I 
111TH CONGRESS 
2D SESSION 
H. R. 5990 
To amend the Internal Revenue Code of 1986 to allow a business credit 
for investments in rural microbusinesses. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 30, 2010 
Mr. KIND (for himself and Mr. HERGER) introduced the following bill; which 
was referred to the Committee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to allow a 
business credit for investments in rural microbusinesses. 
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 ‘‘Rural Microbusiness 
Investment Credit Act of 2010’’. 
SEC. 2. RURAL MICROBUSINESS INVESTMENT CREDIT. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 (relating to business related credits) is amended by 
adding at the end the following new section: 
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‘‘SEC. 45S. RURAL MICROBUSINESS INVESTMENT CREDIT. 
‘‘(a) IN GENERAL.—For purposes of section 38, the 
amount of the rural microbusiness investment credit deter-
mined under this section for any taxable year with respect 
to a rural microbusiness is equal to 35 percent of the 
qualified new investments in the rural microbusiness for 
the taxable year. 
‘‘(b) LIMITATIONS.— 
‘‘(1) 
PER
BUSINESS
LIMITATIONS.—The 
amount allowed as a credit under subsection (a) with 
respect to any rural microbusiness for a taxable year 
shall not exceed— 
‘‘(A) $10,000, reduced (but not below 
zero), by 
‘‘(B) the amount allowed under subsection 
(a) to the rural microbusiness for all preceding 
taxable years. 
‘‘(2) 
PER
TAXPAYER
LIMITATIONS.—The 
amount allowed as a credit under subsection (a) with 
respect to any taxpayer with respect to all rural 
microbusinesses of the taxpayer for a taxable year 
shall not exceed— 
‘‘(A) $10,000, reduced (but not below 
zero), by 
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‘‘(B) the amount allowed under subsection 
(a) to the taxpayer with respect to rural micro-
businesses for all preceding taxable years. 
‘‘(c) DEFINITIONS.—For purposes of this section— 
‘‘(1) QUALIFIED NEW INVESTMENT.—The term 
‘qualified new investment’ means the excess of— 
‘‘(A) qualified expenditures paid or in-
curred for the taxable year, over 
‘‘(B) the greater of— 
‘‘(i) qualified expenditures paid or in-
curred for the preceding taxable year, or 
‘‘(ii) the average annual qualified ex-
penditures paid or incurred over the pre-
ceding three taxable years. 
If the rural microbusiness was not in existence (or 
expenditures relating to such microbusiness were not 
taken into account under subsection (a)) for the en-
tire 3-year period referred to in subparagraph 
(B)(ii), such subparagraph shall be applied on the 
basis of the period during which such entity (or 
trade or business) was in existence or such expendi-
tures taken into account. 
‘‘(2) QUALIFIED EXPENDITURES.— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
expenditures’ means any amount which is paid 
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or incurred with respect to a rural microbusi-
ness which is not described in subparagraph 
(B). Such term includes costs for capital plant 
and equipment, inventory expenses, and wages. 
‘‘(B) EXCEPTION.—Such term does not in-
clude— 
‘‘(i) any interest cost, or 
‘‘(ii) the cost of any vehicle and costs 
associated with purchasing a vehicle. 
‘‘(3) RURAL MICROBUSINESS.— 
‘‘(A) IN
GENERAL.—The term ‘rural 
microbusiness’ means a trade or business car-
ried on as a proprietorship, partnership, trust 
(to the extent that the trust is a pass-thru enti-
ty), S corporation, or other pass-thru entity 
if— 
‘‘(i) such trade or business is carried 
on in a distressed rural area for the first 
taxable year in which the credit under sub-
section (a) is allowable to the trade or 
business, 
‘‘(ii) such trade or business meets the 
gross revenue test under subparagraph (C) 
for the first taxable year in which the cred-
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it under subsection (a) is allowable to the 
trade or business, 
‘‘(iii) such trade or business employed 
not more than 5 full-time equivalent em-
ployees during the taxable year, and 
‘‘(iv) in the case of a trade or busi-
ness the majority of the activity of which 
is in agricultural production, each indi-
vidual who is an owner, shareholder, or 
holds a capital interest, profits interests, or 
beneficial interests (as the case may be) in 
such trade or business is a first-time farm-
er (as defined in section 147(c)(2)(C)). 
All persons treated as a single employer under 
subsection (a) or (b) or section 52 or subsection 
(m) or (o) of section 414 shall be treated as a 
trade or business for purposes of this subpara-
graph. 
‘‘(B) EXCEPTIONS.—Such term shall not 
include— 
‘‘(i) any trade or business which in-
cludes, in whole or in part, any private or 
commercial golf course, country club, mas-
sage parlor, hot tub facility, suntan facil-
ity, racetrack or other facility used for 
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gambling, or any store the principal busi-
ness of which is the sale of alcoholic bev-
erages for consumption off premises, or 
‘‘(ii) any trade or business with re-
spect to which records are required under 
section 2257 of title 18, United States 
Code, to be maintained with respect to any 
performer. 
‘‘(C) GROSS REVENUE TEST.— 
‘‘(i) IN GENERAL.—A trade or busi-
ness meets the gross revenue test of this 
subparagraph for any taxable year if the 
average annual gross revenue of the trade 
or business for the 3-taxable year period 
ending with the taxable year does not ex-
ceed $1,000,000. 
‘‘(ii) AGGREGATION RULES.—All per-
sons treated as a single employer under 
subsection (a) or (b) or section 52 or sub-
section (m) or (o) of section 414 shall be 
treated as a trade or business for purposes 
of clause (i). 
‘‘(iii) SPECIAL RULES FOR ENTITIES 
NOT
IN
EXISTENCE
FOR
ENTIRE
3-YEAR 
PERIOD, ETC.—Rules similar to the rules 
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of subparagraphs (A), (B), and (D) of sec-
tion 448(c)(3) shall apply for purposes of 
this subparagraph. 
‘‘(D) SELF-EMPLOYED INDIVIDUALS.—For 
purposes of this paragraph, if, with respect to 
a trade or business, an individual is treated as 
an employee under section 401(c), such indi-
vidual shall be treated as an employee of such 
trade or business for purposes of the preceding 
sentence. 
‘‘(E) 
FULL-TIME
EQUIVALENT
EM-
PLOYEE.—For purposes of this paragraph— 
‘‘(i) IN
GENERAL.—The term ‘full- 
time equivalent employee’ means a number 
of employees equal to the number deter-
mined by dividing— 
‘‘(I) the total number of hours of 
service for which wages were paid by 
the employer to employees during the 
taxable year, by 
‘‘(II) 2,080. 
Such number shall be rounded to the next 
lowest whole number if not otherwise a 
whole number. 
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‘‘(ii) EXCESS
HOURS
NOT
COUNT-
ED.—If an employee works in excess of 
2,080 hours of service during any taxable 
year, such excess shall not be taken into 
account under clause (i). 
‘‘(iii) HOURS OF SERVICE.—The Sec-
retary, in consultation with the Secretary 
of Labor, shall prescribe such regulations, 
rules, and guidance as may be necessary to 
determine the hours of service of an em-
ployee, including rules for the application 
of this paragraph to employees who are not 
compensated on an hourly basis. 
‘‘(4) DISTRESSED RURAL AREA.— 
‘‘(A) IN GENERAL.—The term ‘distressed 
rural area’ means any area in the United 
States— 
‘‘(i) that has lost at least 5 percent of 
its population over the last 10 years, 
‘‘(ii) that lost at least 10 percent if its 
population over the last 20 years, 
‘‘(iii) that has median family income 
below 85 percent of the national median 
family income, 
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‘‘(iv) that has a poverty rate that ex-
ceeds 12.5 percent, or 
‘‘(v) where average unemployment in 
the preceding year exceeds 125 percent of 
the national average. 
‘‘(B) EXCEPTION.—Such term does not in-
clude any area which is— 
‘‘(i) a city or town that has a popu-
lation of more than 50,000 inhabitants, or 
‘‘(ii) an urbanized area contiguous 
and adjacent to a city or town described in 
clause (i). 
‘‘(C) RELEVANT
SOURCES
OF
INFORMA-
TION.—In determining whether an area is a 
distressed rural area under subparagraph (A) 
or (B), such determination shall be made in ac-
cordance with the most recent information from 
the Bureau of the Census, the Bureau of Labor 
Statistics, or other government entity with rel-
evant information. 
‘‘(5) RELATED
PERSONS.—A person shall be 
treated as related to another person if the relation-
ship between such persons would result in the dis-
allowance of losses under section 267 or 707(b) (but, 
in applying section 267 (b) and (c) for purposes of 
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this section, paragraph (4) of section 267(c) shall be 
treated as providing that the family of an individual 
shall include only his spouse, ancestors, and lineal 
descendants). 
‘‘(d) MATERIAL PARTICIPATION.—No amount shall 
be allowed as a credit under subsection (a) to a taxpayer 
unless that taxpayer materially participates in the quali-
fied rural microbusiness with respect to which the quali-
fied expenditure is paid or incurred. For purposes of the 
preceding sentence, material participation shall be deter-
mined under rules similar to the rules of section 469(h). 
‘‘(e) DENIAL OF DOUBLE BENEFIT.—No deduction 
or credit shall be allowed under any other provision of this 
chapter for any amount taken into account in determining 
the credit under this section. 
‘‘(f) OTHER RULES.— 
‘‘(1) MARRIED COUPLE MUST FILE JOINT RE-
TURN.—Rules similar to the rules of paragraphs (2), 
(3), and (4) of section 21(e) shall apply for purposes 
of this section. 
‘‘(2) DENIAL OF CREDIT TO DEPENDENTS.—No 
credit shall be allowed under this section to any indi-
vidual with respect to whom a deduction is allowed 
under section 151 is allowable to another taxpayer 
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for a taxable year beginning in the calendar year in 
which such individual’s calendar year begins.’’. 
(b) CREDIT ALLOWED AS PART OF GENERAL BUSI-
NESS CREDIT.—Section 38(b) of such Code (defining cur-
rent year business credit) is amended by striking ‘‘plus’’ 
at the end of paragraph (35), by striking the period at 
the end of paragraph (36) and inserting ‘‘, plus’’, and by 
adding at the end the following new paragraph: 
‘‘(37) the rural microbusiness investment credit 
determined under section 45R(a).’’. 
(c) CARRYOVER OF UNUSED CREDIT.—Subsection 
(a) of section 39 of such Code is amended by adding at 
the end the following new paragraph: 
‘‘(4) 5-YEAR
CARRYBACK
FOR
RURAL
MICRO-
BUSINESS
INVESTMENT
CREDIT.—Notwithstanding 
subsection (d), in the case of the rural microbusiness 
investment credit— 
‘‘(A) this section shall be applied sepa-
rately from the business credit and the mar-
ginal oil and gas well production credit (other 
than the rural microbusiness investment credit), 
‘‘(B) paragraph (1) shall be applied by 
substituting ‘each of the 5 taxable years’ for 
‘the taxable year’ in subparagraph (A) thereof, 
and 
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‘‘(C) paragraph (2) shall be applied— 
‘‘(i) by substituting ‘25 taxable years’ 
for ‘21 taxable years’ in subparagraph (A) 
thereof, and 
‘‘(ii) by substituting ‘24 taxable years’ 
for ‘20 taxable years’ in subparagraph (B) 
thereof.’’. 
(d) CONFORMING AMENDMENT.—The table of sec-
tions for subpart D of part IV of subchapter A of chapter 
1 of such Code is amended by adding at the end the fol-
lowing new item: 
‘‘Sec. 45S. Rural microbusiness investment credit.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to expenditures made in taxable 
years beginning after the date of the enactment of this 
Act. 
Æ 
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