A bill to amend the Internal Revenue Code of 1986 to encourage a strong community-based banking system.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Community Savings and Investment Act 
of 2004''.

SEC. 2. INCOME TAX ON QUALIFIED COMMUNITY LENDERS.

    (a) In General.--Section 11 of the Internal Revenue Code of 1986 
(relating to tax imposed on corporations) is amended by redesignating 
subsection (d) as subsection (e) and by inserting after subsection (c) 
the following:
    ``(d) Qualified Community Lenders.--
            ``(1) In general.--In the case of a qualified community 
        lender, in lieu of the amount of tax under subsection (b), the 
        amount of tax imposed by subsection (a) for a taxable year 
        shall be the sum of--
                    ``(A) 15 percent of so much of the taxable income 
                as exceeds $250,000 but does not exceed $1,000,000, and
                    ``(B) the highest rate of tax imposed by subsection 
                (b) multiplied by so much of the taxable income as 
                exceeds $1,000,000.
            ``(2) Qualified community lender.--For purposes of 
        paragraph (1), the term `qualified community lender' means a 
        bank--
                    ``(A) which achieved a rating of `satisfactory 
                record of meeting community credit needs', or better, 
                at the most recent examination of such bank under the 
                Community Reinvestment Act of 1977,
                    ``(B) the outstanding local community loans of 
                which at all times during the taxable year comprised 
                not less than 60 percent of the total outstanding loans 
                of that bank,
                    ``(C) meets the ownership requirements of paragraph 
                (3), and
                    ``(D) at all times during the taxable year has 
                total assets of not more than $1,000,000,000.
            ``(3) Ownership requirements.--
                    ``(A) In general.--The ownership requirements of 
                this paragraph are met with respect to any bank if--
                            ``(i) no shares of, or other ownership 
                        interests in, the bank are publicly traded, or
                            ``(ii) in the case of a bank the shares of 
                        which or ownership interests in which are 
                        publicly traded, the last known address of the 
                        holders of at least \2/3\ of all such shares or 
                        interests, including persons for whose benefit 
                        such shares or interests are held by another, 
                        is in the home State of the bank or a State 
                        contiguous to such home State.
                    ``(B) Home state defined.--For purposes of 
                subparagraph (A), the term `home State' means--
                            ``(i) with respect to a national bank or 
                        Federal savings association, the State in which 
                        the main office of the bank or savings 
                        association is located, and
                            ``(ii) with respect to a State bank or 
                        State savings association, the State by which 
                        the bank or savings association is chartered.
            ``(4) Other definitions.--For purposes of this subsection--
                    ``(A) Bank.--The term `bank'--
                            ``(i) has the meaning given to such term in 
                        section 581, and
                            ``(ii) includes any bank--
                                    ``(I) in which at least 80 percent 
                                of the shares of, or other ownership 
                                interests in, the bank are owned by 
                                other qualified community lenders, and
                                    ``(II) the sole purpose of which is 
                                to serve the banking needs of such 
                                lenders.
                    ``(B) Local community loan.--The term `local 
                community loan' means--
                            ``(i) any loan originated by a bank to any 
                        person, other than a related person with 
                        respect to the bank, who is a resident of a 
                        community in which the bank is chartered or in 
                        which it operates an office at which deposits 
                        are accepted, and
                            ``(ii) any loan originated by a bank to any 
                        person, other than a related person with 
                        respect to the bank, who is engaged in a trade 
                        or business in any such community, to the 
                        extent that all or substantially all of the 
                        proceeds of such loan are expended in 
                        connection with the trade or business of such 
                        person in any such community.
                    ``(C) Related person.--The term `related person' 
                means, with respect to any bank, any affiliate of the 
                bank, any person who is a director, officer, or 
                principal shareholder of the bank, and any member of 
                the immediate family of any such person.''.
    (b) S Corporation Income.--Section 1 of the Internal Revenue Code 
of 1986 (relating to tax imposed) is amended by adding at the end the 
following:
    ``(j) Community Lender Income From S Corporation.--
            ``(1) In general.--If a taxpayer has community lender 
        income from a S corporation for any taxable year, the tax 
        imposed by this section for such taxable year shall be the sum 
        of--
                    ``(A) the tax computed at the rates and in the same 
                manner as if this subsection had not been enacted on 
                the greater of--
                            ``(i) taxable income reduced by community 
                        lender income, or
                            ``(ii) the lesser of--
                                    ``(I) the amount of taxable income 
                                taxed at a rate below 25 percent, or
                                    ``(II) taxable income reduced by 
                                community lender income, and
                    ``(B) a tax on community lender income computed 
                at--
                            ``(i) a rate of zero on zero-rate community 
                        lender income,
                            ``(ii) a rate of 15 percent on 15 percent 
                        community lender income, and
                            ``(iii) the highest rate in effect under 
                        this section with respect to the taxpayer on 
                        the excess of community lender income on which 
                        a tax is determined under clause (i) or (ii).
            ``(2) Community lender income.--For purposes of paragraph 
        (1)--
                    ``(A) In general.--The term `qualified community 
                lender income' means taxable income (if any) of a 
                qualified community lender (as defined in section 
                11(d)(2)) that is an S corporation, determined at the 
                entity level.
                    ``(B) Zero-rate community lender income.--The term 
                `zero-rate community lender income' means the 
                taxpayer's pro rata share of so much of community 
                lender income as does not exceed $250,000.
                    ``(C) 15 percent community lender income.--The term 
                `15 percent community lender income' means the 
                taxpayer's pro rata share of so much of community 
                lender income as exceeds $250,000 but does not exceed 
                $1,000,000.
                    ``(D) Special rules.--
                            ``(i) For purposes of this paragraph, the 
                        taxpayer's pro rata share of community lender 
                        income shall be determined under part II of 
                        subchapter S.
                            ``(ii) This subsection shall be applied 
                        after the application of subsection (h).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2003.

SEC. 3. EXCLUSION FROM INCOME TAXATION FOR INCOME DERIVED FROM BANKING 
              SERVICES WITHIN DISTRESSED COMMUNITIES.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items specifically excluded 
from gross income) is amended by inserting after section 140A the 
following new section:

``SEC. 140B. BANKING SERVICES WITHIN DISTRESSED COMMUNITIES.

    ``(a) In General.--At the election of the taxpayer, gross income 
shall not include distressed community banking income.
    ``(b) Distressed Community Banking Income.--For purposes of 
subsection (a), the term `distressed community banking income' means 
net income of a qualified depository institution which is derived from 
the active conduct of a banking business in a distressed community.
    ``(c) Qualified Depository Institution.--For purposes of this 
section, an institution is a qualified depository institution if--
            ``(1) such institution is an insured depository institution 
        (as defined in section 3 of the Federal Deposit Insurance Act 
        (12 U.S.C. 1813)),
            ``(2) such institution is located in, or has a branch 
        located in, a qualified distressed community, and
            ``(3) as of the last day of the taxable year, at least 85 
        percent of its loans from its location within the qualified 
        distressed community are local community loans (as defined in 
        section 11(d)(4)(B)).
    ``(d) Distressed Community.--For purposes of this section, the term 
`distressed community' has the meaning given the term `qualified 
distressed community' by section 233 of the Bank Enterprise Act of 1991 
(12 U.S.C. 1834a(b)).''.
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is 
amended by inserting after the item relating to section 140A the 
following:

                              ``Sec. 140B. Banking services within 
                                        distressed communities.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

Summary: Community Savings and Investment Act of 2004 - Amends the Internal Revenue Code to establish a separate corporate income tax rate for qualified community lenders of: (1) 15 percent of the amount of taxable income over $250,000 up to $1 million; and (2) the highest corporate tax rate imposed (currently 35%) for income over $1 million. Defines "qualified community lender" as a local community bank which: (1) achieved a satisfactory record of meeting community credit needs at its most recent Federal bank examination: (2) provided not less than 60 percent of its loans to its local community; (2) meets specified community ownership requirements; and (4) has total assets of not more than $1 billion. Reduces tax rates on certain subchapter S taxable income attributable to community lender income.

Excludes from gross income distressed community banking income. Defines "distressed community banking income" as the net income of an FDA-insured bank which is derived from the active conduct of a banking business in a low-income, high unemployment community as defined by the Bank Enterprise Act of 1991.