I
108TH CONGRESS
1ST SESSION
H. R. 2194
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
MAY 21, 2003
Mr. POMEROY (for himself and Mr. OSBORNE) introduced the following bill;
which was referred to the Committee on Ways and Means, and in addi-
tion to the Committees on Education and the Workforce, and Agriculture,
for a period to be subsequently 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 Act of 2003’’.
(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. Qualified rural small business investment credit.
Sec. 203. 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, 10
percent of the total amount of all loans made to a
student under the provisions of the Higher Edu-
cation Act of 1965 as described in subsection (b)(1),
up to a maximum amount of $2,000 each year.
(2) 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.
(3) 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 $2,000.
(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.
(2) PERKINS LOAN FUNDS.—There are author-
ized to be appropriated such sums as may be nec-
essary 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 Act of 2003’’ after ‘‘employers’’.
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 (27), by
striking the period at the end of paragraph (28) and
inserting ‘‘, and’’, and by adding at the end the fol-
lowing:
‘‘(29) 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).’’.
(2) Section 24(b)(3)(B), as amended by the Job
Creation and Worker Assistance Act of 2002, is
amended by striking ‘‘23 and 25B’’ and inserting
‘‘23, 25B, and 25C’’.
(3) Section 25(e)(1)(C) is amended by striking
‘‘23 and 1400C’’ and by inserting ‘‘23, 25C, and
1400C’’.
(4) Section 25(e)(1)(C), as amended by the Job
Creation and Worker Assistance Act of 2002, is
amended by inserting ‘‘25C,’’ after ‘‘25B,’’.
(5) Section 25B(g), as amended by the Job
Creation and Worker Assistance Act of 2002, is
amended by striking ‘‘section 23’’ and inserting
‘‘sections 23 and 25C’’.
(6) Section 26(a)(1), as amended by the Job
Creation and Worker Assistance Act of 2002, is
amended by striking ‘‘and 25B’’ and inserting ‘‘25B,
and 25C’’.
(7) Section 1400C(d) is amended by inserting
‘‘and section 25C’’ after ‘‘this section’’.
(8) Section 1400C(d), as amended by the Job
Creation and Worker Assistance Act of 2002, is
amended by striking ‘‘and 25B’’ and inserting ‘‘25B,
and 25C’’.
(9) The table of sections for subpart A of part
IV of subchapter A of chapter 1 is amended by in-
serting before the item relating to section 26 the fol-
lowing:
‘‘Sec. 25C. Purchase of residences by certain rural homebuyers.’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
subsections (a) and (b)(9) shall apply to purchases
after the date of the enactment of this Act, in tax-
able years ending after such date.
(2) TEMPORARY CONFORMING AMENDMENTS.—
The amendments made by paragraphs (3) and (7) of
subsection (b) shall apply to taxable years ending be-
fore January 1, 2004.
(3) PERMANENT CONFORMING AMENDMENTS.—
The amendments made by paragraphs (1), (2), (4),
(5), (6), and (8) of subsection (b) shall apply to tax-
able years beginning after December 31, 2003.
SEC. 103. CAPITAL LOSS DEDUCTION ALLOWED WITH RE-
SPECT TO SALE OR EXCHANGE OF PRINCIPAL
RESIDENCE IN CERTAIN RURAL AREAS.
(a) IN GENERAL.—Subsection (c) of section 165 (re-
lating to limitation on losses of individuals) is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(2),
(2) by striking the period at the end of para-
graph (3) and inserting ‘‘; and’’, and
(3) by adding at the end the following:
‘‘(4) losses arising from the sale or exchange of
the principal residence (within the meaning of sec-
tion 121) of the taxpayer located in a qualifying
county (as defined in section 223(b)(2)), but only if
the principal residence was acquired by the taxpayer
after the date of enactment of this paragraph.’’.
(b) CONFORMING AMENDMENT.—Section 67(b)(3) is
amended by striking ‘‘paragraph (2) or (3)’’ and inserting
‘‘paragraph (2), (3), or (4)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to sales and exchanges after the
date of the enactment of this Act, in taxable years ending
after such date.
SEC. 104. INDIVIDUAL HOMESTEAD ACCOUNTS.
(a) IN GENERAL.—Subchapter F of chapter 1 (relat-
ing to exempt organizations) is amended by adding at the
end the following:
‘‘PART IX—INDIVIDUAL HOMESTEAD ACCOUNTS
‘‘Sec. 530A. Individual homestead accounts.
‘‘SEC. 530A. INDIVIDUAL HOMESTEAD ACCOUNTS.
‘‘(a) GENERAL RULE.—An individual homestead ac-
count shall be exempt from taxation under this subtitle.
Notwithstanding the preceding sentence, any individual
homestead account shall be subject to the taxes imposed
by section 511 (relating to imposition of tax on unrelated
business income of charitable, etc., organizations).
‘‘(b) INDIVIDUAL HOMESTEAD ACCOUNT.—For pur-
poses of this title, the term ‘individual homestead account’
means a trust created or organized in the United States
for the exclusive benefit of a qualified individual or his
beneficiaries, but only if the written governing instrument
creating the trust meets the following requirements:
‘‘(1) Except in the case of a qualified rollover
(as defined in subsection (f)(7))—
‘‘(A) no contribution will be accepted un-
less it is in cash;
‘‘(B) contributions will not be accepted for
the taxable year in excess of $2,500 (deter-
mined without regard to any contribution made
under subsection (d)); and
‘‘(C) contributions will not be accepted for
any taxable year following the fifth taxable year
in which the qualified individual has contributed
to any individual homestead account.
‘‘(2) The requirements of paragraphs (2)
through (6) of section 408(a) are met.
‘‘(c) QUALIFIED INDIVIDUAL; QUALIFYING COUN-
TY.—For purposes of this section—
‘‘(1) QUALIFIED INDIVIDUAL.—The term ‘quali-
fied individual’ means, for any taxable year, an indi-
vidual who is a bona fide resident of a qualifying
county.
‘‘(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.
‘‘(d) MATCHING CONTRIBUTIONS
TO INDIVIDUAL
HOMESTEAD ACCOUNTS.—
‘‘(1) IN GENERAL.—Not less than once each
taxable year, the Secretary shall deposit (to the ex-
tent provided in appropriation Acts) into an indi-
vidual Homestead account of each qualified indi-
vidual an amount equal to the applicable percentage
of the sum of the amounts deposited into all of the
individual homestead accounts of such individual
during such taxable year (determined without regard
to any amount contributed under this subsection).
‘‘(2) APPLICABLE PERCENTAGE.—For purposes
of this subsection, the applicable percentage with re-
spect to any qualified individual for any taxable year
shall be determined in accordance with the following
tables:
‘‘If modified adjusted gross
income is:
The applicable percentage is:
$30,000 or less ...................................................................................
100
Over $30,000 but not over $60,000 ..................................................
Over $60,000 but not over $100,000 ................................................
Over $100,000 ...................................................................................
zero.
‘‘(A) In the case of a head of household (as
defined in section 2(b)):
‘‘If modified adjusted gross
income is:
The applicable percentage is:
$22,500 or less ...................................................................................
100
Over $22,500 but not over $45,000 ..................................................
Over $45,000 but not over $75,000 ..................................................
Over $75,000 .....................................................................................
zero.
‘‘(B) In the case of any other individual:
‘‘If modified adjusted gross
income is:
The applicable percentage is:
$15,000 or less ...................................................................................
100
Over $15,000 but not over $30,000 ..................................................
Over $30,000 but not over $50,000 ..................................................
Over $50,000 .....................................................................................
zero.
For purposes of this paragraph, the term ‘modified
adjusted gross income’ has the meaning given such
term by section 86(b)(2).
‘‘(3) EXCLUSION
FROM
INCOME.—Except as
otherwise provided in this section, gross income shall
not include any amount deposited into an individual
homestead account under paragraph (1).
‘‘(4) FORFEITURE
OF
MATCHING
CONTRIBU-
TIONS IN THE CASE OF CERTAIN DISTRIBUTIONS.—
In the event of a distribution from an individual
homestead account before the date described in sub-
section (f)(1)(A) (other than a distribution described
in subsection (e)(2)(A)), the account holder shall
forfeit the corresponding matching contributions and
interest earned on the matching contributions, un-
less such distribution is recontributed to such ac-
count within 6 months of such distribution.
‘‘(e) TAX TREATMENT OF DISTRIBUTIONS.—
‘‘(1) INCLUSION
OF
AMOUNTS
IN
GROSS
IN-
COME.—Except as otherwise provided in this sub-
section, any amount paid or distributed out of an in-
dividual homestead account shall be includible in the
gross income of the payee or distributee, as the case
may be, in the manner as provided in section 72.
For purposes of the preceding 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) EXCLUSION OF CATASTROPHIC MEDICAL
EXPENSE DISTRIBUTIONS IN FIRST FIVE YEARS AND
QUALIFIED INDIVIDUAL HOMESTEAD DISTRIBUTIONS
THEREAFTER.—Paragraph (1) shall not apply to—
‘‘(A) any distribution described in section
72(t)92)(B) before the date described in sub-
section (f)(1)(A), but only to the extent such
distribution does not exceed the balance in the
account as of the date of such distribution, re-
duced by any matching contribution under sub-
section (d), and
‘‘(B) any qualified individual homestead
distribution.
‘‘(f) QUALIFIED INDIVIDUAL HOMESTEAD DISTRIBU-
TION.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified indi-
vidual homestead distribution’ means any amount
paid or distributed out of an individual homestead
account which would otherwise be includible in gross
income, to the extent that such payment or
distribution—
‘‘(A) is paid or distributed after the 5-tax-
able year period beginning with the first taxable
year in which the qualified individual made a
contribution to the individual homestead ac-
count (including any predecessor account), and
‘‘(B) is used exclusively to pay qualified in-
dividual homestead expenses for the qualified
individual or the spouse or dependent (as de-
fined in section 152) of such individual.
‘‘(2) QUALIFIED INDIVIDUAL HOMESTEAD EX-
PENSES.—The term ‘qualified individual homestead
expenses’ means any of the following:
‘‘(A) Qualified higher education expenses.
‘‘(B) Qualified first-time homebuyer costs.
‘‘(C) 
Qualified 
business 
capitalization
costs.
‘‘(D) Qualified medical expenses.
‘‘(E) Qualified rollovers.
‘‘(3) QUALIFIED
HIGHER
EDUCATION
EX-
PENSES.—
‘‘(A) IN
GENERAL.—The term ‘qualified
higher education expenses’ has the meaning
given such term by section 72(t)(7), determined
by treating postsecondary vocational edu-
cational schools as eligible educational institu-
tions.
‘‘(B) POSTSECONDARY VOCATIONAL EDU-
CATION SCHOOL.—The term ‘postsecondary vo-
cational educational school’ means an area vo-
cational education school (as defined in sub-
paragraph (C) or (D) of section 521(4) of the
Carl D. Perkins Vocational and Applied Tech-
nology Education Act (20 U.S.C. 2471(4)))
which is in any State (as defined in section
521(33) of such Act), as such sections are in
effect on the date of the enactment of this sec-
tion.
‘‘(C) COORDINATION WITH OTHER BENE-
FITS.—The amount of qualified higher edu-
cation expenses for any taxable year shall be re-
duced as provided in section 25A(g)(2).
‘‘(4) 
QUALIFIED
FIRST-TIME
HOMEBUYER
COSTS.—The term ‘qualified first-time homebuyer
costs’ means qualified acquisition costs (as defined
in section 72(t)(8) without regard to subparagraph
(B) thereof) with respect to a principal residence
(within the meaning of section 121) located in a
qualifying county for a qualified first-time home-
buyer (as defined in section 72(t)(8)).
‘‘(5) QUALIFIED
BUSINESS
CAPITALIZATION
COSTS.—
‘‘(A) IN
GENERAL.—The term ‘qualified
business capitalization costs’ means qualified
expenditures for the capitalization of a qualified
business pursuant to a qualified plan.
‘‘(B) 
QUALIFIED
EXPENDITURES.—The
term ‘qualified expenditures’ means expendi-
tures included in a qualified plan, including
capital, plant, equipment, working capital, and
inventory expenses.
‘‘(C) QUALIFIED
BUSINESS.—The term
‘qualified business’ means any trade or business
located in a qualifying county other than any
trade or business—
‘‘(i) which consists of the operation of
any 
facility 
described 
in 
section
144(c)(6)(B), or
‘‘(ii) which contravenes any law.
Rules similar to the rules under subsection (b)
or (c) of section 1397C shall apply to any quali-
fied business under this section.
‘‘(D) QUALIFIED PLAN.—The term ‘quali-
fied plan’ means a business plan which meets
such requirements as the Secretary may specify.
‘‘(6) QUALIFIED
MEDICAL
EXPENSES.—The
term ‘qualified medical expenses’ means any amount
paid during the taxable year, not compensated for by
insurance or otherwise, for medical care (as defined
in section 213(d)) of the taxpayer, his spouse, or his
dependent (as defined in section 152).
‘‘(7) QUALIFIED ROLLOVERS.—The term ‘quali-
fied rollover’ means any amount paid from an indi-
vidual homestead account of a taxpayer into another
such account established for the benefit of—
‘‘(A) such taxpayer, or
‘‘(B) any qualified individual who is—
‘‘(i) the spouse of such taxpayer, or
‘‘(ii) any dependent (as defined in sec-
tion 152) of the taxpayer.
Rules similar to the rules of section 408(d)(3) shall
apply for purposes of this paragraph.
‘‘(g) TAX TREATMENT OF ACCOUNTS.—
‘‘(1) LOSS OF EXEMPTION IN CASE OF PROHIB-
ITED TRANSACTIONS.—For purposes of this section,
rules similar to the rules of section 408(e) shall
apply.
‘‘(2) OTHER RULES TO APPLY.—Rules similar
to the rules of paragraphs (4), (5), and (6) of sec-
tion 408(d) shall apply for purposes of this section.
‘‘(h) OTHER DEFINITIONS AND SPECIAL RULES.—
For purposes of this section—
‘‘(1) ALL
ACCOUNTS
TREATED
AS
ONE
AC-
COUNT.—All individual homestead accounts of a
qualified individual shall be treated as 1 account.
‘‘(2) TIME
WHEN
CONTRIBUTIONS
DEEMED
MADE.—A taxpayer shall be deemed to have made a
contribution to an individual homestead account on
the last day of the preceding taxable year if the con-
tribution is made on account of such taxable year
and is made not later than the time prescribed by
law for filing the return for such taxable year (not
including extensions thereof).
‘‘(3) CUSTODIAL ACCOUNTS.—Rules similar to
the rules of section 408(h) shall apply.
‘‘(4) REPORTS.—The trustee of an individual
homestead account shall make such reports regard-
ing such account to the Secretary and to the indi-
‘‘(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