I 
109TH CONGRESS 
2D SESSION 
H. R. 4854 
To amend the Internal Revenue Code of 1986 to exclude from gross income 
interest received on loans secured by agricultural real estate and rural 
housing. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 2, 2006 
Mr. LEWIS of Kentucky (for himself and Mr. OSBORNE) 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 exclude 
from gross income interest received on loans secured 
by agricultural real estate and rural housing. 
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 Communities 
Investment Act of 2006’’. 
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SEC. 2. EXCLUSION FOR INTEREST ON LOANS SECURED BY 
AGRICULTURAL REAL ESTATE AND RURAL 
HOUSING . 
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to 
items specifically excluded from gross income) is amended 
by inserting after section 139A the following new section: 
‘‘SEC. 139B. INTEREST ON LOANS SECURED BY AGRICUL-
TURAL REAL ESTATE AND RURAL HOUSING. 
‘‘(a) EXCLUSION.—Gross income shall not include in-
terest received by a qualified lender on any qualified real 
estate loan. 
‘‘(b) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
‘‘(1) QUALIFIED LENDER.—The term ‘qualified 
lender’ means any bank or savings association the 
deposits of which are insured under the Federal De-
posit Insurance Act (12 U.S.C. 1811 et seq.). 
‘‘(2) QUALIFIED
REAL
ESTATE
LOAN.—The 
term ‘qualified real estate loan’ means— 
‘‘(A) any indebtedness (including the refi-
nancing of indebtedness) secured by agricul-
tural real estate or by a leasehold mortgage 
(with a status as a lien) on agricultural real es-
tate, or 
‘‘(B) any indebtedness— 
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‘‘(i) acquired for the purpose of pur-
chasing or improving rural housing, and 
‘‘(ii) secured by such rural housing or 
by a leasehold mortgage (with a status as 
a lien) on such rural housing. 
‘‘(3) AGRICULTURAL REAL ESTATE.— 
‘‘(A) IN GENERAL.—The term ‘agricultural 
real estate’ means real property used or avail-
able for the production of 1 or more agricul-
tural products. 
‘‘(B) WHEN DETERMINATION MADE.—For 
purposes of subparagraph (A), the determina-
tion of whether property securing any indebted-
ness is agricultural real estate shall be made as 
of the time the interest income on such indebt-
edness accrues. 
‘‘(4) RURAL HOUSING.— 
‘‘(A) IN GENERAL.—The term ‘rural hous-
ing’ means any single family residence which is 
located in a rural area and which is the prin-
cipal residence (within the meaning of section 
121) of the borrower. 
‘‘(B) WHEN DETERMINATION MADE.—The 
determination of whether property qualifies as 
rural housing with respect to any indebtedness 
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shall be made as of the date such indebtedness 
originates. 
‘‘(5) RURAL
AREA.—The term ‘rural area’ 
means an area (as determined by the Secretary of 
Agriculture) which is not within a metropolitan sta-
tistical area (as defined by the Office of Manage-
ment and Budget) and which has a population (de-
termined on the basis of the most recent decennial 
census for which date are available) of 2,500 or less. 
‘‘(c) COORDINATION WITH SECTION 265.—For pur-
poses of this section, the rules of section 265 shall apply, 
as follows: 
‘‘(1) IN GENERAL.—Qualified real estate loans 
shall be treated as an obligation described in section 
265(a)(2). 
‘‘(2) PRO RATA ALLOCATION OF INTEREST EX-
PENSE
OF
FINANCIAL
INSTITUTIONS
TO
TAX-EX-
EMPT INTEREST.—In applying section 265(b)— 
‘‘(A) the term ‘tax-exempt obligation’, as 
defined in paragraph (4)(B) thereof, shall in-
clude a qualified real estate loan, 
‘‘(B) the term ‘financial institution’, as de-
fined in paragraph (5) thereof, shall include a 
qualified lender, and 
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‘‘(C) the term ‘qualified tax-exempt obliga-
tion’, as defined in paragraph (3)(B) thereof, 
shall include a qualified real estate loan made 
after December 31, 2005, to a qualified small 
borrower. 
For purposes of subparagraph (C), the term ‘quali-
fied small borrower’ means, with respect to qualified 
real estate loans received during any calendar year, 
any borrower if the reasonably anticipated amount 
of qualified real estate loans which will be received 
by such borrower during such calendar year does not 
exceed $10,000,000.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for such part III is amended by inserting after the item 
relating to section 139A the following new item: 
‘‘Sec. 139B. Interest on loans secured by agricultural real estate and rural 
housing.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
Æ 
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