I
108TH CONGRESS
1ST SESSION
H. R. 2341
To amend the Internal Revenue Code of 1986 to encourage a strong
community-based banking system.
IN THE HOUSE OF REPRESENTATIVES
JUNE 4, 2003
Mr. SESSIONS (for himself, Mr. POMEROY, Mr. SOUDER, Mr. SMITH of Texas,
Mr. PETERSON
of Pennsylvania, Mr. PAUL, Mr. BONILLA, Mr.
NETHERCUTT, Mr. GONZALEZ, and Mr. EDWARDS) introduced the fol-
lowing bill; which was referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to encourage
a strong community-based banking system.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Community Savings
and Investment Act of 2003’’.
SEC. 2. INCOME TAX ON QUALIFIED COMMUNITY LENDERS.
(a) IN GENERAL.—Section 11 of the Internal Rev-
enue Code of 1986 (relating to tax imposed on corpora-
tions) is amended by redesignating subsection (d) as sub-
section (e) and by inserting after subsection (c) the fol-
lowing new subsection:
‘‘(d) QUALIFIED COMMUNITY LENDERS.—
‘‘(1) IN GENERAL.—In the case of a qualified
community lender, in lieu of the amount of tax
under subsection (b) the amount of tax imposed by
subsection (a) for a taxable year shall be the sum
of—
‘‘(A) 15 percent of so much of the taxable
income as exceeds $250,000 but does not ex-
ceed $1,000,000, and
‘‘(B) the highest rate of tax imposed by
subsection (b) multiplied by so much of the tax-
able income as exceeds $1,000,000.
‘‘(2) QUALIFIED
COMMUNITY
LENDER.—For
purposes of paragraph (1), the term ‘qualified com-
munity lender’ means a bank—
‘‘(A) which achieved a rating of ‘satisfac-
tory record of meeting community credit needs’,
or better, at the most recent examination of
such bank under the Community Reinvestment
Act of 1977,
‘‘(B) whose outstanding local community
loans at all times during the taxable year com-
prised not less than 60 percent of the total out-
standing loans,
‘‘(C) meets the ownership requirements of
paragraph (3), and
‘‘(D) at all times during the taxable year
has 
total 
assets 
of 
not 
more 
than
$1,000,000,000.
‘‘(3) OWNERSHIP REQUIREMENTS.—
‘‘(A) IN
GENERAL.—The ownership re-
quirements of this paragraph are met with re-
spect to any bank if—
‘‘(i) no shares of, or other ownership
interests in, the bank are publicly traded,
or
‘‘(ii) in the case of a bank the shares
of which or ownership interests in which
are publicly traded, the last known address
of the holders of at least 2⁄3 of all such
shares or interests, including persons for
whose benefit such shares or interests are
held by another, is in the home State of
the bank or a State contiguous to such
home State.
‘‘(B) HOME
STATE
DEFINED.—For pur-
poses of subparagraph (A), the term ‘home
State’ means—
‘‘(i) with respect to a national bank or
Federal savings association, the State in
which the main office of the bank or sav-
ings association is located, and
‘‘(ii) with respect to a State bank or
State savings association, the State by
which the bank or savings association is
chartered.
‘‘(4) OTHER
DEFINITIONS.—For purposes of
this subsection—
‘‘(A) BANK.—The term ‘bank’—
‘‘(i) has the meaning given to such
term in section 581, and
‘‘(ii) includes any bank—
‘‘(I) in which at least 80 percent
of the shares of, or other ownership
interests in the bank are owned by
other qualified community lenders,
and
‘‘(II) the sole purpose of which is
to serve the banking needs of such
lenders.
‘‘(B) LOCAL COMMUNITY LOAN.—The term
‘local community loan’ means—
‘‘(i) any loan originated by a bank to
any person, other than a related person
with respect to the bank, who is a resident
of a community in which the bank is char-
tered or in which it operates an office at
which deposits are accepted, and
‘‘(ii) any loan originated by a bank to
any person, other than a related person
with respect to the bank, who is engaged
in a trade or business in any such commu-
nity, to the extent that all or substantially
all of the proceeds of such loan are ex-
pended in connection with the trade or
business of such person in any such com-
munity.
‘‘(C) RELATED
PERSON.—The term ‘re-
lated person’ means, with respect to any bank,
any affiliate of the bank, any person who is a
director, officer, or principal shareholder of the
bank, and any member of the immediate family
of any such person.’’.
(b) S CORPORATION INCOME.—
(1) IN GENERAL.—Section 1 of such Code (re-
lating to tax imposed) is amended by adding at the
end the following new subsection:
‘‘(j) COMMUNITY LENDER INCOME FROM S COR-
PORATION.—
‘‘(1) IN GENERAL.—If a taxpayer has commu-
nity lender income from a S corporation for any tax-
able year, the tax imposed by this section for such
taxable year shall be the sum of—
‘‘(A) the tax computed at the rates and in
the same manner as if this subsection had not
been enacted on the greater of—
‘‘(i) taxable income reduced by com-
munity lender income, or
‘‘(ii) the lesser of—
‘‘(I) the amount of taxable in-
come taxed at a rate below 28 per-
cent, or
‘‘(II) taxable income reduced by
community lender income, and
‘‘(B) a tax on community lender income
computed at—
‘‘(i) a rate of zero on zero-rate com-
munity lender income,
‘‘(ii) a rate of 15 percent on 15 per-
cent community lender income, and
‘‘(iii) the highest rate in effect under
this section with respect to the taxpayer on
the excess of community lender income on
which a tax is determined under clause (i)
or (ii).
‘‘(2) COMMUNITY LENDER INCOME.—For pur-
poses of paragraph (1)—
‘‘(A) IN
GENERAL.—The term ‘qualified
community lender income’ means taxable in-
come (if any) of a qualified community lender
(as defined in section 11(d)(2)) that is an S
corporation, determined at the entity level.
‘‘(B) ZERO-RATE COMMUNITY LENDER IN-
COME.—The term ‘zero-rate community lender
income’ means the taxpayer’s pro rata share of
so much of community lender income as does
not exceed $250,000.
‘‘(C) 15 PERCENT COMMUNITY LENDER IN-
COME.—The term ‘15 percent community lend-
er income’ means the taxpayer’s pro rata share
of so much of community lender income as ex-
ceeds 
$250,000 
but 
does 
not 
exceed
$1,000,000.
‘‘(D) SPECIAL RULES.—
‘‘(i) For purposes of this paragraph,
the taxpayer’s pro rata share of commu-
nity lender income shall be determined
under part II of subchapter S.
‘‘(ii) This subsection shall be applied
after the application of subsection (h).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2003.
SEC. 3. EXCLUSION FROM INCOME TAXATION FOR INCOME
DERIVED FROM BANKING SERVICES WITHIN
DISTRESSED COMMUNITIES.
(a) FEDERAL TAXATION.—Part III of subchapter B
of chapter 1 of the Internal Revenue Code of 1986 (relat-
ing to items specifically excluded from gross income) is
amended by inserting after section 139 the following new
section:
‘‘SEC. 139A. BANKING SERVICES WITHIN DISTRESSED COM-
MUNITIES.
‘‘(a) IN GENERAL.—At the election of the taxpayer,
gross income shall not include distressed community bank-
ing income.
‘‘(b) DISTRESSED COMMUNITY BANKING INCOME.—
For purposes of subsection (a), the term ‘distressed com-
munity banking income’ means net income of a qualified
depository institution which is derived from the active con-
duct of a banking business in a distressed community.
‘‘(c) QUALIFIED DEPOSITORY INSTITUTION.—An in-
stitution is a qualified depository institution if—
‘‘(1) such institution is an insured depository
institution (as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813)),
‘‘(2) such institution is located in, or has a
branch located in, a qualified distressed community,
and
‘‘(3) as of the last day of the taxable year, at
least 85 percent of its loans from its location within
the qualified distressed community are local commu-
nity loans (as defined in section 11(d)(4)(B)).
‘‘(d) DISTRESSED
COMMUNITY.—The term ‘dis-
tressed community’ has the meaning given the term ‘quali-
fied distressed community’ by section 233 of the Bank En-
terprise Act of 1991 (12 U.S.C. 1834a(b)).’’.
(b) CLERICAL AMENDMENT.—The table of sections
for part III of subchapter B of chapter 1 of such Code
is amended by inserting after the item relating to section
139 the following new item:
‘‘Sec. 139A. Banking services within distressed communities.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
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