Rural Broadband Financing Flexibility Act
Bill: S.1676 | Sponsor: Sen. Hassan, Margaret Wood (D-NH)
Policy area: Taxation

Summary:
Rural Broadband Financing Flexibility Act
This bill provides tax incentives for investment in broadband, particularly in rural areas.
Specifically, the bill allows
The bill defines qualified broadband project as any project that (1) is designed to provide broadband service solely to one or more areas that are rural areas and in which more than 50% of residential households do not have access to fixed, terrestrial broadband service that delivers at least 25 megabits per second downstream and at least 3 megabits service upstream, and (2) results in gigabit capable internet access to certain residential and commercial locations.

To amend the Internal Revenue Code of 1986 to allow tax-exempt private 
activity bonds to be used for qualified broadband projects, to provide 
for tax credit payments to issuers of tax-exempt bonds used to finance 
broadband infrastructure projects, and to provide an investment credit 
                   for qualified broadband projects.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Rural Broadband Financing 
Flexibility Act''.

                      TITLE I--TAX-PREFERRED BONDS

SEC. 101. PRIVATE ACTIVITY BONDS FOR QUALIFIED BROADBAND PROJECTS.

    (a) In General.--Section 142(a) of the Internal Revenue Code of 
1986 is amended by striking ``or'' at the end of paragraph (14), by 
striking the period at the end of paragraph (15) and inserting ``, 
or'', and by adding at the end the following new paragraph:
            ``(16) qualified broadband projects.''.
    (b) Qualified Broadband Projects.--Section 142 of such Code is 
amended by adding at the end the following new subsection:
    ``(n) Qualified Broadband Project.--
            ``(1) In general.--For purposes of subsection (a)(16), the 
        term `qualified broadband project' means any project which--
                    ``(A) is designed to provide broadband service 
                solely to 1 or more areas--
                            ``(i) which are rural areas (as defined in 
                        section 343(a)(13) of the Consolidated Farm and 
                        Rural Development Act (7 U.S.C. 1991(a)(13) 
                        without regard to subparagraph (B) or (C) 
                        thereof), and
                            ``(ii) in which more than 50 percent of 
                        residential households do not have access to 
                        fixed, terrestrial broadband service which 
                        delivers at least 25 megabits per second 
                        downstream and at least 3 megabits service 
                        upstream, and
                    ``(B) results in gigabit capable internet access to 
                residential locations, commercial locations, or a 
                combination of residential and commercial locations, 
                but only if at least 90 percent of the locations 
                provided such access under the project are locations 
                where, before the project, a broadband service 
                provider--
                            ``(i) did not provide service, or
                            ``(ii) did not provide service meeting the 
                        minimum speed requirements described in 
                        subparagraph (A)(ii).
            ``(2) Notice to broadband providers.--A project shall not 
        be treated as a qualified broadband project unless, before the 
        issue date of any issue the proceeds of which are to be used to 
        fund the project, the issuer--
                    ``(A) notifies each broadband service provider 
                providing broadband service in the area within which 
                broadband services are to be provided under the project 
                of the project and its intended scope,
                    ``(B) includes in such notice a request for 
                information from each such provider with respect to the 
                provider's ability to deploy, manage, and maintain a 
                broadband network capable of providing gigabit capable 
                Internet access to residential or commercial locations, 
                and
                    ``(C) allows each such provider at least 90 days to 
                respond to such notice and request.''.
    (c) Partial Exception From Volume Cap.--
            (1) In general.--Section 146(g) of the Internal Revenue 
        Code of 1986 is amended by striking ``and'' at the end of 
        paragraph (3), by striking the period at the end of paragraph 
        (4) and inserting ``, and'', and by inserting immediately after 
        paragraph (4) the following new paragraph:
            ``(5) 75 percent of any exempt facility bond issued as part 
        of an issue described in paragraph (16) of section 142(a) 
        (relating to qualified broadband projects).''.
            (2) Government-owned projects.--The last sentence of 
        section 146(g) of such Code is amended by striking ``Paragraph 
        (4)'' and inserting ``Paragraphs (4) and (5)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to obligations issued in calendar years beginning after the date 
of the enactment of this Act.

SEC. 102. CREDIT FOR BROADBAND INFRASTRUCTURE BONDS ALLOWED TO ISSUERS.

    (a) In General.--Subchapter B of chapter 65 of the Internal Revenue 
Code of 1986 is amended by inserting after section 6430 the following 
new section:

``SEC. 6431. CREDIT FOR BROADBAND INFRASTRUCTURE BONDS ALLOWED TO 
              ISSUER.

    ``(a) In General.--In the case of a broadband infrastructure bond, 
the issuer of such bond shall be allowed a credit with respect to each 
interest payment under such bond which shall be payable by the 
Secretary as provided in subsection (b).
    ``(b) Payment of Credit.--The Secretary shall pay 
(contemporaneously with each interest payment date under such bond) to 
the issuer of such bond (or to any person who makes such interest 
payments on behalf of the issuer) 35 percent of the interest payable 
under such bond on such date.
    ``(c) Broadband Infrastructure Bond.--For purposes of this 
section--
            ``(1) In general.--The term `broadband infrastructure bond' 
        means any obligation--
                    ``(A) the interest on which would (but for this 
                section) be excludable from gross income under section 
                103,
                    ``(B) which is issued by a qualified issuer,
                    ``(C) which is issued as part of an issue with 
                respect to which--
                            ``(i) the requirements of paragraph (2) are 
                        met,
                            ``(ii) all of the property to be financed 
                        by the net proceeds of the issue is to be owned 
                        by a governmental unit (within the meaning of 
                        section 142(b)(1)), and
                            ``(iii) the aggregate face amount of bonds 
                        issued pursuant to the issue, when added to the 
                        aggregate face amount of broadband 
                        infrastructure bonds previously issued by the 
                        issuing authority during the calendar year, 
                        does not exceed such issuing authority's 
                        allocation of its State's volume cap under 
                        subsection (d) for such year, and
                    ``(D) with respect to which the issuer makes an 
                irrevocable election to have this section apply.
            ``(2) Special rules relating to expenditures.--
                    ``(A) In general.--An issue shall be treated as 
                meeting the requirements of this paragraph if, as of 
                the date of issuance, the issuer reasonably expects--
                            ``(i) 95 percent of the available project 
                        proceeds to be spent in connection with 1 or 
                        more qualified broadband projects within the 3-
                        year period beginning on such date of issuance, 
                        and
                            ``(ii) a binding commitment with a third 
                        party to spend at least 10 percent of such 
                        available project proceeds will be incurred 
                        within the 6-month period beginning on such 
                        date of issuance.
                    ``(B) Failure to spend required amount of bond 
                proceeds within 3 years.--
                            ``(i) In general.--To the extent that less 
                        than 95 percent of the available project 
                        proceeds of the issue are expended by the close 
                        of the expenditure period, the issuer shall 
                        redeem all of the nonqualified bonds within 90 
                        days after the end of such period. For purposes 
                        of this paragraph, the amount of the 
                        nonqualified bonds required to be redeemed 
                        shall be determined in the same manner as under 
                        section 142.
                            ``(ii) Expenditure period.--For purposes of 
                        this section, the term `expenditure period' 
                        means, with respect to any issue, the 3-year 
                        period beginning on the date of issuance. Such 
                        term shall include any extension of such period 
                        under clause (iii).
                            ``(iii) Extension of period.-- Upon 
                        submission of a request prior to the expiration 
                        of the expenditure period (determined without 
                        regard to any extension under this clause), the 
                        Secretary may extend such period if the issuer 
                        establishes that the failure to expend the 
                        proceeds within the original expenditure period 
                        is due to reasonable cause and the expenditures 
                        in connection with 1 or more qualified 
                        broadband projects will continue to proceed 
                        with due diligence.
                    ``(C) Reimbursement.--For purposes of this 
                subtitle, available project proceeds of an issue shall 
                be treated as spent in connection with 1 or more 
                qualified broadband projects if such proceeds are used 
                to reimburse the issuer for amounts paid in connection 
                with such projects after the date that an allocation of 
                a State's volume cap under subsection (d) has been made 
                with respect to such issue, but only if-
                            ``(i) prior to the payment of the original 
                        expenditure, the issuer declared its intent to 
                        reimburse such expenditure with the proceeds of 
                        such issue,
                            ``(ii) not later than 60 days after payment 
                        of the original expenditure, the issuer adopts 
                        an official intent to reimburse the original 
                        expenditure with such proceeds, and
                            ``(iii) the reimbursement is made not later 
                        than 18 months after the date the original 
                        expenditure is paid.
            ``(3) Limitation on issue price.--An obligation shall not 
        be treated as a broadband infrastructure bond if the issue 
        price has more than a de minimis amount (determined under rules 
        similar to the rules of section 1273(a)(3)) of premium over the 
        stated principal amount of the obligation.
            ``(4) Available project proceeds.--For purposes of this 
        subsection, the term `available project proceeds' means, with 
        respect to any issue, the sum of--
                    ``(A) the excess of--
                            ``(i) the proceeds from the sale of an 
                        issue, over
                            ``(ii) the issuance costs financed by the 
                        issue (to the extent that such costs do not 
                        exceed 2 percent of such proceeds), plus
                    ``(B) the proceeds from any investment of the 
                excess described in subparagraph (A).
            ``(5) Qualified broadband project.-- For purposes of this 
        subsection, the term `qualified broadband project' has the 
        meaning given such term by section 142(n).
    ``(d) Limitation on Amount of Bonds Designated.--
            ``(1) National limitation.--There is a national broadband 
        infrastructure bond limitation for each calendar year of 
        $2,500,000,000.
            ``(2) State volume cap; allocation.--For purposes of this 
        subsection, the broadband infrastructure bonds volume cap of a 
        State for any calendar year is the portion of the national 
        broadband infrastructure bond limitation under paragraph (1) 
        equal to the sum of--
                    ``(A) $25,000,000, plus
                    ``(B) the amount which bears the same ratio to 
                $1,250,000,000 as the--
                            ``(i) number of individuals in such State 
                        who reside in rural areas (as defined in 
                        section 343(a)(13) of the Consolidated Farm and 
                        Rural Development Act (7 U.S.C. 1991(a)(13) 
                        without regard to subparagraph (B) or (C) 
                        thereof), bears to
                            ``(ii) the total number of individuals 
                        living in such rural areas in all States.
            ``(3) Allocation of volume cap.--
                    ``(A) In general.--For purposes of this section--
                            ``(i) except as provided in subparagraph 
                        (C), 50 percent of the State broadband 
                        infrastructure bonds volume cap of a State for 
                        any calendar year shall be allocated to 
                        qualified issuers that are not agencies of the 
                        State in the amount determined under 
                        subparagraph (B), and
                            ``(ii) the remaining 50 percent of such 
                        volume cap shall be allocated to qualified 
                        issuers in such manner as the State provides.
                    ``(B) Amount of allocation.--
                            ``(i) In general.--The amount of the State 
                        broadband infrastructure bonds volume cap for 
                        any calendar year allocated under this 
                        subparagraph to any qualified issuer described 
                        in subparagraph (A)(i) shall be equal to the 
                        amount which bears the same ratio to the amount 
                        described in subparagraph (A)(i) for such 
                        calendar year as--
                                    ``(I) the number of individuals in 
                                such State who reside in rural areas 
                                (as defined in section 343(a)(13) of 
                                the Consolidated Farm and Rural 
                                Development Act (7 U.S.C. 1991(a)(13) 
                                without regard to subparagraph (B) or 
                                (C) thereof) within the jurisdiction of 
                                such qualified issuer, bears to
                                    ``(II) the total number of 
                                individuals living in such rural areas 
                                in the State.
                            ``(ii) Special rule for overlapping 
                        jurisdictions.--For purposes of clause (i)(I), 
                        if an area is within the jurisdiction of 2 or 
                        more governmental units, such area shall be 
                        treated as only within the jurisdiction of the 
                        unit having jurisdiction over the smallest 
                        geographical area unless such unit agrees to 
                        surrender all or part of such jurisdiction for 
                        such calendar year to the unit with overlapping 
                        jurisdiction which has the next smallest 
                        geographical area.
                    ``(C) Reallocation.--The amount allocated under 
                this paragraph to any qualified issuer may be 
                reallocated by such issuer to the State for 
                reallocation to other qualified issuers (including 
                agencies of the State).
            ``(4) Carryover of unused limitation.--
                    ``(A) In general.--If, for any calendar year, a 
                State's broadband infrastructure bonds volume cap 
                exceeds the amount of bonds issued during such year 
                which are designated as broadband infrastructure bonds 
                under subsection (c)(1)(D) with respect to broadband 
                projects within such State, the broadband 
                infrastructure bonds volume cap for such State for the 
                following calendar year shall be increased by the 
                amount of such excess.
                    ``(B) Limitation on carryover.--Any carryforward of 
                an excess amount may be carried only to the first 2 
                years following the unused volume cap year. For 
                purposes of the preceding sentence, a volume cap amount 
                shall be treated as used on a first-in first-out basis.
    ``(e) Other Rules and Definitions.--
            ``(1) Interest includible in income.--For purposes of this 
        title, interest on any broadband infrastructure bond shall be 
        includible in gross income.
            ``(2) Credit not a federal guarantee.--For purposes of 
        section 149(b), a broadband infrastructure bond shall not be 
        treated as Federally guaranteed by reason of the credit allowed 
        under this section.
            ``(3) Coordination with section 148.--
                    ``(A) Yield reduced by credit.--For purposes of 
                section 148, the yield on a broadband infrastructure 
                bond shall be determined by reducing the otherwise 
                effective yield by the amount of the credit allowed to 
                the issuer under this section.
                    ``(B) Investment during extension period.--An issue 
                shall not be treated as failing to meet the 
                requirements of section 148 by reason of any investment 
                of available project proceeds during the expenditure 
                period.
            ``(4) Rural populations.--For purposes of this section, the 
        determination of the number of individuals living in rural 
        areas shall be made in consultation with the Secretary of 
        Agriculture.
            ``(5) Definitions.--For purposes of this section--
                    ``(A) Qualified issuer.--The term `qualified 
                issuer' means a State or any political subdivision or 
                instrumentality thereof having authority to issue 
                private activity bonds.
                    ``(B) State.--Notwithstanding section 7701(a)(10), 
                the term `State' only includes the 50 States.
    ``(f) Regulations.--The Secretary may prescribe such regulations 
and other guidance as may be necessary or appropriate to carry out this 
section.''.
    (b) Conforming Amendments.--
            (1) Section 6401(b)(1) of the Internal Revenue Code of 1986 
        is amended by striking ``under subparts A, B, D, and G of such 
        part IV'' and inserting ``under all subparts of such part IV 
        other than such subpart C''.
            (2) The table of sections for subchapter B of chapter 65 of 
        such Code is amended by inserting after the item related to 
        section 6430 the following new section:

``Sec. 6431. Credit for broadband infrastructure bonds allowed to 
                            issuer.''.
    (c) Gross-Up of Payment to Issuers in Case of Sequestration.--The 
amount of any payment under section 6431(b) of the Internal Revenue 
Code of 1986 made after the date of the enactment of this Act to which 
sequestration applies shall be increased by the amount necessary to 
preserve the full amount of such payment payable to the issuer before 
sequestration. For purposes of this subsection, the term 
``sequestration'' means any reduction in direct spending ordered in 
accordance with a sequestration report prepared by the Director of the 
Office and Management and Budget pursuant to the Balanced Budget and 
Emergency Deficit Control Act of 1985 or the Statutory Pay-As-You-Go 
Act of 2010.
    (d) Effective Date.--The amendments made by this section shall 
apply to bonds issued in calendar years beginning after the date of the 
enactment of this Act.

                    TITLE II--INVESTMENT TAX CREDIT

SEC. 201. INVESTMENT CREDIT FOR QUALIFYING BROADBAND PROJECTS.

    (a) In General.--Subpart E of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 48C the following new section:

``SEC. 48D. QUALIFYING BROADBAND PROJECT CREDIT.

    ``(a) In General.--For purposes of section 46, the qualifying 
broadband project credit for any taxable year is an amount equal to 10 
percent of the qualified investment for such taxable year with respect 
to any qualifying broadband project.
    ``(b) Qualified Investment.--
            ``(1) In general.--For purposes of subsection (a), the 
        qualified investment for any taxable year is the basis of 
        eligible property placed in service by the taxpayer during such 
        taxable year which is part of a qualifying broadband project--
                    ``(A)(i) the construction, reconstruction, or 
                erection of which is completed by the taxpayer, or
                    ``(ii) which is acquired by the taxpayer if the 
                original use of such property commences with the 
                taxpayer, and
                    ``(B) with respect to which depreciation (or 
                amortization in lieu of depreciation) is allowable.
            ``(2) Special rule for certain subsidized property.--Rules 
        similar to section 48(a)(4) (without regard to subparagraph (D) 
        thereof) shall apply for purposes of this section.
            ``(3) Certain qualified progress expenditures rules made 
        applicable.--Rules similar to the rules of subsections (c)(4) 
        and (d) of section 46 (as in effect on the day before the 
        enactment of the Revenue Reconciliation Act of 1990) shall 
        apply for purposes of this section.
    ``(c) Limitation.--
            ``(1) In general.--The amount of the credit allowed under 
        subsection (a) for any taxable year with respect to any 
        qualifying broadband project shall not exceed the broadband 
        credit dollar amount allocated to such project by a State under 
        this section.
            ``(2) Broadband credit dollar amount.--
                    ``(A) In general.--The aggregate broadband credit 
                dollar amount which may be allocated for any calendar 
                year by any State shall not exceed the sum of--
                            ``(i) $5,000,000, plus
                            ``(ii) the amount that bears the same ratio 
                        to $2,500,000 as the population of individuals 
                        in the state residing in rural areas bears the 
                        population of individuals residing in rural 
                        areas in all States.
                    ``(B) Broadband credit dollar amount 
                carryforward.--
                            ``(i) In general.--If the limitation under 
                        subparagraph (A) (determined without regard to 
                        this subparagraph) exceeds the aggregate amount 
                        of broadband credit dollar amounts allocated 
                        for any calendar year, such excess shall be 
                        treated as a broadband credit dollar amount 
                        carryforward and added to the limitation under 
                        such subparagraph for the 2 succeeding calendar 
                        years.
                            ``(ii) Ordering rules.--Broadband credit 
                        dollar amount carryforwards shall be treated as 
                        used in the order in which they arose.
    ``(d) Qualifying Broadband Project.--For purposes of this section--
            ``(1) In general.--The term `qualifying broadband project' 
        means any project which--
                    ``(A) is designed to provide broadband service 
                solely to 1 or more areas--
                            ``(i) which are rural areas, and
                            ``(ii) in which more than 50 percent of 
                        residential households do not have access to 
                        fixed, terrestrial broadband service which 
                        delivers at least 25 megabits per second 
                        downstream and at least 3 megabits service 
                        upstream,
                    ``(B) results in gigabit capable Internet access to 
                residential locations, commercial locations, or a 
                combination of residential and commercial locations, 
                but only if at least 90 percent of the locations 
                provided such access under the project are locations 
                where, before the project, a broadband service 
                provider--
                            ``(i) did not provide service, or
                            ``(ii) did not provide service which meets 
                        the minimum speed requirements described in 
                        subparagraph (A)(ii), and
                    ``(C) is certified by the Secretary pursuant to 
                paragraph (2).
            ``(2) Qualifying broadband project certification program.--
                    ``(A) In general.--Not later than 180 days after 
                the date of enactment of this section, the Secretary, 
                in consultation with the Chairman of the Federal 
                Communications Commission and the Secretary of 
                Agriculture, shall establish a qualifying broadband 
                project certification program to consider and award 
                certifications for qualified investments eligible for 
                credits under this section.
                    ``(B) Application period.--
                            ``(i) In general.--Each applicant for 
                        certification under this paragraph shall submit 
                        an application containing such information as 
                        the Secretary may require during each annual 
                        application period.
                            ``(ii) Annual application period.--For 
                        purposes of this paragraph, the term `annual 
                        application period' means a 60-day period 
                        beginning each calendar year on the date 
                        determined by the Secretary.
                    ``(C) Nomination.--A project may not be certified 
                under this paragraph unless--
                            ``(i) the project is nominated by a State 
                        or local government in a single, uniform 
                        application that is submitted to the Secretary 
                        by each State on behalf of projects nominated 
                        by the State and by its localities, and
                            ``(ii) such State or local government 
                        provides written assurances within the 
                        application under clause (i) that the project 
                        satisfies the requirements of subparagraphs (A) 
                        and (B) of paragraph (1).
                    ``(D) Certification.--Not later than 60 days after 
                the end of the annual application period, the 
                Secretary, in consultation with the Chairman of the 
                Federal Communications Commission and the Secretary of 
                Agriculture, shall award certifications under this 
                section.
    ``(e) Definitions.--For purposes of this section--
            ``(1) Eligible property.--The term `eligible property' 
        means any property which is a part of a qualifying broadband 
        project.
            ``(2) Rural area.--The term `rural area' has the meaning 
        given such term under section 343(a)(13) of the Consolidated 
        Farm and Rural Development Act (7 U.S.C. 1991(a)(13)), 
        determined without regard to subparagraph (B) or (C) thereof.
            ``(3) State.--The term `State' means the 50 States.''.
    (b) Conforming Amendments.--
            (1) Section 46 of the Internal Revenue Code of 1986 is 
        amended by striking ``and'' at the end of paragraph (5), by 
        striking the period at the end of paragraph (6) and inserting 
        ``, and'', and by adding at the end the following new 
        paragraph:
            ``(7) the qualifying broadband project credit.''.
            (2) Section 49(a)(1)(C) of such Code is amended by striking 
        ``and'' at the end of clause (iv), by striking the period at 
        the end of clause (v) and inserting ``, and'', and by adding at 
        the end the following new clause:
                            ``(vi) the basis of any property which is 
                        part of a qualifying broadband project under 
                        section 48D.''.
            (3) Section 50(a)(2)(E) of such Code is amended by striking 
        ``or 48C(b)(2)'' and inserting ``48C(b)(2), or 48D(b)(3)''.
            (4) The table of sections for subpart E of part IV of 
        subchapter A of chapter 1 of such Code is amended by inserting 
        after the item relating to section 48C the following new item:

``Sec. 48D. Qualifying broadband project credit.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to periods after December 31, 2021, in taxable years ending after 
such date, under rules similar to the rules of section 48(m) of such 
Code (as in effect on the day before the date of the enactment of the 
Revenue Reconciliation Act of 1990).
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