I 
108TH CONGRESS 
1ST SESSION H. R. 1686
To reward the hard work and risk of individuals who choose to live in 
and help preserve America’s small, rural towns, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
APRIL 9, 2003
Mr. CARSON of Oklahoma introduced the following bill; which was referred to 
the Committee on Ways and Means, and in addition to the Committees 
on Education and the Workforce, and Agriculture, for a period to be sub-
sequently determined by the Speaker, in each case for consideration of 
such provisions as fall within the jurisdiction of the committee concerned 
A BILL 
To reward the hard work and risk of individuals who choose 
to live in and help preserve America’s small, rural towns, 
and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘New Homestead Economic Opportunity Act’’. 
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986. 
(c) TABLE OF CONTENTS.—The table of contents for 
this Act is as follows:
Sec. 1. Short title; etc. 
TITLE I—NEW HOMESTEAD OPPORTUNITIES 
Sec. 101. Loans for leadership initiative. 
Sec. 102. Credit for certain rural homebuyers. 
Sec. 103. Capital loss deduction allowed with respect to sale or exchange of 
principal residence in certain rural areas. 
Sec. 104. Individual homestead accounts. 
TITLE II—INCENTIVES FOR MAIN STREET BUSINESSES 
Sec. 201. Rural investment tax credit. 
Sec. 202. Accelerated depreciation for rural investment property. 
TITLE III—NEW HOMESTEAD VENTURE CAPITAL FUND 
Sec. 301. New homestead venture capital fund.
TITLE I—NEW HOMESTEAD 
OPPORTUNITIES 
SEC. 101. LOANS FOR LEADERSHIP INITIATIVE. 
(a) DEFINITIONS.—In this section: 
(1) DEGREE.—The term ‘‘degree’’ means an as-
sociate’s or bachelor’s degree awarded by an institu-
tion of higher education. 
(2) INSTITUTION OF HIGHER EDUCATION.—The 
term ‘‘institution of higher education’’ has the 
meaning given the term in section 101 of the Higher 
Education Act of 1965 (20 U.S.C. 1001).
(3) 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 enact-
ment of this Act, has a net out-migration of in-
habitants from the county of at least 10 percent 
of the population of the county at the beginning 
of such period. 
(4) SECRETARY.—The term ‘‘Secretary’’ means 
the Secretary of Education. 
(b) PROGRAM.—
(1) IN
GENERAL.—The Secretary shall carry 
out a program of assuming the obligation to repay, 
pursuant to subsection (c), a loan made, insured, or 
guaranteed under part B, D, or E of title IV of the 
Higher Education Act of 1965 (20 U.S.C. 1071 et 
seq., 20 U.S.C. 1087a et seq., and 20 U.S.C. 
1087aa et seq.), excluding loans made under section 
428B of such Act or comparable loans made under 
part D of such Act, for any borrower who—
(A) completes a degree; 
(B) resides in a qualifying county; and
(C) is employed in a qualifying county. 
(2) REGULATIONS.—The Secretary is author-
ized to prescribe such regulations as may be nec-
essary to carry out the provisions of this section. 
(c) LOAN REPAYMENT.—
(1) IN GENERAL.—The Secretary shall assume 
the obligation to repay, after each of the first 5 
years of the residency and employment described in 
subparagraphs (B) and (C) of subsection (b)(1) that 
occur after the date of enactment of this section, the 
percentage described in paragraph (2) of the total 
amount of all loans made to a student under the 
provisions of the Higher Education Act of 1965 as 
described in subsection (b)(1), up to a maximum 
amount of $3,000 each year. 
(2) PERCENTAGES.—The percentage of repay-
ment under paragraph (1) shall be—
(A) 7.5 percent of the total amount for 
each of the first and second years; 
(B) 10 percent of the total amount for 
each of the third and fourth years; and 
(C) 15 percent of the total amount for the 
fifth year.
(3) CONSTRUCTION.—Nothing in this section 
shall be construed to authorize the refunding of any
repayment of a loan made under part B, D, or E 
of title IV of the Higher Education Act of 1965. 
(4) INTEREST.—If a portion of a loan is repaid 
by the Secretary under this section for any year, the 
proportionate amount of interest on such loan which 
accrues for such year shall be repaid by the Sec-
retary so long as the total amount repaid by the 
Secretary in any 1 year does not exceed $3,000. 
(d) REPAYMENT TO ELIGIBLE LENDERS.—The Sec-
retary shall pay to each eligible lender or holder for each 
fiscal year an amount equal to the aggregate amount of 
loans which are subject to repayment pursuant to this sec-
tion for such year. 
(e) APPLICATION FOR REPAYMENT.—
(1) IN GENERAL.—An eligible borrower desiring 
loan repayment under this section shall submit a 
complete and accurate application to the Secretary 
at such time, in such manner, and containing such 
information as the Secretary may require. 
(2) CONDITIONS.—An eligible borrower may 
apply for loan repayment under this section after 
completing each year of qualifying residency and em-
ployment. The eligible borrower shall receive forbear-
ance while engaged in qualifying residency and em-
ployment unless the borrower is in deferment while 
so engaged. 
(f) DEFINITION OF ELIGIBLE BORROWER.—In this 
section the term ‘‘eligible borrower’’ means any borrower 
who is not in default on any of the borrower’s student 
loans under part B, D, or E of title IV of the Higher 
Education Act of 1965. 
(g) AUTHORIZATION OF APPROPRIATIONS.—
(1) LOAN REPAYMENT.—There are authorized 
to be appropriated to carry out this section such 
sums as may be necessary for fiscal year 2003 and 
each of the 5 succeeding fiscal years. 
(2) PERKINS LOAN FUNDS.—There are author-
ized to be appropriated such sums as may be nec-
essary for fiscal year 2003 and each of the 5 suc-
ceeding fiscal years for Federal capital contributions 
to student loan funds established under part E of 
title IV of the Higher Education Act of 1965. 
(h) REPAYMENT
EXCLUDED
FROM
GROSS
IN-
COME.—Section 108(f)(1) (relating to student loans) is 
amended by inserting ‘‘or pursuant to section 101 of the 
New Homestead Economic Opportunity Act’’ after ‘‘em-
ployers’’.
SEC. 102. CREDIT FOR CERTAIN RURAL HOMEBUYERS. 
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 (relating to nonrefundable personal 
credits) is amended by inserting before section 26 the fol-
lowing: 
‘‘SEC. 25C. PURCHASE OF RESIDENCES BY CERTAIN RURAL 
HOMEBUYERS. 
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual who purchases a qualified residence in a quali-
fying county during any taxable year, there shall be al-
lowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to the lesser of—
‘‘(1) 10 percent of the purchase price of the 
residence, or 
‘‘(2) $5,000. 
‘‘(b) LIMITATIONS.—
‘‘(1) LIMITATION
BASED
ON
AMOUNT
OF 
TAX.—The credit allowed under subsection (a) for 
any taxable year shall not exceed the excess of—
‘‘(A) the sum of the regular tax liability 
(as defined in section 26(b)) plus the tax im-
posed by section 55, over 
‘‘(B) the sum of the credits allowable 
under this subpart (other than this section and 
section 23) and section 27 for the taxable year.
‘‘(2) MARRIED INDIVIDUALS FILING JOINTLY.—
In the case of a husband and wife who file a joint 
return, the credit under this section is allowable only 
if the residence is a qualified residence with respect 
to both the husband and wife, and the amount speci-
fied under subsection (a)(2) shall apply to the joint 
return. 
‘‘(3) MARRIED
INDIVIDUALS
FILING
SEPA-
RATELY.—In the case of a married individual filing 
a separate return, subsection (a)(2) shall be applied 
by substituting ‘$2,500’ for ‘$5,000’. 
‘‘(4) OTHER TAXPAYERS.—If 2 or more individ-
uals who are not married purchase a qualified resi-
dence, the amount of the credit allowed under sub-
section (a) shall be allocated among such individuals 
in such manner as the Secretary may prescribe, ex-
cept that the total amount of the credits allowed to 
all such individuals shall not exceed $5,000. 
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED RESIDENCE.—The term ‘quali-
fied residence’ has the same meaning as when used 
in section 163(h). 
‘‘(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. 
‘‘(3) PURCHASE AND PURCHASE PRICE.—The 
terms ‘purchase’ and ‘purchase price’ have the 
meanings provided by section 1400C(e). 
‘‘(d) CARRYFORWARD OF UNUSED CREDIT.—If the 
credit allowable under subsection (a) for any taxable year 
exceeds the limitation imposed by subsection (b)(1) for 
such taxable year reduced by the sum of the credits allow-
able under this subpart (other than this section and sec-
tion 23), such excess shall be carried to the succeeding 
taxable year and added to the credit allowable under sub-
section (a) for such taxable year. 
‘‘(e) REPORTING.—If the Secretary requires informa-
tion reporting under section 6045 by a person described 
in subsection (e)(2) thereof to verify the eligibility of tax-
payers for the credit allowable by this section, the excep-
tion provided by section 6045(e)(5) shall not apply.
‘‘(f) RECAPTURE OF CREDIT IN CASE OF CERTAIN 
SALES.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (5), if the taxpayer disposes of a qualified res-
idence with respect to the purchase of which a credit 
was allowed under subsection (a) at any time within 
5 years after the date the taxpayer acquired the 
property, then the tax imposed under this chapter 
for the taxable year in which the disposition occurs 
is increased by the credit recapture amount. 
‘‘(2) CREDIT RECAPTURE AMOUNT.—For pur-
poses of paragraph (1), the credit recapture amount 
is an amount equal to the sum of—
‘‘(A) the applicable recapture percentage of 
the amount of the credit allowed to the tax-
payer under this section, plus 
‘‘(B) interest at the overpayment rate es-
tablished under section 6621 on the amount de-
termined under subparagraph (A) for each 
prior taxable year for the period beginning on 
the due date for filing the return for the prior 
taxable year involved. 
No deduction shall be allowed under this chapter for 
interest described in subparagraph (B). 
‘‘(3) APPLICABLE RECAPTURE PERCENTAGE.—
‘‘(A) IN GENERAL.—For purposes of this 
subsection, the applicable recapture percentage 
shall be determined from the following table:
The applicable 
recapture 
‘‘If the sale occurs in: 
percentage is: 
Year 1 ........................................................................
100
Year 2 ........................................................................
Year 3 ........................................................................
Year 4 ........................................................................
Year 5 ........................................................................
Years 6 and thereafter ..............................................
0.
‘‘(B) YEARS.—For purposes of subpara-
graph (A), year 1 shall begin on the first day 
of the taxable year in which the purchase of the 
qualified residence described in subsection (a) 
occurs. 
‘‘(4) NO CREDITS AGAINST TAX.—Any increase 
in tax under this subsection shall not be treated as 
a tax imposed by this chapter for purposes of deter-
mining the amount of any credit under this chapter 
or for purposes of section 55. 
‘‘(5) DEATH OF OWNER; CASUALTY LOSS; IN-
VOLUNTARY CONVERSION; ETC.—The provisions of 
paragraph (1) do not apply to—
‘‘(A) a disposition of a qualified residence 
made on account of the death of any individual 
having a legal or equitable interest therein oc-
curring during the 5-year period to which ref-
erence is made under paragraph (1),
‘‘(B) a disposition of the old qualified resi-
dence if it is substantially or completely de-
stroyed by a casualty described in section 
165(c)(3) or compulsorily or involuntarily con-
verted (within the meaning of section 1033(a)), 
or 
‘‘(C) a disposition pursuant to a settlement 
in a divorce or legal separation proceeding 
where the qualified residence is sold or the 
other spouse retains such residence. 
‘‘(g) BASIS ADJUSTMENT.—For purposes of this sub-
title, if a credit is allowed under this section with respect 
to the purchase of any residence, the basis of such resi-
dence shall be reduced by the amount of the credit so al-
lowed.’’. 
(b) CONFORMING AMENDMENTS.—
(1) Subsection (a) of section 1016 (relating to 
general rule for adjustments to basis) is amended by 
striking ‘‘and’’ at the end of paragraph (26), by 
striking the period at the end of paragraph (27) and 
inserting ‘‘, and’’, and by adding at the end the fol-
lowing new paragraph: 
‘‘(28) in the case of a residence with respect to 
which a credit was allowed under section 25C, to the 
extent provided in section 25C(g).’’.