4) the following:
‘‘(5) an individual homestead account (within
the meaning of section 530A(b)),’’.
(2) EXCESS CONTRIBUTIONS.—Section 4973 is
amended by adding at the end the following:
‘‘(g) INDIVIDUAL HOMESTEAD ACCOUNTS.—For pur-
poses of this section, in the case of individual homestead
accounts, the term ‘excess contributions’ means the sum
of—
‘‘(1) the excess (if any) of—
‘‘(A) the amount contributed for the tax-
able year to the accounts (other than a quali-
fied rollover, as defined in section 530A(f)(7),
or a contribution under section 530A(d)), over
‘‘(B) the amount allowable under section
530A for such contributions; and
‘‘(2) the amount determined under this sub-
section for the preceding taxable year reduced by the
sum of—
‘‘(A) the distributions out of the accounts
for the taxable year which were included in the
gross income of the payee under section
530A(e)(1);
‘‘(B) the distributions out of the accounts
for the taxable year to which rules similar to
the rules of section 408(d)(5) apply by reason
of section 530A(g)(2); and
‘‘(C) the excess (if any) of the maximum
amount allowable as a contribution under sec-
tion 530A for the taxable year over the amount
contributed to the account for the taxable year
(other than a contribution under section
530A(d)).
For purposes of this subsection, any contribution which
is distributed from the individual homestead account in
a distribution to which rules similar to the rules of section
408(d)(4) apply by reason of section 530A(g)(2) shall be
treated as an amount not contributed.’’.
(c) TAX ON PROHIBITED TRANSACTIONS.—Section
4975 is amended—
(1) by adding at the end of subsection (c) the
following:
‘‘(6) SPECIAL
RULE
FOR
INDIVIDUAL
HOME-
STEAD ACCOUNTS.—An individual for whose benefit
an individual homestead account is established and
any contributor to such account shall be exempt
from the tax imposed by this section with respect to
any transaction concerning such account (which
would otherwise be taxable under this section) if,
with respect to such transaction, the account ceases
to be an individual homestead account by reason of
the application of section 530A(g)(1) to such ac-
count.’’; and
(2) in subsection (e)(1), by striking ‘‘or’’ at the
end of subparagraph (E), by redesignating subpara-
graph (F) as subparagraph (G), and by inserting
after subparagraph (E) the following:
‘‘(F) an individual homestead account de-
scribed in section 530A(b), or’’.
(d) INFORMATION RELATING TO CERTAIN TRUSTS
AND ANNUITY PLANS.—Subsection (c) of section 6047 is
amended—
(1) by inserting ‘‘or section 530A’’ after ‘‘sec-
tion 219’’; and
(2) by inserting ‘‘, of any individual homestead
account described in section 530A(b),’’, after ‘‘sec-
tion 408(a)’’.
(e) INSPECTION OF APPLICATIONS FOR TAX EXEMP-
TION.—Clause (i) of section 6104(a)(1)(B) is amended by
inserting ‘‘an individual homestead account described in
section 530A(b),’’ after ‘‘section 408(a),’’.
(f) FAILURE TO PROVIDE REPORTS ON INDIVIDUAL
HOMESTEAD
ACCOUNTS.—Paragraph (2) of section
6693(a) is amended by striking ‘‘and’’ at the end of sub-
paragraph (C), by striking the period and inserting ‘‘,
and’’ at the end of subparagraph (D), and by adding at
the end the following:
‘‘(E) section 530A(h)(4) (relating to indi-
vidual homestead accounts).’’.
(g) CLERICAL AMENDMENT.—The table of parts for
subchapter F of chapter 1 is amended by adding at the
end the following:
‘‘Part IX. Individual homestead accounts.’’.
TITLE II—INCENTIVES FOR MAIN
STREET BUSINESSES
SEC. 201. RURAL INVESTMENT TAX CREDIT.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 (relating to business related cred-
its) 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; 30 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) 70 percent of the eligible basis of a
new building, and
‘‘(B) 30 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.—
‘‘(1) CREDIT
MAY
NOT
EXCEED
CREDIT
AMOUNT ALLOCATED TO BUILDING.—The amount of
the credit determined under this section for any tax-
able year with respect to any building shall not ex-
ceed the rural investment credit dollar amount allo-
cated to such building under rules similar to the
rules of section 42(h)(1).
‘‘(2) ALLOCATED CREDIT AMOUNT TO APPLY
TO ALL TAXABLE YEARS ENDING DURING OR AFTER
CREDIT ALLOCATION YEAR.—Any rural investment
credit dollar amount allocated to any building for
any calendar year—
‘‘(A) shall apply to such building for all
taxable years in the credit period ending during
or after such calendar year, and
‘‘(B) shall reduce the aggregate rural in-
vestment credit dollar amount of the allocating
agency only for such calendar year.
‘‘(3) RURAL
INVESTMENT
CREDIT
DOLLAR
AMOUNT FOR AGENCIES.—
‘‘(A) IN GENERAL.—The aggregate rural
investment credit dollar amount which a rural
investment credit agency may allocate for any
calendar year is the portion of the State rural
investment credit ceiling allocated under this
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
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 2004, 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 sub-
stituting ‘calendar year 2003’ for ‘cal-
endar year 1992’ in subparagraph (B)
thereof.
‘‘(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 subpara-
graph (A) to any taxpayer.
‘‘(iii) CREDIT NOT INCOME.—A trans-
fer under subparagraph (B) of any credit
allowable under subparagraph (A) 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.
‘‘(7) PORTION
OF
STATE
CEILING
SET-ASIDE
FOR QUALIFIED RURAL SMALL BUSINESS INVEST-
MENT CREDITS.—Not more than 20 percent of the
State rural investment credit ceiling for any State
for any calendar year may be allocated to qualified
rural small business investment credits under section
42B.
‘‘(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,
‘‘(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) (relating to current year business
credit) is amended by striking ‘‘plus’’ at the end of para-
graph (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 (relating to carryback and carryforward of un-
used credits) is amended by adding at the end the fol-
lowing:
‘‘(11) NO CARRYBACK OF RURAL INVESTMENT
CREDIT BEFORE EFFECTIVE DATE.—No portion of
the unused business credit for any taxable year
which is attributable to the rural investment credit
determined under section 42A may be carried back
to a taxable year beginning before the date of the
enactment of the New Homestead Act of 2003.’’.
(d) CONFORMING AMENDMENTS.—
(1) Section 55(c)(1) is amended by inserting
‘‘or subsection (i) or (j) of section 42A’’ after ‘‘sec-
tion 42’’.
(2) Subsections (i)(c)(3), (i)(c)(6)(B)(i), and
(k)(1) of section 469 are each amended by inserting
‘‘or 42A’’ after ‘‘section 42’’.
(3) Section 772(a) is amended by striking
‘‘and’’ at the end of paragraph (10), by redesig-
nating paragraph (11) as paragraph (12), and by in-
serting after paragraph (10) the following:
‘‘(11) the rural investment credit determined
under section 42A, and’’.
(4) Section 774(b)(4) 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
is amended by inserting after the item relating 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 the date of the enactment of this
Act.
SEC. 202. QUALIFIED RURAL SMALL BUSINESS INVEST-
MENT CREDIT.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 (relating to business related cred-
its), as amended by this Act, is amended by adding at
the end the following:
‘‘SEC. 42B. QUALIFIED RURAL SMALL BUSINESS INVEST-
MENT CREDIT.
‘‘(a) IN GENERAL.—For purposes of section 38, in
the case of a qualified rural small business, the amount
of the qualified rural small business investment credit de-
termined under this section for any taxable year is equal
to 30 percent of the qualified expenditures for the taxable
year of such business.
‘‘(b) DOLLAR LIMITATION.—
‘‘(1) IN GENERAL.—The credit allowable under
subsection (a) for any taxable year shall not exceed
the lesser of—
‘‘(A) $5,000, or
‘‘(B) the amount when added to the aggre-
gate credits allowable to the taxpayer under
subsection (a) for all preceding taxable years
does not exceed $25,000.
‘‘(2) NO DOUBLE CREDIT ALLOWED.—In the
case of any qualified rural small business which
places in service a qualified rural investment build-
ing with respect to which a rural investment credit
is allowed under section 42A for any taxable year,
paragraph (1)(A) shall be applied with respect to
such taxable year by substituting ‘zero’ for ‘$5,000’.
‘‘(c) QUALIFIED RURAL SMALL BUSINESS.—For
purposes of this section, the term ‘qualified rural small
business’ means any person if such person—
‘‘(1) employed not more than 5 full-time em-
ployees during the taxable year,
‘‘(2) materially and substantially participates in
management,
‘‘(3) is located is a qualifying county, and
‘‘(4) submitted a qualified business plan with
respect to which the rural investment credit agency
with jurisdiction over such qualifying county has al-
located a portion of the State rural investment ceil-
ing for such taxable year under section 42A(g)(7).
For purposes of paragraph (1), an employee shall be con-
sidered full-time if such employee is employed at least 30
hours per week for 20 or more calendar weeks in the tax-
able year.
‘‘(d) QUALIFIED EXPENDITURES.—For purposes of
this section—
‘‘(1) IN GENERAL.—The term ‘qualified expend-
itures’ means expenditures normally associated with
starting or expanding a business and included in a
qualified business plan, including costs for capital,
plant and equipment, inventory expenses, and wages,
but not including interest costs.
‘‘(2) ONLY CERTAIN EXPENDITURES INCLUDED
FOR EXISTING BUSINESSES.—In the case of a quali-
fied rural small business with respect to which a
credit under subsection (a) was allowed for a pre-
ceding taxable year, such term shall include only so
much of the expenditures described in paragraph (1)
for the taxable year as exceed the aggregate of such
expenditures for the preceding taxable year.
‘‘(e) QUALIFIED BUSINESS PLAN.—For purposes of
this section, the term ‘qualified business plan’ means a
business plan which—
‘‘(1) has been approved by the rural investment
credit agency with jurisdiction over the qualifying
county in which the qualified rural small business is
located pursuant to such agency’s rural investment
plan, and
‘‘(2) meets such requirements as the agency
may specify.
‘‘(f) DENIAL OF DOUBLE BENEFIT.—In the case of
the amount of the credit determined under this section—
‘‘(1) no deduction or credit shall be allowed for
such amount under any other provision of this chap-
ter, and
‘‘(2) no increase in the adjusted basis of any
property shall result from such amount.
‘‘(g) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) any term which is used in this section
which is used in section 42A shall have the meaning
given such term by section 42A, and
‘‘(2) rules similar to the rules under subsections
(j)(2), (j)(3), and (k) of section 42A shall apply.’’.
(b) CURRENT YEAR BUSINESS CREDIT CALCULA-
TION.—Section 38(b) (relating to current year business
credit), as amended by this Act, is amended by striking
‘‘plus’’ at the end of paragraph (15), by striking the period
at the end of paragraph (16) and inserting ‘‘, plus’’, and
by adding at the end the following:
‘‘(17) the qualified rural small business invest-
ment credit determined under section 42B(a).’’.
(c) LIMITATION ON CARRYBACK.—Subsection (d) of
section 39 (relating to carryback and carryforward of un-
used credits), as amended by this Act, is amended by add-
ing at the end the following:
‘‘(12) NO
CARRYBACK
OF
QUALIFIED
RURAL
SMALL BUSINESS INVESTMENT CREDIT BEFORE EF-
FECTIVE DATE.—No portion of the unused business
credit for any taxable year which is attributable to
the qualified rural small business investment credit
determined under section 42B may be carried back
to a taxable year beginning before the date of the
enactment of the New Homestead Act of 2003.’’.
(d) CLERICAL AMENDMENT.—The table of sections
for subpart D of part IV of subchapter A of chapter 1,
as amended by this Act, is amended by inserting after the
item relating to section 42A the following:
‘‘Sec. 42B. Qualified rural small business 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.
SEC. 203. ACCELERATED DEPRECIATION FOR RURAL IN-
VESTMENT PROPERTY.
(a) IN GENERAL.—Section 168 is amended by adding
at the end the following:
‘‘(l) PROPERTY IN RURAL INVESTMENT PROJECTS.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a), the applicable recovery period for qualified rural
investment property shall be determined in accord-
ance with the table contained in paragraph (2) in
lieu of the table contained in subsection (c).
‘‘(2) APPLICABLE
RECOVERY
PERIOD
FOR
RURAL INVESTMENT PROPERTY.—For purposes of
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.
‘‘(3) DEDUCTION
ALLOWED
IN
COMPUTING
MINIMUM TAX.—For purposes of determining alter-
native minimum taxable income under section 55,
the deduction under subsection (a) for property to
which paragraph (1) applies shall be determined
under this section without regard to any adjustment
under section 56.
‘‘(4) QUALIFIED
RURAL
INVESTMENT
PROP-
ERTY DEFINED.—For purposes of this subsection—
‘‘(A) IN
GENERAL.—The term ‘qualified
rural investment property’ means property
which is property described in the table in para-
graph (2) and which is—
‘‘(i) used by the taxpayer predomi-
nantly in the active conduct of a trade or
business within a qualified rural invest-
ment project,
‘‘(ii) not used or located outside the
qualified rural investment project on a reg-
ular basis,
‘‘(iii) not acquired (directly or indi-
rectly) by the taxpayer from a person who
is related to the taxpayer (within the
meaning of section 465(b)(3)(C)), and
‘‘(iv) not property (or any portion
thereof) placed in service for purposes of
operating any facility described in section
144(c)(6)(B).
‘‘(B) EXCEPTION FOR ALTERNATIVE DE-
PRECIATION
PROPERTY.—The term ‘qualified
rural investment property’ does not include any
property to which the alternative depreciation
system 
under 
subsection 
(g) 
applies,
determined—
‘‘(i) without regard to subsection
(g)(7) (relating to election to use alter-
native depreciation system), and
‘‘(ii) after the application of section
280F(b) (relating to listed property with
limited business use).
‘‘(C) SPECIAL RULE FOR INFRASTRUCTURE
INVESTMENT.—
‘‘(i) 
IN
GENERAL.—Subparagraph
(A)(ii) shall not apply to qualified infra-
structure property located outside of the
qualified rural investment project if the
purpose of such property is to connect with
qualified infrastructure property located
within such project.
‘‘(ii) 
QUALIFIED
INFRASTRUCTURE
PROPERTY.—For purposes of this subpara-
graph, the term ‘qualified infrastructure
property’ means qualified rural investment
property (determined without regard to
subparagraph (A)(ii)) which—
‘‘(I) benefits the qualifying coun-
ty infrastructure,
‘‘(II) is available to the general
public, and
‘‘(III) is placed in service in con-
nection with the taxpayer’s active con-
duct of a trade or business within a
qualified rural investment project.
Such term includes, but is not limited to,
roads, power lines, water systems, railroad
spurs, and communications facilities.
‘‘(5) DEFINITIONS.—For purposes of this sub-
section, any term used in this section which is used
in section 42A shall have the meaning given such
term by section 42A.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to property placed in service after
the date of the enactment of this Act, in taxable years
ending after such date.
TITLE III—NEW HOMESTEAD
VENTURE CAPITAL FUND
SEC. 301. NEW HOMESTEAD VENTURE CAPITAL FUND.
The Consolidated Farm and Rural Development Act
(7 U.S.C. 1921 et seq.) is amended by adding at the end
the following:
‘‘Subtitle G—New Homestead
Venture Capital Fund
‘‘SEC. 383A. SHORT TITLE.
‘‘This subtitle may be cited as the ‘New Homestead
Venture Capital Fund Act’.
‘‘SEC. 383B. DEFINITIONS.
‘‘In this subtitle:
‘‘(1) AUTHORIZED
PRIVATE
INVESTOR.—The
term ‘authorized private investor’ means an indi-
vidual, legal entity, or affiliate or subsidiary of an
individual or legal entity that—
‘‘(A) is eligible to receive a loan guarantee
under this title;
‘‘(B) is eligible to receive a loan guarantee
under the Rural Electrification Act of 1936 (7
U.S.C. 901 et seq.);
‘‘(C) is created under the National Con-
sumer Cooperative Bank Act (12 U.S.C. 3011
et seq.);
‘‘(D) is an insured depository institution
subject to section 383D(b)(2);
‘‘(E) is a Farm Credit System institution
described in section 1.2(a) of the Farm Credit
Act of 1971 (12 U.S.C. 2002(a)); or
‘‘(F) is determined by the Board to be an
appropriate investor in the Fund.
‘‘(2) BOARD.—The term ‘Board’ means the
board of directors of the Fund established under
section 383F.
‘‘(3) FUND.—The term ‘Fund’ means the New
Homestead Venture Capital Fund established under
section 383C.
‘‘(4) GROUP OF SIMILAR AUTHORIZED PRIVATE
INVESTORS.—The term ‘group of similar authorized
private investors’ means any 1 of the following:
‘‘(A) Insured depository institutions with
total assets of more than $250,000,000.
‘‘(B) Insured depository institutions with
total assets equal to or less than $250,000,000.
‘‘(C) Farm Credit System institutions de-
scribed in section 1.2(a) of the Farm Credit Act
of 1971 (12 U.S.C. 2002(a)).
‘‘(D) Cooperative financial institutions
(other than Farm Credit System institutions).
‘‘(E) Authorized private investors, other
than those described in subparagraphs (A)
through (D).
‘‘(F) Other nonprofit organizations, includ-
ing credit unions.
‘‘(5) INSURED DEPOSITORY INSTITUTION.—The
term ‘insured depository institution’ means any bank
or savings association the deposits of which are in-
sured under the Federal Deposit Insurance Act (12
U.S.C. 1811 et seq.).
‘‘(6) QUALIFYING COUNTY.—The term ‘quali-
fying county’ means any county that—
‘‘(A) is located outside a metropolitan sta-
tistical area (as defined by the Office of Man-
agement and Budget); and
‘‘(B) during the 20-year period ending
with the fiscal year preceding the applicable fis-
cal year for which assistance is made available
under section 383E, has a net outmigration of
inhabitants from the county of at least 10 per-
cent of the population of the county at the be-
ginning of the period.
‘‘(7) RURAL BUSINESS.—The term ‘rural busi-
ness’ means a rural cooperative, a value-added agri-
cultural enterprise, or any other enterprise that is or
will be located in a qualifying county.
‘‘SEC. 383C. ESTABLISHMENT OF THE FUND.
‘‘(a) IN GENERAL.—
‘‘(1) AUTHORITY TO ESTABLISH.—Upon certifi-
cation by the Secretary that, to the maximum extent
practicable, the parties proposing to establish a fund
provide a broad representation of all of the groups
of similar authorized private investors described in
subparagraphs (A) through (F) of section 383B(4),
the parties so certified may establish, a non-Federal
entity under State law, to purchase shares of, and
manage a fund to be known as the ‘New Homestead
Venture Capital Fund’, to generate and provide eq-
uity capital to rural businesses.
‘‘(2) OWNERSHIP.—
‘‘(A) IN GENERAL.—To the maximum ex-
tent practicable, equity ownership of the Fund
shall be distributed among authorized private
investors representing all of the groups of simi-
lar authorized private investors described in
subparagraphs (A) through (F) of section
383B(4).
‘‘(B) EXCLUSION OF GROUPS.—No group
of similar authorized private investors shall be
excluded from equity ownership of the Fund
during any period during which the Fund is in
existence if an authorized private investor rep-
resentative of the group is able and willing to
invest in the Fund.
‘‘(b) PURPOSE.—The purpose of the Fund is to
strengthen the economies of qualifying counties by—
‘‘(1) making needed investments in qualifying
counties to reverse the devastating impact of chronic
outmigration and to help the qualifying counties re-
build and grow;
‘‘(2) providing equity funding for existing and
startup rural businesses with high potential for job
creation that are or will be located in qualifying
counties;
‘‘(3) offering the funding described in para-
graph (2) to rural businesses, many of which have
difficulty obtaining equity capital;
‘‘(4) authorizing use of the funding described in
paragraph (2) only after State and local govern-
ments match a significant portion of the funding;
‘‘(5) requiring a portion of the funding de-
scribed in paragraph (2) to be used for technical and
other similar assistance to rural businesses; and
‘‘(6) providing incentives to greater participa-
tion by authorized private investors through provi-
sion of guarantees of up to 60 percent of the invest-
ments of the authorized private investors in quali-
fying counties.
‘‘(c) ARTICLES OF INCORPORATION AND BY-LAWS.—
The articles of incorporation and by-laws of the Fund shall
set forth purposes of the Fund that are consistent with
the purposes described in subsection (b).
‘‘SEC. 383D. INVESTMENT IN THE FUND.
‘‘(a) IN GENERAL.—The Secretary shall—
‘‘(1) subject to subsection (b)(1), make avail-
able to the Fund $200,000,000 for each of fiscal
years 2004 through 2013;
‘‘(2) subject to subsection (c), guarantee a por-
tion of each investment made by an authorized pri-
vate investor in the Fund; and
‘‘(3) subject to subsection (d), guarantee the re-
payment of principal of, and accrued interest on, de-
bentures issued by the Fund to authorized private
investors.
‘‘(b) NON-FEDERAL FUNDS.—
‘‘(1) IN
GENERAL.—Under subsection (a)(1),
the Secretary shall make an amount available to the
Fund for a fiscal year only after—
‘‘(A) at least $50,000,000 has been in-
vested in the Fund for the fiscal year by au-
thorized private investors in accordance with
this subtitle and the terms and conditions set
forth in the by-laws of the Fund; and
‘‘(B) at least $50,000,000 has been in-
vested in the Fund for the fiscal year by State
and local governments.
‘‘(2) INSURED DEPOSITORY INSTITUTIONS.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graphs (B) and (C)—
‘‘(i) an insured depository institution
may be an authorized private investor in
the Fund; and
‘‘(ii) an investment in the Fund may
be considered to be part of the record of
an institution in meeting the credit needs
of the community in which the institution
is located under any applicable Federal
law.
‘‘(B) INVESTMENT LIMIT.—The total in-
vestment in the Fund of an insured depository
institution shall not exceed 5 percent of the in-
stitution’s capital and surplus.
‘‘(C) REGULATORY
AUTHORITY.—An ap-
propriate Federal banking agency may, by regu-
lation or order, impose on any insured deposi-
tory institution investing in the Fund, any safe-
guard, limitation, or condition (including an in-
vestment limit that is lower than the investment
limit under subparagraph (B)) that the Federal
banking agency considers to be appropriate to
ensure that the institution operates—
‘‘(i) in a financially sound manner;
and
‘‘(ii) in compliance with all applicable
law.
‘‘(c) GUARANTEE OF PRIVATE INVESTMENTS.—
‘‘(1) IN GENERAL.—The Secretary shall guar-
antee, under terms and conditions determined by the
Secretary—
‘‘(A) except as provided in subparagraph
(B), 40 percent of any loss of the principal of
each investment made by an authorized private
investor in the Fund; and
‘‘(B) 60 percent of any loss of the prin-
cipal of each investment made by an authorized
private investor in the Fund if the investment
is used for a manufacturing or high-technology
business.
‘‘(2) MAXIMUM TOTAL GUARANTEE.—The ag-
gregate potential liability of the Secretary with re-
spect to all guarantees under paragraph (1) shall
not apply to more than $500,000,000 in private in-
vestments in the Fund.
‘‘(3) REDEMPTION OF GUARANTEE.—
‘‘(A) DATE.—An authorized private inves-
tor in the Fund may redeem a guarantee under
paragraph (1), with respect to the total invest-
ments in the Fund and the total losses of the
authorized private investor as of the date of
redemption—
‘‘(i) on the date that is 5 years after
the date of the initial investment of the au-
thorized private investor; or
‘‘(ii) annually thereafter.
‘‘(B) EFFECT
OF
REDEMPTION.—On re-
demption of a guarantee under subparagraph
(A)—
‘‘(i) the shares in the Fund of the au-
thorized private investor shall be redeemed;
and
‘‘(ii) the authorized private investor
shall be prohibited from making any future
investment in the Fund.
‘‘(d) DEBENTURES.—
‘‘(1) IN GENERAL.—The Fund may, at the dis-
cretion of the Board, raise additional capital through
the issuance of debentures and through other means
determined to be appropriate by the Board.
‘‘(2) GUARANTEE OF DEBT BY SECRETARY.—
‘‘(A) IN
GENERAL.—The Secretary shall
guarantee 100 percent of the principal of, and
accrued interest on, debentures issued by the
Fund that are approved by the Secretary.
‘‘(B) MAXIMUM
DEBT
GUARANTEED
BY
SECRETARY.—The outstanding value of deben-
tures issued by the Fund and guaranteed by
the Secretary shall not exceed the lesser of—
‘‘(i) the amount equal to twice the
value of the assets held by the Fund; or
‘‘(ii) $500,000,000.
‘‘(C) RECAPTURE
OF
GUARANTEE
PAY-
MENTS.—If the Secretary makes a payment on
a debenture issued by the Fund as a result of
a guarantee of the Secretary under this para-
graph, the Secretary shall have priority over
other creditors for repayment of the debenture.
‘‘(3) AUTHORIZED
PRIVATE
INVESTORS.—An
authorized private investor may purchase debentures
issued by the Fund.
‘‘SEC. 383E. INVESTMENTS AND OTHER ACTIVITIES OF THE
FUND.
‘‘(a) INVESTMENTS.—
‘‘(1) IN GENERAL.—
‘‘(A) TYPES.—Subject to subparagraphs
(B) and (C), the Fund may—
‘‘(i) make equity investments in a
rural business that meets the requirements
of paragraph (6) and such other require-
ments as the Board may establish; and
‘‘(ii) extend credit to such rural busi-
ness in—
‘‘(I) the form of mezzanine debt,
convertible debt, or subordinated debt;
or
‘‘(II) any other form of near-eq-
uity debt.
‘‘(B) LIMITATIONS
ON
EQUITY
INVEST-
MENTS.—After the initial equity investment in
a rural business described in subparagraph
(A)(i), the Fund may not make additional eq-
uity investments in such rural business if the
additional equity investments would result in
the Fund owning more than 30 percent of the
equity of such rural business.
‘‘(C) LIMITATION ON NONEQUITY INVEST-
MENTS.—Except in the case of a project to as-
sist a rural cooperative, the total amount of
nonequity investments described in subpara-
graph (A)(ii) that may be provided by the Fund
shall not exceed 20 percent of the total invest-
ments of the Fund in the project.
‘‘(2) PROCEDURES.—The Fund shall implement
procedures to ensure that—
‘‘(A) the financing arrangements of the
Fund meet the Fund’s primary focus of pro-
viding equity capital; and
‘‘(B) the Fund does not compete with con-
ventional sources of credit.
‘‘(3) DIVERSITY OF PROJECTS.—The Fund—
‘‘(A) shall seek to make equity investments
in a variety of viable projects for rural busi-
nesses, 
with 
a 
significant 
share 
of
investments—
‘‘(i) in manufacturing or high-tech-
nology businesses of diverse sizes;
‘‘(ii) in smaller projects in rural com-
munities of diverse sizes; and
‘‘(iii) in cooperative and noncoopera-
tive businesses; and
‘‘(B) shall be managed in a manner that
diversifies the risks to the Fund among a vari-
ety of projects.
‘‘(4) LIMITATION ON RURAL BUSINESSES AS-
SISTED.—The Fund shall not invest in any rural
business that—
‘‘(A) is primarily retail in nature (as deter-
mined by the Board), other than a purchasing
cooperative, or
‘‘(B) consists of the operation of any facil-
ity described in section 144(c)(6)(B).
‘‘(5) INTEREST
RATE
LIMITATIONS.—Returns
on investments in and by the Fund, and returns on
the extension of credit by participants in projects as-
sisted by the Fund, shall not be subject to any State
or Federal law establishing a maximum allowable in-
terest rate.
‘‘(6) REQUIREMENTS FOR RECIPIENTS.—
‘‘(A) OTHER
INVESTMENTS.—Any recipi-
ent of amounts from the Fund shall make or
obtain a significant investment from a source of
capital other than the Fund.
‘‘(B) SPONSORSHIP.—To be considered for
an equity investment from the Fund, a rural
business investment project shall be sponsored
by a regional, State, or local sponsoring or en-
dorsing organization such as—
‘‘(i) a financial institution;
‘‘(ii) a development organization; or
‘‘(iii) any other established entity en-
gaging or assisting in rural business devel-
opment, including a rural cooperative.
‘‘(b) TECHNICAL ASSISTANCE.—The Board shall use
not less than 2 percent of capital provided by the Federal
Government to provide technical assistance to rural busi-
nesses seeking an equity investment from the Fund.
‘‘(c) ANNUAL AUDIT.—
‘‘(1) IN GENERAL.—The Board shall authorize
an annual audit of the financial statements of the
Fund by a nationally recognized auditing firm using
generally accepted accounting procedures.
‘‘(2) AVAILABILITY OF AUDIT RESULTS.—The
results of the audit required by paragraph (1) shall
be made available to investors in the Fund.
‘‘(d) ANNUAL REPORT.—The Board shall prepare
and make available to the public an annual report that—
‘‘(1) describes the projects funded with amounts
from the Fund;
‘‘(2) specifies the recipients of amounts from
the Fund;
‘‘(3) specifies the co-investors in all projects
that receive amounts from the Fund; and
‘‘(4) meets the reporting requirements, if any,
of the State under the law of which the Fund is es-
tablished.
‘‘(e) OTHER AUTHORITIES.—
‘‘(1) IN
GENERAL.—The Board may exercise
such other authorities as are necessary to carry out
this subtitle.
community banker from an insured depository insti-
tution with total assets equal to or less than
$250,000,000 with an investment in the Fund.
‘‘(b) LIMITATION ON VOTING CONTROL.—No indi-
vidual investor or group of similar authorized private in-
vestors may control more than 25 percent of the votes on
the Board.
‘‘SEC. 383G. AUTHORIZATION OF APPROPRIATIONS.
‘‘There are authorized to be appropriated such sums
as are necessary to carry out this subtitle.’’.
Æ