I
104TH CONGRESS
1ST SESSION
H. R. 2590
To better target loans to family farmers and income-producing activities,
to provide for the improved management of the portfolio of loans made
under the Consolidated Farm and Rural Development Act, to assure
the prompt repayment of such loans, and to consolidate Federal rural
development programs into a single program of capitalization grants
to States for rural development, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
NOVEMBER 7, 1995
Mr. ALLARD (for himself and Mr. ROBERTS) introduced the following bill;
which was referred to the Committee on Agriculture
A BILL
To better target loans to family farmers and income-produc-
ing activities, to provide for the improved management
of the portfolio of loans made under the Consolidated
Farm and Rural Development Act, to assure the prompt
repayment of such loans, and to consolidate Federal
rural development programs into a single program of
capitalization grants to States for rural development,
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; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Farm Credit and Rural Development Reform Act of
1995’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
Subtitle A—Agricultural Credit
CHAPTER 1—AMENDMENTS TO THE CONSOLIDATED FARM AND
RURAL DEVELOPMENT ACT
Sec. 101. References.
Sec. 102. Redirection of resources to family farmers.
Sec. 103. Redirection of resources to income-producing activities.
Sec. 104. Improvement of loan portfolio management.
Sec. 105. Assuring prompt repayment of loans.
Sec. 106. Modification of programs for beginning farmers.
Sec. 107. Elimination of target participation rates.
Sec. 108. Miscellaneous and conforming amendments.
CHAPTER 2—AMENDMENTS TO THE FARM CREDIT ACT OF 1971
Sec. 151. References.
Sec. 152. Repeal of requirements relating to review of decisions to deny or re-
duce the amount of a loan.
Sec. 153. Prohibition against restructuring of restructured loans or loans in-
volved in bankruptcy proceedings.
Sec. 154. Repeal of rules governing effect of restructuring on borrower stock.
Sec. 155. Repeal of rules governing review of restructuring denials.
Sec. 156. Elimination of certain requirements relating to loans placed in
nonaccrual status.
Sec. 157. Limitations on the right of first refusal.
Subtitle B—Rural Development
Sec. 201. Capitalization grants to States for rural development.
Sec. 202. Elimination of other rural development programs.
Sec. 203. Conforming amendments.
Sec. 204. Savings provision.
Sec. 205. Effective date.
Subtitle A—Agricultural Credit
CHAPTER 1—AMENDMENTS TO THE CON-
SOLIDATED FARM AND RURAL DEVEL-
OPMENT ACT
SEC. 101. REFERENCES.
Except as otherwise expressly provided, wherever in
this chapter an amendment or repeal is expressed in terms
of an amendment to, or repeal of, a section or other provi-
sion, the reference shall be considered to be made to a
section or other provision of the Consolidated Farm and
Rural Development Act.
SEC. 102. REDIRECTION OF RESOURCES TO FAMILY FARM-
ERS.
(a) OWNERSHIP LOANS.—
(1) TARGETING TO FAMILY FARMERS.—
(A) IN
GENERAL.—Section 302(a) (7
U.S.C. 1922(a)) is amended to read as follows:
‘‘(a)(1) The Secretary may make loans under this
subtitle to any eligible applicant for such a loan.
‘‘(2) For purposes of paragraph (1), an individual
who has applied for a loan under this subtitle is an eligible
applicant if the individual—
‘‘(A) is a citizen of the United States;
‘‘(B) has training or farming experience that
the Secretary determines is sufficient to assure rea-
sonable prospects of success in the proposed farming
operation;
‘‘(C) is or will become an owner-operator of a
not larger than family farm in the United States;
and
‘‘(D) is unable to obtain sufficient credit else-
where to finance the needs of the individual relating
to the proposed farming operation at reasonable
rates and terms, taking into consideration prevailing
private and cooperative rates and terms in the com-
munity in or near which the individual resides for
loans for similar purposes and periods of time.
‘‘(3) For purposes of paragraph (1), a person (other
than an individual) who has applied for a loan under this
subtitle is an eligible applicant if—
‘‘(A) the person—
‘‘(i) is controlled by farmers and ranchers;
‘‘(ii) is engaged primarily and directly in
farming or ranching in the United States;
‘‘(iii) is or will become an owner-operator
of a not larger than family farm; and
‘‘(iv) is unable to obtain sufficient credit
elsewhere to finance the needs of the person re-
lating to the proposed farming operation at rea-
sonable rates and terms, taking into consider-
ation prevailing private and cooperative rates
and terms in the community in or near which
the person is located for loans for similar pur-
poses and periods of time; and
‘‘(B) each individual who has greater than a 5
percent ownership interest in the person meets the
requirements of paragraph (2).
‘‘(4) As used in this subsection, the term ‘person’
means an individual, a corporation, a partnership, a joint
venture, or any combination thereof.’’.
(B) CONFORMING AMENDMENTS.—
(i) Section 304(b) (7 U.S.C. 1924(b))
is amended by striking ‘‘clauses (2) and
(3) of section 302’’ and inserting ‘‘sub-
paragraphs 
(B) 
and 
(C) 
of 
section
302(a)(2)’’.
(ii) 
Section 
310D(a) 
(7 
U.S.C.
1934(a)) is amended by striking ‘‘para-
graphs (2) through (4) of section 302’’ and
inserting ‘‘subparagraphs (B), (C), and
(D) of section 302(a)(2)’’.
(iii) Section 359(c)(2) (7 U.S.C.
2006a(c)(2)) 
is 
amended 
by 
striking
‘‘302(a)(2)’’ and inserting ‘‘302(a)(2)(B)’’.
(2) 
ELIMINATION
OF
LOANS
FOR
REC-
REATIONAL USES AND FACILITIES.—
(A) IN
GENERAL.—Section 303(a) (7
U.S.C. 1923(a)) is amended by striking clause
(2) and redesignating clauses (3), (4), and (5)
as clauses (2), (3), and (4), respectively.
(B) CONFORMING AMENDMENTS.—Section
307(a)(6)(B) (7 U.S.C. 1927(a)(6)(B)) is
amended in each of clauses (i) and (vii) by
striking ‘‘clauses (2) and (3) of section 303(a)’’
and inserting ‘‘section 303(a)(2)’’.
(3) REFINANCING LIMITED TO LOANS RELATED
TO
FARM
OPERATIONS.—Section 
303(a)(3) 
(7
U.S.C. 1923(a)(3)), as so redesignated by paragraph
(2)(A) of this subsection, is amended by inserting
‘‘with respect to farming, ranching, or aquaculture
operations if such refinancing enhances significantly
the likelihood of repayment of such indebtedness’’
before the comma.
(b) OPERATING LOANS.—
(1) TARGETING TO FAMILY FARMERS.—
(A) IN
GENERAL.—Section 311(a) (7
U.S.C. 1941(a)) is amended to read as follows:
‘‘(a)(1) The Secretary may make loans under this
subtitle to any eligible applicant for such a loan.
‘‘(2) For purposes of paragraph (1), an individual
who has applied for a loan under this subtitle is an eligible
applicant if the individual—
‘‘(A) is a citizen of the United States;
‘‘(B) has training or farming experience that
the Secretary determines is sufficient to assure rea-
sonable prospects of success in the proposed farming
operation;
‘‘(C) is or will become an operator of a not
larger than family farm in the United States; and
‘‘(D) is unable to obtain sufficient credit else-
where to finance the needs of the individual relating
to the farming operation at reasonable rates and
terms, taking into consideration prevailing private
and cooperative rates and terms in the community
in or near which the individual resides for loans for
similar purposes and periods of time.
‘‘(3) For purposes of paragraph (1), a person (other
than an individual) who has applied for a loan under this
subtitle is an eligible applicant if—
‘‘(A) the person—
‘‘(i) is controlled by farmers and ranchers;
‘‘(ii) is engaged primarily and directly in
farming or ranching in the United States;
‘‘(iii) is or will become an owner-operator
of a not larger than family farm; and
‘‘(iv) is unable to obtain sufficient credit
elsewhere to finance the needs of the person re-
lating to the proposed farming operation at rea-
sonable rates and terms, taking into consider-
ation prevailing private and cooperative rates
and terms in the community in or near which
the person is located for loans for similar pur-
poses and periods of time; and
‘‘(B) each individual who has greater than a 5
percent ownership interest in the person meets the
requirements of paragraph (2).
‘‘(4) As used in this subsection, the term ‘person’
means an individual, a corporation, a partnership, a joint
venture, or any combination thereof.’’.
(B) CONFORMING AMENDMENTS.—
(i) 
Section 
312(a)(5) 
(7 
U.S.C.
1924(a)(5)) is amended by striking ‘‘sec-
tion 311 (2) and (3)’’ and inserting ‘‘sub-
paragraphs 
(B) 
and 
(C) 
of 
section
311(a)(2)’’.
(ii) Section 312(b) (7 U.S.C. 1924(b))
is amended by striking ‘‘clauses (2) and
(3) of section 311(a)’’ and inserting ‘‘sub-
paragraphs 
(B) 
and 
(C) 
of 
section
311(a)(2)’’.
(iii) Section 359(c)(2) (7 U.S.C.
2006a(c)(2)) 
is 
amended 
by 
striking
‘‘311(a)(2)’’ and inserting ‘‘311(a)(2)(B)’’.
(2) REFINANCING LIMITED TO LOANS RELATED
TO
FARM
OPERATIONS.—Section 
312(a)(7) 
(7
U.S.C. 1942(a)(7)) is amended by inserting ‘‘with
respect to farming, ranching, or aquaculture oper-
ations if such refinancing enhances significantly the
likelihood of repayment of such indebtedness’’ before
the comma.
(3) ELIMINATION OF LOANS FOR OSHA COMPLI-
ANCE.—Section 312(a) (7 U.S.C. 1942(a)) is
amended by striking clause (10) and redesignating
clauses (11), (12), and (13) as clauses (10), (11),
and (12), respectively.
(c) EMERGENCY LOANS.—
(1) TARGETING TO FAMILY FARMERS.—Section
321(a) (7 U.S.C. 1961(a)) is amended to read as
follows:
‘‘(a)(1) The Secretary shall make loans under this
subtitle to any eligible applicant for such a loan.
‘‘(i) a natural disaster in the United
States; or
‘‘(ii) a major disaster or emergency des-
ignated by the President under the Disaster Re-
lief and Emergency Assistance Act.
‘‘(3) For purposes of paragraph (1), a person (other
than an individual) who has applied for a loan under this
subtitle is an eligible applicant if—
‘‘(A) the person—
‘‘(i) is controlled by farmers, ranchers, and
persons engaged in aquaculture;
‘‘(ii) is primarily engaged in farming,
ranching, or aquaculture in the United States;
‘‘(iii) is or will become an owner-operator
(in the case of loans for a purpose under sub-
title A) or operator (in the case of loans for a
purpose under subtitle B) of a not larger than
family farm in the United States; and
‘‘(iv) is unable to obtain sufficient credit
elsewhere to finance the needs of the person re-
lating to the proposed farming operation at rea-
sonable rates and terms, taking into consider-
ation prevailing private and cooperative rates
and terms in the community in or near which
the person is located for loans for similar pur-
poses and periods of time;
‘‘(B) each individual who has greater than a 5
percent ownership interest in the person meets the
requirements of paragraph (2)(A); and
‘‘(C) the Secretary finds that the farming,
ranching, or aquaculture operations of the person
have been substantially affected by—
‘‘(i) a natural disaster in the United
States; or
‘‘(ii) a major disaster or emergency des-
ignated by the President under the Disaster Re-
lief and Emergency Assistance Act.
‘‘(4)(A) The Secretary shall accept applications from,
and make loans pursuant to this subtitle to, applicants
otherwise eligible for such a loan, that conduct farming,
ranching, or aquaculture operations in any county contig-
uous to a county where the Secretary has found that farm-
ing, ranching, or aquaculture operations have been sub-
stantially affected by—
‘‘(i) a natural disaster in the United States; or
‘‘(ii) a major disaster or emergency designated
by the President under the Disaster Relief and
Emergency Assistance Act.
‘‘(B) The Secretary shall accept applications for as-
sistance under this subtitle from applicants affected by a
natural disaster at any time during the 8-month period
beginning on—
‘‘(i) the date on which the Secretary determines
that farming, ranching, or aquaculture operations
have been substantially affected by the natural dis-
aster; or
‘‘(ii) the date on which the President makes the
major disaster or emergency designation with re-
spect to the natural disaster.
‘‘(5) The authority provided by this subsection shall
be effective only to the extent or in such amounts as are
provided in advance in appropriations Acts.
‘‘(6) As used in this subsection, the term ‘person’
means an individual, a corporation, a partnership, a joint
venture, or any combination thereof.’’.
(2) CONFORMING
AMENDMENT.—Section 329
(7 U.S.C. 1970) is amended by striking ‘‘a single
enterprise which constitutes a basic part of’’.
SEC. 103. REDIRECTION OF RESOURCES TO INCOME-PRO-
DUCING ACTIVITIES.
(a) ELIMINATION OF OWNERSHIP LOANS FOR THE
ACQUISITION, INSTALLATION, 
OR
MODIFICATION
OF
QUALIFIED NON-FOSSIL ENERGY SYSTEMS.—
(1) IN GENERAL.—Section 303 (7 U.S.C. 1923)
is amended—
(A) by striking ‘‘(a)’’; and
(B) by striking subsection (b).
(2) 
CONFORMING
AMENDMENTS.—Section
307(a)(6)(B) (7 U.S.C. 1927(a)(6)(B)), as amended
by section 102(a)(2)(B) of this Act, is amended in
each of clauses (i) and (vii) by striking ‘‘section
303(a)(2)’’ and inserting ‘‘section 303(2)’’.
(b) ELIMINATING OF OWNERSHIP LOANS FOR THE
CONSTRUCTION
OF
CONSERVATION
STRUCTURES
OR
NON-INCOME-PRODUCING CONSERVATION PRACTICES.—
Section 304 (7 U.S.C. 1924) is amended—
(1) by striking subsection (a) and inserting
‘‘(a)(1) Loans may be made to farm owners or ten-
ants who are eligible borrowers under this subtitle
for—
‘‘(A) the establishment of forest cover for sus-
tained yield timber management;
‘‘(B) the establishment of permanent pasture;
or
‘‘(C) the construction of environmental struc-
tures or systems required by Federal statute.
‘‘(2) The Secretary shall not make a loan under this
section that exceeds the lesser of—
‘‘(A) the value of the farm or other security for
such loan; or
‘‘(B) $50,000.’’; and
(2) by striking subsection (c).
(c) ELIMINATION OF OPERATING LOANS FOR THE
DEVELOPMENT AND CONSTRUCTION OF SOLAR ENERGY
SYSTEMS.—Section 312(a) (7 U.S.C. 1942(a)), as amend-
ed by section 102(b)(3) of this Act, is amended—
(1) by striking clause (10) and redesignating
clauses (11) and (12) as clauses (10) and (11), re-
spectively; and
(2) by striking the 2nd sentence.
(d) ELIMINATION OF AUTHORITY TO ACQUIRE EASE-
MENTS FOR CONSERVATION, RECREATIONAL, OR WILD-
LIFE PURPOSES.—Section 349 (7 U.S.C. 1997) is re-
pealed.
(e) CONFORMING AMENDMENTS.—Section 335 (7
U.S.C. 1985) is amended—
(1) in subsection (c)(1)—
(A) by striking ‘‘, other than easements ac-
quired under section 349’’; and
(B) by striking the last sentence and in-
serting ‘‘Notwithstanding the preceding sen-
tence, the Secretary may grant or sell an ease-
ment, restriction, development rights, or the
equivalent thereof, to a unit of local or State
government or a private nonprofit organization
for conservation purposes at its fair market
value.’’;
(2) in subsection (e)(7), by striking ‘‘sale or’’;
and
(3) by striking subsection (g).
SEC. 104. IMPROVEMENT OF LOAN PORTFOLIO MANAGE-
MENT.
(a) EXPANSION OF AUTHORITY TO REQUIRE ADDI-
TIONAL COLLATERAL TO SECURE A FARMER PROGRAM
LOAN.—Section 307(e)(1) (7 U.S.C. 1927(e)(1)) is
amended by striking ‘‘, if the borrower is current in the
payment of principal and interest on the loan’’ and insert-
ing ‘‘unless the fair market value of the collateral securing
the loan is less than 80 percent of the total of the principal
and any unpaid accrued interest on the loan’’.
(b) LINKING OF EMERGENCY LOANS FOR CROP OR
LIVESTOCK CHANGES TO NATURAL DISASTERS.—Section
323 (7 U.S.C. 1963) is amended by inserting ‘‘which are
necessitated by a natural disaster, major disaster, or
emergency and which are’’ after ‘‘livestock changes’’.
(c) ESTABLISHMENT OF DATE CERTAIN FOR EMER-
GENCY LOAN ASSET VALUATION.—Section 324(d) (7
U.S.C. 1962(d)) is amended in the last sentence by strik-
ing all that follows ‘‘shall’’ and inserting ‘‘establish the
value of the assets as of the day before the occurrence
of the natural disaster, major disaster, or emergency
which gave rise to the request for assistance under this
subtitle or under the Disaster Relief and Emergency As-
sistance Act.’’.
(d) CREATION OF MEASURABLE STANDARD FOR DE-
FERRAL OF LOAN PRINCIPAL AND FOREGOING FORE-
CLOSURE.—Section 331A (7 U.S.C. 1981a) is amended
to read as follows:
‘‘SEC. 331A. ADDITIONAL AUTHORITY TO DEFER PRINCIPAL
PAYMENTS AND FOREGO FORECLOSURE.
‘‘In addition to any other authority that the Secretary
may have to defer principal and forego foreclosure, the
Secretary may, at the request of the borrower, permit the
deferral of principal only on any outstanding loan made,
insured, or held by the Secretary under this title or under
any other law administered by the Consolidated Farm
Services Agency, and may forego foreclosure on any such
loan for such period as the Secretary deems necessary,
upon a showing by the borrower that—
‘‘(1) due to circumstances beyond the borrow-
er’s control that could not have been anticipated by
the borrower, the borrower is temporarily unable to
continue making payments of such principal when
due without using funds needed to provide for the
basic family needs of the borrower and the imme-
diate family of the borrower; and
‘‘(2) the borrower has the ability to continue
making interest payments on such loan when due
throughout the anticipated deferral period.’’.
(e) ELIMINATION OF NOTIFICATION OF LOAN SERV-
ICING PROGRAMS.—
(1) IN
GENERAL.—Section 331D (7 U.S.C.
1981d) is repealed.
(2) 
CONFORMING
AMENDMENT.—Section
343(b) (7 U.S.C. 1991(b)) is amended by striking
‘‘331D,’’.
(f) PROVIDING AN ANNUAL REVIEW OF THE CREDIT
HISTORY, BUSINESS OPERATION AND CONTINUED ELIGI-
BILITY OF A BORROWER.—
(1) IN GENERAL.—Section 333 (7 U.S.C. 1983)
is amended by redesignating paragraphs (2), (3),
and (4) as paragraphs (3), (4), and (5), respectively,
and by inserting after paragraph (1) the following:
‘‘(2) the county or area committee, as appro-
priate, under section 8(b) of the Soil Conservation
and Domestic Allotment Act (16 U.S.C. 590h(b)) to
certify in writing that it has performed an annual
review of the credit history and business operation
of a borrower (other than a borrower under section
306, 310B, or 314), and its opinion as to the contin-
ued eligibility of that borrower for such a loan;’’.
(2) 
CONFORMING
AMENDMENT.—Section
310B(a) (7 U.S.C. 1932(a)) is amended in the 3rd
sentence by striking ‘‘(3)’’ and inserting ‘‘(4)’’.
(g) ELIMINATION OF THE SALES RESTRICTIONS ON
INVENTORY PROPERTY.—
(1) IN
GENERAL.—Section 335 (7 U.S.C.
1985), as amended by sections 103(e)(2) and
108(f)(33) of this Act, is amended—
(A) in subsection (b), by striking ‘‘Except
as provided in subsection (e), real’’ and insert-
ing ‘‘Real’’;
(B) in subsection (c)—
(i) by striking ‘‘(1) Except as pro-
vided in subsection (e), the’’ and inserting
‘‘The’’;
(ii) by striking the 2nd sentence; and
(iii) by striking paragraph (2); and
(C) by striking subsections (e) and (f).
(2) CONFORMING AMENDMENTS.—
(A) Section 602(5) of the Agricultural Act
of 1949 (7 U.S.C. 1471(5)) is amended by in-
serting ‘‘(as in effect before the date of the en-
actment of the Farm Credit and Rural Develop-
ment Reform Act of 1995)’’ before the last
close parenthesis.
(B) Section 343(b) (7 U.S.C. 1991(b)) is
amended by striking ‘‘335 (e) and (f),’’.
(h) ELIMINATION OF DEBT RESTRUCTURING AND
LOAN SERVICING.—
(1) GENERAL
PROVISIONS.—Section 353 (7
U.S.C. 2001) is repealed.
(2) PROVISIONS
APPLICABLE
TO
COMMUNITY
FACILITY LOANS.—Section 353A (7 U.S.C. 2001a)
is repealed.
(3) CONFORMING AMENDMENTS.—
(A) Section 343(b) (7 U.S.C. 1991(b)) is
amended by striking ‘‘353,’’.
(B) Section 357(b) (7 U.S.C. 2005(b)) is
amended by striking paragraph (3).
(i) SHORT FORM CERTIFICATION OF PROGRAM COM-
PLIANCE.—Subtitle D (7 U.S.C. 1981–2008f) is amended
by adding at the end the following:
‘‘SEC. 372. SHORT FORM CERTIFICATION OF FARM PRO-
GRAM BORROWER COMPLIANCE.
‘‘The Secretary shall develop and utilize a consoli-
dated short form for farm program borrowers to use in
certifying compliance with any and all applicable statutes
and regulations which serve as eligibility prerequisites for
loans made under this title.’’.
(j) EFFECT OF PRIOR DEFAULT, DEFERRAL, DEBT
RESTRUCTURING, OR LOAN SERVICING ON ELIGIBILITY
FOR LOANS.—Subtitle D (7 U.S.C. 1981–2008f), as
amended by subsection (i) of this section, is amended by
adding at the end the following:
‘‘SEC. 373. EFFECT OF PRIOR DEFAULT, DEFERRAL, DEBT
RESTRUCTURING, OR LOAN SERVICING ON
ELIGIBILITY FOR LOANS.
‘‘Notwithstanding any other section of this title, the
Secretary shall not make any loan under this title to an
applicant if the applicant (or, in the case of a legal entity
which is an applicant, an individual who has greater than
a 5 percent ownership interest in the applicant) has de-
faulted on a loan made or insured under this title, had
the principal or interest on a loan made or insured under
this title deferred under section 331A, or had a loan made
or insured under this title restructured or serviced under
section 353, unless the default, deferral, restructuring, or
servicing resulted from circumstances that were beyond
the control of the applicant or individual, and that could
not have been reasonably anticipated by the applicant or
individual.’’.
SEC. 105. ASSURING PROMPT REPAYMENT OF LOANS.
(a) NARROWING OF USE OF NONSUPERVISED BANK
ACCOUNTS.—Section 312(e) (7 U.S.C. 1942(e)) is amend-
ed to read as follows:
‘‘(e)(1) Notwithstanding any other provision of this
title, the Secretary shall reserve a portion of any loan
made under this subtitle to be placed in a nonsupervised
bank account which may be used at the discretion of the
borrower for the basic family needs of the borrower and
the immediate family of the borrower.
‘‘(2) The size of any such reserve shall be limited to
the least of—
‘‘(A) 10 percent of the loan;
‘‘(B) $5,000; or
‘‘(C) the amount needed to provide for the basic
family needs of the borrower and the borrower’s im-
mediate family for 3 calendar months.’’.
(b) REDUCTION
OF
THE LIMIT
ON EMERGENCY
LOANS.—Section 324(a) (7 U.S.C. 1964(a)) is amended
by striking ‘‘$500,000’’ and inserting ‘‘$300,000’’.
(c) ELIMINATION OF AUTHORITY TO WAIVE APPLI-
CATION
OF
THE CREDIT ELSEWHERE TEST.—Section
322(b) (7 U.S.C. 1962(b)) is amended by striking ‘‘: Pro-
vided further, That for loans of $300,000 or less, the Sec-
retary may waive the requirement of this subsection if the
Secretary determines that it would impose an undue bur-
den on the applicant’’.
SEC. 106. MODIFICATION OF PROGRAMS FOR BEGINNING
FARMERS.
(a) ESTABLISHMENT
OF LOAN GUARANTEE PRO-
GRAM.—Section 309(h)(1) (7 U.S.C. 1929(a)(1)) is
amended by adding at the end the following: ‘‘In the case
of a loan made to a beginning farmer (as defined by the
Secretary in regulations), the guarantee shall be for the
payment of 98 percent of loan principal and interest.’’.
(b) ENHANCEMENT OF INTEREST RATE BUYDOWN
PROGRAM.—Section 351(c) (7 U.S.C. 1999(c)) is amend-
ed by inserting ‘‘(or 6 percent, in the case of a loan made
to a beginning farmer, as defined by the Secretary)’’ be-
fore the period.
(c) ELIMINATION OF DOWN PAYMENT LOAN PRO-
GRAM.—Section 310E (7 U.S.C. 1935) is repealed.
(d) ELIMINATION OF LIMITATIONS ON THE AVAIL-
ABILITY OF FARM OWNERSHIP LOANS AND LOAN GUAR-
ANTEES.—Section 310F (7 U.S.C. 1936) is repealed.
(e) ELIMINATION
OF SPECIAL ASSISTANCE PRO-
GRAM.—Section 318 (7 U.S.C. 1948) is repealed.
(f) CONFORMING AMENDMENTS.—
(1) Section 305 (7 U.S.C. 1925) is amended by
striking ‘‘310D, and 310E’’ and inserting ‘‘or
310D’’.
(2) Section 309 (7 U.S.C. 1929) is amended by
striking subsections (h)(3) and (i).
(3) Section 346(b) (7 U.S.C. 1994(b)) is
amended—
(A) in paragraph (3), by striking subpara-
graphs (E) and (F) and redesignating subpara-
graph (G) as subparagraph (E); and
(B) by striking paragraphs (5) and (6).
SEC. 107. ELIMINATION OF TARGET PARTICIPATION RATES.
(a) REPEAL.—Section 355 (7 U.S.C. 2003) is re-
pealed.
(b) CONFORMING AMENDMENTS.—
(1) 
Section 
346(b)(3)(D) 
(7 
U.S.C.
1994(b)(3)(D)) is amended by striking ‘‘To the ex-
tent that it is not inconsistent with an exercise of
authority under section 355, in’’ and inserting ‘‘In’’.
(2) Section 2501(c)(2)(D) of the Food, Agri-
culture, Conservation, and Trade Act of 1990 (7
U.S.C. 2279(c)(2)(D)) is amended by striking ‘‘com-
pared to the target participation rates established
pursuant to sections 355(a)(1) and 355(c) of the
Consolidated Farm and Rural Development Act (7
U.S.C. 2003(a)(1)),’’.
(3) Section 8(b)(5)(B)(iv) of the Soil Conserva-
tion and Domestic Allotment Act (16 U.S.C.
590h(b)(5)(B)(iv)) is amended by striking ‘‘groups’’
and all that follows and inserting ‘‘groups. For pur-
poses of the preceding sentence, the term ‘socially
disadvantaged groups’ means groups whose members
have been subjected to racial, ethnic, or gender prej-
udice because of their identity as members of a
group without regard to their individual qualities.’’.
SEC. 108. MISCELLANEOUS AND CONFORMING AMEND-
MENTS.
(a) CLARIFICATION OF WRITTEN STATEMENT RE-
QUIRED
OF BORROWERS.—Section 333(1) (7 U.S.C.
1983(1)) is amended by striking ‘‘a written statement
showing the applicant’s net worth’’ and inserting ‘‘an ap-
propriate written financial statement’’.
(b) EXTENSION
OF VETERANS PREFERENCE TO
VETERANS
OF
THE GULF WAR.—Section 333(5) (7
U.S.C. 1983(5)), as so redesignated by section 104(f)(1)
of this Act, is amended by striking ‘‘or the Vietnam era’’
and inserting ‘‘, during the Vietnam era, or during the
liberation of Kuwait under Project Desert Shield or
Project Desert Storm,’’.
(c) VERIFICATION
OF
THE CREDIT ELSEWHERE
TEST.—Section 333A(e)(4) (7 U.S.C. 1983a(e)(4)) is
amended by striking ‘‘With the approval of the borrower,
the’’ and inserting ‘‘The’’.
(d) ELIMINATION
OF REQUIREMENT TO TESTIFY
AND REPORT ON BUDGET REQUEST.—Section 345 (7
U.S.C. 1993) is repealed.
(e) ELIMINATION OF REQUIREMENT TO DEVELOP
AND REPORT ON LONG-TERM COST PROJECTIONS.—Sec-
tion 346(c) (7 U.S.C. 1994(c)) is repealed.
(f) ELIMINATION
OF
AUTHORITY
TO
INSURE
LOANS.—
(1) Section 302(b) (7 U.S.C. 1922(b)) is
amended by striking ‘‘or insured’’.
(2) Section 303 (7 U.S.C. 1923), as amended
by section 103(a)(1) of this Act, is amended by
striking ‘‘or insured’’.
(3) Section 304(b) (7 U.S.C. 1924(b)) is
amended by striking ‘‘or insured’’.
(4) Section 305 (7 U.S.C. 1925) is amended by
striking ‘‘or insure’’.
(5) Section 306(a)(1) (7 U.S.C. 1926(a)(1)) is
amended—
(A) by striking ‘‘or insure’’; and
(B) by striking ‘‘or insured’’.
(6) 
Section 
306(a)(15)(A) 
(7 
U.S.C.
1926(a)(15)(A)) is amended—
(A) by striking ‘‘or insure’’; and
(B) by striking ‘‘or insured’’.
(7) Section 306C(a)(1) (7 U.S.C. 1926c(a)(1))
is amended by striking ‘‘or insure’’.
(8) Section 306C(b)(1) (7 U.S.C. 1926c(b)(1))
is amended by striking ‘‘or insure’’.
(9) 
Section 
307(a)(6)(A) 
(7 
U.S.C.
1927(a)(6)(A)) is amended by striking ‘‘or insured’’.
(10) Section 307(c) (7 U.S.C. 1927(c)) is
amended by striking ‘‘, insured,’’.
(11) Section 308 (7 U.S.C. 1928) is amended
by striking the 1st sentence.
(12) Section 309(f)(1) (7 U.S.C. 1929(f)(1)) is
amended—
(A) by striking ‘‘could be’’ and inserting
‘‘(before the date of the enactment of the Farm
Credit and Rural Development Reform Act of
1995) could have been’’; and
(B) by striking ‘‘and insure’’.
(13) Section 309(f)(2) (7 U.S.C. 1929(f)(2)) is
amended by striking ‘‘or hereafter’’.
(14) Section 309A (7 U.S.C. 1929a) is amend-
ed in each of subsections (d) and (e) by striking ‘‘,
guaranteed, or insured’’ and inserting ‘‘or guaran-
teed’’.
(15) 
Section 
309A(g)(1) 
(7 
U.S.C.
1929a(g)(1)) is amended—
(A) by striking ‘‘could be’’ and inserting
‘‘(before the date of the enactment of the Farm
Credit and Rural Development Reform Act of
1995) could have been’’; and
(B) by striking ‘‘and insure’’.
(16) Section 309A(g) (7 U.S.C. 1929a(g)) is
amended in each of paragraphs (2) and (7) by strik-
ing ‘‘or hereafter’’.
(17) Section 310A (7 U.S.C. 1931) is repealed.
(18) Section 310B(a) (7 U.S.C. 1932(a)) is
amended—
(A) by striking ‘‘and insure’’; and
(B) by striking ‘‘, insured,’’.
(19) Section 310B(e)(1) (7 U.S.C. 1932(e)(1))
is amended by striking ‘‘insure and’’.
(20) Section 310B(e)(2) (7 U.S.C. 1932(e)(2))
is amended by striking ‘‘insure or’’.
(21) Section 310D(a) (7 U.S.C. 1934(a)) is
amended by striking ‘‘and insure’’.
(22) Section 311(c) (7 U.S.C. 1941(c)) is
amended by striking ‘‘or insured’’.
(23) Section 313 (7 U.S.C. 1943) is amended
by striking ‘‘or insure’’.
(24) Section 316(a)(3) (7 U.S.C. 1946(a)(3)) is
amended by striking ‘‘or insured’’.
(25) Section 317 (7 U.S.C. 1947) is repealed.
(26) Section 322(a) (7 U.S.C. 1962(a)) is
amended by striking ‘‘or insure’’.
(27) Section 323 (7 U.S.C. 1963) is amended
by striking ‘‘or insured’’.
(28) Section 324(a) (7 U.S.C. 1964(a)) is
amended by striking ‘‘or insured’’.
(29) Section 324(b)(2) (7 U.S.C. 1964(b)(2)) is
amended—
(A) by striking clause (A); and
(B) by striking ‘‘(B)’’.
(30) Section 328 (7 U.S.C. 1968) is repealed.
(31) Section 333A (7 U.S.C. 1983a) is amend-
ed by striking subsection (b).
(32) Section 333A(f) (7 U.S.C. 1983a(f)) is
amended in each of paragraphs (4) and (5) by strik-
ing ‘‘an insured’’ and inserting ‘‘a’’.
(33) 
Section 
335(e)(5)(A) 
(7 
U.S.C.
1985(e)(5)(A)) is amended by striking ‘‘made or in-
sured’’.
(34) Section 343(a)(4) (7 U.S.C. 1991(a)(4)) is
amended by striking ‘‘word ‘insure’ as used in this
title includes guarantee, which means’’ and inserting
‘‘term ‘guarantee’ means’’.
(35) Section 343(a)(9) (7 U.S.C. 1991(a)(9)) is
amended by striking ‘‘or insured’’.
(36) Section 344 (7 U.S.C. 1992) is amended
by striking ‘‘insured, or made to be sold and in-
sured,’’.
(37) Section 346(a) (7 U.S.C. 1994(a)) is
amended by striking ‘‘and insured’’.
(38) Section 346(b)(1) (7 U.S.C. 1994(b)(1)) is
amended by striking ‘‘insured, made to be sold and
insured, or’’.
(39) Section 346(b)(3) (7 U.S.C. 1994(b)(3)),
as amended by sections 106(f)(3) and 107(b)(1) of
this Act, is amended by striking subparagraphs (B)
and (D) and redesignating subparagraphs (C) and
(E) as subparagraphs (B) and (C), respectively.
(40) Section 346(d)(1) (7 U.S.C. 1994(d)(1)) is
amended by striking ‘‘authorized to be insured, or
made to be sold and insured,’’ and inserting
‘‘made’’.
(41) Section 348 (7 U.S.C. 1996) is amended—
(A) by striking ‘‘and insuring’’;
(B) by striking ‘‘and insure’’; and
(C) by striking ‘‘or insured’’.
(42) 
Section 
351(h)(8)(C) 
(7 
U.S.C.
1999(h)(8)(C)) is amended by striking ‘‘, insured, ’’.
(43) Section 358 (7 U.S.C. 2006) is amended
by striking ‘‘, insure,’’.
CHAPTER 2—AMENDMENTS TO THE FARM
CREDIT ACT OF 1971
SEC. 151. REFERENCES.
Except as otherwise expressly provided, wherever in
this chapter an amendment or repeal is expressed in terms
of an amendment to, or repeal of, a section or other provi-
sion, the reference shall be considered to be made to a
section or other provision of the Farm Credit Act of 1971.
SEC. 152. REPEAL OF REQUIREMENTS RELATING TO RE-
VIEW OF DECISIONS TO DENY OR REDUCE
THE AMOUNT OF A LOAN.
(a) REPEAL.—Section 4.14 (12 U.S.C. 2202) is re-
pealed.
(b) CONFORMING AMENDMENTS.—
(1) Section 4.13B (12 U.S.C. 2201) is amended
in each of subsections (a) and (b)—
(A) by adding ‘‘and’’ at the end of para-
graph (1);
(B) by striking ‘‘; and’’ at the end of para-
graph (2) and inserting a period; and
(C) by striking paragraph (3).
(2) Section 8.9 (12 U.S.C. 2279aa–9) is
amended by striking ‘‘4.14,’’ each place such term
appears.
SEC. 153. PROHIBITION AGAINST RESTRUCTURING OF RE-
STRUCTURED LOANS OR LOANS INVOLVED IN
BANKRUPTCY PROCEEDINGS.
(a) IN GENERAL.—Section 4.14A(a)(5) (12 U.S.C.
2202a(a)(5)) is amended by inserting ‘‘, which has not
been restructured under this section and with respect to
which the borrower has not filed a petition for bankruptcy
under title 11, United States Code’’ before the period.
(b) ELIMINATION OF REQUIRED REPORTS TO THE
FARM CREDIT ADMINISTRATION.—Section 4.14A (12
U.S.C. 2202a) is amended by striking subsections (g) and
(h) and inserting the following:
‘‘(g) RESTRUCTURING POLICY.—
‘‘(1) ESTABLISHMENT.—Within 60 days after
the date of the enactment of this paragraph, the
board of directors of each qualified lender shall de-
velop a policy that is consistent with this section, to
govern the restructuring of distressed loans.
‘‘(2) CONTENTS OF POLICY.—The policy estab-
lished under paragraph (1) shall include an expla-
nation of the procedure for submitting an applica-
tion for restructuring.’’.
(c) RELATED AMENDMENTS.—Section 4.14A (12
U.S.C. 2202a) is amended by striking subsections (k) and
(l).
(d) CONFORMING AMENDMENTS.—
(1) Section 4.14A (12 U.S.C. 2202a) is amend-
ed by redesignating subsections (i) and (j) as sub-
sections (h) and (i), respectively.
(2) Section 5.31 (12 U.S.C. 2267) is amended
by striking ‘‘4.14A(i)’’ and inserting ‘‘4.14A(h)’’.
(3) Section 5.32(h) (12 U.S.C. 2268(h)) is
amended by striking ‘‘4.14A(i)’’ and inserting
‘‘4.14A(h)’’.
SEC. 154. REPEAL OF RULES GOVERNING EFFECT OF RE-
STRUCTURING ON BORROWER STOCK.
(a) REPEAL.—Section 4.14B (12 U.S.C. 2202b) is
repealed.
(b) CONFORMING AMENDMENTS.—
(1) Section 4.9A(b) (12 U.S.C. 2162(b)) is
amended—
(A) by adding ‘‘or’’ at the end of para-
graph (1);
(B) by striking paragraph (2); and
(C) by redesignating paragraph (3) as
paragraph (2).
(2) Section 8.9 (12 U.S.C. 2279aa–9) is
amended by striking ‘‘4.14B,’’ each place such term
appears.
SEC. 155. REPEAL OF RULES GOVERNING REVIEW OF RE-
STRUCTURING DENIALS.
(a) REPEAL.—Section 4.14C (12 U.S.C. 2202c) is re-
pealed.
(b) CONFORMING AMENDMENTS.—Section 8.9 (12
U.S.C. 2279aa–9) is amended by striking ‘‘4.14C,’’ each
place such term appears.
SEC. 156. ELIMINATION OF CERTAIN REQUIREMENTS RE-
LATING TO LOANS PLACED IN NONACCRUAL
STATUS.
Section 4.14D (12 U.S.C. 2202d) is amended by
striking subsection (d).
SEC. 157. LIMITATIONS ON THE RIGHT OF FIRST REFUSAL.
Section 4.36 (12 U.S.C. 2219a) is amended—
(1) in subsection (a), by striking ‘‘or lease’’;
(2) in subsection (b)(1)—
(A) by striking ‘‘Within’’ and inserting
‘‘Except as otherwise provided in subsection (c),
within’’; and
(B) by inserting ‘‘by private sale,’’ after
‘‘such real estate,’’;
(3) by striking subsection (c) and redesignating
subsections (d) through (g) as subsections (c)
through (f), respectively;
(4) by redesignating subsections (h) and (i) as
subsections (j) and (k), respectively; and
(5) by inserting after subsection (f) (as so re-
designated by paragraph (3) of this section) the fol-
lowing:
‘‘(g) PREVIOUS OWNER DEFINED.—As used in this
section, the term ‘previous owner’ does not include a mort-
gagor or grantor of an equivalent lien interest in agricul-
tural real estate unless such person is also a borrower in
the transaction.
‘‘(h) PERSONAL AND NONASSIGNABLE RIGHT.—The
right of first refusal arising under this section is personal
to, and not assignable by, the previous owner.
‘‘(i) RULE OF INTERPRETATION.—This section shall
not be interpreted to preclude a borrower from voluntarily
waiving the right of first refusal arising under this section
in connection with a voluntary conveyance of agricultural
real estate in lieu of foreclosure.’’.
Subtitle B—Rural Development
SEC. 201. CAPITALIZATION GRANTS TO STATES FOR RURAL
DEVELOPMENT.
The Rural Development Act of 1972 is amended by
adding at the end the following:
‘‘TITLE 
VII—CAPITALIZATION
GRANTS 
TO 
STATES 
FOR
RURAL DEVELOPMENT
‘‘SEC. 701. PURPOSES.
‘‘The purpose of this title is to provide eligible States
and territories with a consolidated source of funding for
rural development, and to encourage States to establish
revolving funds through which rural development may be
financed permanently.
‘‘SEC. 702. GRANTS.
‘‘(a) GRANT AUTHORITY.—
‘‘(1) IN GENERAL.—
‘‘(A) GRANTS TO ELIGIBLE STATES.—Each
eligible State shall be entitled to receive from
the Secretary for each fiscal year a grant in an
amount equal to the applicable share of 99.25
percent of the amount (if any) appropriated
pursuant to this title for the fiscal year.
‘‘(B) 
GRANTS
TO
ELIGIBLE
TERRI-
TORIES.—Each eligible territory shall be enti-
tled to receive from the Secretary for each fiscal
year a grant in an amount equal to the applica-
ble share of 0.75 percent of the amount (if any)
appropriated pursuant to this title for the fiscal
year.
‘‘(C) SPECIAL RULES FOR FISCAL YEARS
1997 AND 1998.—In lieu of any grant under sub-
paragraph (A) or (B) for fiscal year 1997 or
1998, each eligible State and each eligible terri-
tory shall be entitled to receive from the Sec-
retary for each of such fiscal years a grant in
an amount equal to the applicable share of the
amount (if any) appropriated pursuant to this
title for the fiscal year.
‘‘(2) SCHEDULE
OF
PAYMENTS.—On the 1st
day of each calendar quarter in a fiscal year, the
Secretary shall pay each jurisdiction to which a
grant is payable under paragraph (1) for the fiscal
year an amount equal to 1⁄4 of the amount of the
grant.
‘‘(3) SUBJECT TO APPROPRIATIONS.—The au-
thority provided by this title shall be effective only
to such extent or in such amounts as are provided
in advance in appropriations Acts.
‘‘(4) LIMITATIONS ON AUTHORIZATION OF AP-
PROPRIATIONS.—For grants under paragraph (1),
there are authorized to be appropriated to the Sec-
retary not more than $836,025,000 for each fiscal
year.
‘‘(b) LIMITATION ON FEDERAL AUTHORITY.—A ju-
risdiction to which funds are provided under subsection
(a) shall have sole discretion to determine how such funds
are to be expended and the entities to which such funds
are to be provided, subject to this title.
‘‘(c) DEFINITIONS.—As used in this title:
‘‘(1) ELIGIBLE
STATE.—The term ‘eligible
State’ means a State that meets the following re-
quirements:
‘‘(A) The State has established a rural de-
velopment revolving fund.
‘‘(B) The State has established to the sat-
isfaction of the Secretary that the revolving
fund will be operated and administered in ac-
cordance with section 703(a).
‘‘(C) The State has agreed that the State
agency responsible for administering the revolv-
ing fund shall—
‘‘(i) consult with representatives of
local governments, businesses, nonprofit
organizations, and with the State agency
with expertise in rural development and
agriculture, in implementing this title; and
‘‘(ii) consult with general purpose
local governments in developing priorities
for funding activities from the revolving
fund, criteria for selecting recipients of as-
sistance from the revolving fund, and the
method of distributing funds from the re-
volving fund.
‘‘(D)(i) The State has agreed to submit to
the Secretary biennial reports which describe
the manner in which the amounts paid to the
State under subsection (a) are used, and in-
clude evidence that, in each fiscal year covered
by the report, the State has expended for rural
development from State sources an amount
equal to not less than 20 percent of the total
amount paid to the State under subsection (a)
during the fiscal year.
‘‘(ii) As used in clause (i), the term ‘rural
development’ includes—
‘‘(I) rural infrastructure, including
water and sewer systems, highways, roads,
and bridges;
‘‘(II) rural education and job training,
including vocational and technical training;
‘‘(III) rural health services; and
‘‘(IV) rural housing assistance.
‘‘(2) ELIGIBLE TERRITORY.—The term ‘eligible
territory’ means a territory that meets the following
requirements:
‘‘(A) The territory has agreed to use the
funds provided to the territory under subsection
(a) only for qualified rural development pur-
poses.
‘‘(B) The territory has agreed to submit to
the Secretary biennial reports which describe
the manner in which the amounts paid to the
territory under subsection (a) are used, and in-
clude evidence that, in each fiscal year covered
by the report, the territory has expended for
rural development from territory sources an
amount equal to not less than 20 percent of the
total amount paid to the territory under sub-
section (a) during the fiscal year.
‘‘(3) STATE.—The term ‘State’ means the 50
States.
‘‘(4) TERRITORY.—The term ‘territory’ means
the Commonwealth of Puerto Rico, the United
States Virgin Islands, the Commonwealth of the
Northern Mariana Islands, Guam, American Samoa,
and the Trust Territory of the Pacific Islands.
‘‘(5) SECRETARY.—The term ‘Secretary’ means
the Secretary of Agriculture.
‘‘(6) APPLICABLE SHARE.—
‘‘(A) IN GENERAL.—The term ‘applicable
share’ means, with respect to a jurisdiction, the
sum of—
‘‘(i) 1⁄2 of the rural population per-
centage of the jurisdiction;
‘‘(ii) 1⁄4 of the rural poverty percent-
age of the jurisdiction; and
‘‘(iii) 1⁄4 of the rural unemployment
percentage of the jurisdiction.
‘‘(B) SPECIAL
RULE
FOR
FISCAL
YEARS
1997 AND 1998.—Notwithstanding subparagraph
(A), for purposes of grants under this title for
fiscal years 1997 and 1998, the term ‘applica-
ble share’ means, with respect to a jurisdic-
tion—
‘‘(i) the total amount paid to the ju-
risdiction for fiscal year 1995 under the
provisions of law stricken or repealed by
sections 104(h)(2), 108(f)(25), and 202 of
the Farm Credit and Rural Development
Reform Act of 1995; divided by
‘‘(ii) the total amount paid to all
States and territories for fiscal year 1995
under such provisions of law.
‘‘(7) RURAL POPULATION PERCENTAGE.—
‘‘(A) FOR STATES.—The term ‘rural popu-
lation percentage’ means, with respect to a
State—
‘‘(i) the number of individuals who re-
side in a rural area in the State (as deter-
mined by the Secretary on the basis of the
latest census data available); divided by
‘‘(ii) the total number of individuals
who reside in a rural area in the States (as
determined by the Secretary on the basis
of the latest census data available).
‘‘(B) FOR TERRITORIES.—The term ‘rural
population percentage’ means, with respect to a
territory—
‘‘(i) the number of individuals who re-
side in a rural area in the territory (as de-
termined by the Secretary on the basis of
the latest census data available); divided by
‘‘(ii) the total number of individuals
who reside in a rural area in the territories
(as determined by the Secretary on the
basis of the latest census data available).
‘‘(8) RURAL POVERTY PERCENTAGE.—
‘‘(A) FOR STATES.—The term ‘rural pov-
erty percentage’ means, with respect to a
State—
‘‘(i) the number of individuals residing
in a rural area in the State whose income
is at or below the poverty line (as deter-
mined by the Secretary on the basis of the
latest census data available); divided by
‘‘(ii) the total number of individuals
residing in a rural area in the States
whose income is at or below the poverty
line (as determined by the Secretary on the
basis of the latest census data available).
‘‘(B) FOR TERRITORIES.—The term ‘rural
poverty percentage’ means, with respect to a
territory—
‘‘(i) the number of individuals residing
in a rural area in the territory whose in-
come is at or below the poverty line (as de-
termined by the Secretary on the basis of
the latest census data available); divided by
‘‘(ii) the total number of individuals
residing in a rural area in the territories
whose income is at or below the poverty
line (as determined by the Secretary on the
basis of the latest census data available).
‘‘(9) RURAL UNEMPLOYMENT PERCENTAGE.—
‘‘(A) FOR STATES.—The term ‘rural un-
employment percentage’ means, with respect to
a State—
‘‘(i) the number of individuals residing
in a rural area in the State who are unem-
ployed (as determined by the Secretary on
the basis of the latest census data avail-
able); divided by
‘‘(ii) the total number of individuals
residing in a rural area in the States who
are unemployed (as determined by the Sec-
retary on the basis of the latest census
data available).
‘‘(B) FOR TERRITORIES.—The term ‘rural
unemployment percentage’ means, with respect
to a territory—
‘‘(i) the number of individuals residing
in a rural area in the territory who are un-
employed (as determined by the Secretary
on the basis of the latest census data avail-
able); divided by
‘‘(ii) the total number of individuals
residing in a rural area in the territories
who are unemployed (as determined by the
Secretary on the basis of the latest census
data available).
‘‘SEC. 
703. 
STATE 
RURAL 
DEVELOPMENT 
REVOLVING
FUNDS.
‘‘(a) REQUIREMENTS.—A State rural development
revolving fund shall be operated and administered in ac-
cordance with the following requirements:
‘‘(1) GRANTS
TO
BE
DEPOSITED
INTO
THE
FUND.—Any amount paid to the State under section
702(a) shall be immediately deposited into the fund.
‘‘(2) USE OF AMOUNTS.—The amounts in the
fund may be used only for qualified rural develop-
ment purposes, except that amounts not immediately
to be so used may be invested in interest-bearing se-
curities.
‘‘(3) LIMITATIONS ON TERM OF LOANS.—Loans
may be made from the fund at or below market in-
terest rates (including interest-free), and shall not
be made for a period that exceeds the lesser of—
‘‘(A) the life of the activities so financed;
or
‘‘(B) 40 years.
‘‘(4) CREDITING OF REPAYMENTS.—The fund
will be credited with all repayments of principal and
interest on loans and investments made by the fund.
‘‘(5) LIMIT
ON
PERCENTAGE
OF
FEDERAL
FUNDS USED FOR GRANTS.—During any fiscal year,
not more than 30 percent of the total amount paid
to the State under section 702(a) during the fiscal
year may be used to make grants.
‘‘(6) MINIMUM PERCENTAGE OF FUNDS USED
FOR SMALL COMMUNITIES.—Not less than 60 per-
cent of the amounts in the fund shall be used for the
benefit of communities with a population of fewer
than 10,000 individuals.
‘‘(7) LIMIT ON PERCENTAGE OF FUNDS USED
FOR LARGE COMMUNITIES.—Not more than 40 per-
cent of the amounts in the fund may be used for the
benefit of communities with a population of more
than 10,000 but fewer than 25,000 individuals.
‘‘(8) MINIMUM
PERCENTAGE
OF
FEDERAL
FUNDS USED FOR TECHNICAL ASSISTANCE RELATED
TO WATER AND WASTE DISPOSAL.—Not less than 1
percent of the amounts paid to the State under sec-
tion 702(a) during the fiscal year shall be used to
provide financing for technical assistance pursuant
to subsection (b)(2) of this section.
‘‘(9) ACCOUNTING
FOR
FUNDS
BY
RECIPI-
ENTS.—An amount in the fund shall not be provided
to any entity unless, as a condition of providing the
amount, the entity agrees to account for the amount
in accordance with generally accepted accounting
principles.
‘‘(10) REASONABLE ASSURANCE OF LOAN RE-
PAYMENT.—A loan shall not be made to an entity
from the fund unless the entity provides reasonable
assurance of a source of funds for repayment of the
loan.
‘‘(11) CERTIFICATION BY LOCAL GOVERNMENTS
OF
DIRECT
BENEFIT
TO
LOCAL
RESIDENTS.—An
amount in the fund shall not be provided to any en-
tity for any activity to be conducted in an area un-
less the entity has provided the State with a certifi-
cation from the unit of local government for the area
that the activity will directly benefit the residents of
the area.
‘‘(12) POWERS
OF
FUND
ADMINISTRATOR.—
The fund shall be administered by an instrumental-
ity of the State with such powers as may be required
to operate the fund in accordance with this title.
‘‘(b) QUALIFIED RURAL DEVELOPMENT PURPOSE.—
As used in this title, the term ‘qualified rural development
purpose’ means any of the following:
‘‘(1) WATER
AND
WASTE
DISPOSAL
PRO-
GRAMS.—To make loans or grants to associations,
including corporations not operated for profit, In-
dian tribes on Federal and State reservations and
other federally recognized Indian tribes, and public
and quasi-public agencies, all primarily serving
farmers, ranchers, farm tenants, farm laborers,
rural businesses, and other rural residents—
‘‘(A) to provide for the conservation, devel-
opment, use, and control of water, and the in-
stallation or improvement of drainage or waste
disposal facilities, and essential community fa-
cilities including necessary related equipment,
and to furnish financial assistance or other aid
in planning projects for such purposes; or
‘‘(B) to finance specific projects for works
for the development, storage, treatment, purifi-
cation, or distribution of water or the collection,
treatment, or disposal of waste in rural areas.
‘‘(2) RURAL WATER AND WASTE DISPOSAL CIR-
CUIT RIDER TECHNICAL ASSISTANCE AND TRAINING
PROGRAM.—To make grants to associations de-
scribed in paragraph (1) for technical assistance and
training—
‘‘(A) to identify, and evaluate alternative
solutions to, problems relating to the obtaining,
storage, treatment, purification, or distribution
of water or the collection, treatment, or disposal
of waste in rural areas;
‘‘(B) to prepare applications to receive fi-
nancial assistance for any purpose specified in
paragraph (1) from any public or private
source; or
‘‘(C) to improve the operation and mainte-
nance practices at any existing works for the
storage, treatment, purification, or distribution
of water or the collection, treatment, or disposal
of waste in rural areas.
‘‘(3) RURAL BUSINESS AND INDUSTRY.—
‘‘(A) IN
GENERAL.—To make loans or
grants to public, private, or cooperative organi-
zations organized not for profit, to Indian tribes