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 December 31, 2002.’’. 
(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 2003, 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 2002’ 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. 
‘‘(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 recapture amount de-
termined 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 speci-
fying—
‘‘(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 regula-
tions—
‘‘(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) (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 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) 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 December 31, 2002. 
SEC. 202. ACCELERATED DEPRECIATION FOR RURAL IN-
VESTMENT PROPERTY. 
(a) IN GENERAL.—Section 168 is amended by adding 
at the end the following: 
‘‘(k) 
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, deter-
mined—
‘‘(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 
December 31, 2002.
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 2003 through 2012; 
‘‘(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.
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 re-
demption—
‘‘(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 invest-
ments—
‘‘(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. 
‘‘(2) OVERSIGHT.—The Secretary shall enter 
into a contract with the Administrator of the Small 
Business Administration under which the Adminis-
trator of the Small Business Administration shall be 
responsible for the routine duties of the Secretary in 
regard to the Fund.
‘‘SEC. 383F. GOVERNANCE OF THE FUND. 
‘‘(a) IN GENERAL.—The Fund shall be governed by 
a board of directors that represents all of the authorized 
private investors in the Fund and the Federal Government 
and that consists of—
‘‘(1) a designee of the Secretary; 
‘‘(2) 2 members who are appointed by the Sec-
retary and are not Federal employees, including—
‘‘(A) 1 member with expertise in venture 
capital investment; and 
‘‘(B) 1 member with expertise in coopera-
tive development; 
‘‘(3) 1 member who is appointed by the Sec-
retary and is a State government representative 
from among States with the highest rates of out-
migration from qualifying counties; and 
‘‘(4) 7 members who are elected by the author-
ized private investors with investments in the Fund, 
of whom not less than 1 member shall be a rural 
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