SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small and Rural Communities 
Wastewater Infrastructure Act''.

SEC. 2. PUBLICLY OWNED TREATMENT WORKS SERVING SMALL AND DISADVANTAGED 
              COMMUNITIES.

    Title VI of the Federal Water Pollution Control Act (33 U.S.C. 1381 
et seq.) is amended--
            (1) by redesignating section 607 as section 608; and
            (2) by inserting after section 606 the following:

``SEC. 607. PUBLICLY OWNED TREATMENT WORKS SERVING SMALL AND 
              DISADVANTAGED COMMUNITIES.

    ``(a) Allocation of Funds for Small Treatment Works.--
            ``(1) In general.--Of the funds received by a State in 
        capitalization grants under this title for a fiscal year--
                    ``(A) not less than 5 percent shall be used to 
                provide assistance to publicly owned treatment works 
                that regularly serve 5,000 or fewer persons, to the 
                extent that there are sufficient applications for such 
                assistance;
                    ``(B) not less than 10 percent shall be used to 
                provide assistance to publicly owned treatment works 
                that regularly serve between 5,001 and 20,000 persons, 
                to the extent that there are sufficient applications 
                for such assistance; and
                    ``(C) not less than 15 percent shall be used to 
                provide assistance to publicly owned treatment works 
                that regularly serve between 20,001 and 50,000 persons, 
                to the extent that there are sufficient applications 
                for such assistance.
            ``(2) Use of funds in other categories.--If a State is not 
        able to use an amount of funds to provide assistance to 
        publicly owned treatment works in accordance with paragraph 
        (1)(A), (1)(B), or (1)(C) because there are not sufficient 
        applications, the State, to the maximum extent practicable, 
        shall use that amount of funds to provide assistance for 
        another purpose specified in paragraph (1).
            ``(3) Limitation on statutory construction.--Nothing in 
        paragraph (1)(A), (1)(B), or (1)(C) shall be construed to limit 
        the amount of funds received by a State in capitalization 
        grants under this title that may be used by the State for the 
        purposes described in that paragraph.
    ``(b) Preconstruction Assistance for Small Treatment Works.--
            ``(1) Authority to make preloans.--Notwithstanding any 
        other provision of this title, a State may use funds received 
        in capitalization grants under this title for making preloans 
        to eligible recipients in accordance with the requirements of 
        this subsection.
            ``(2) Eligible uses of preloans.--A preloan received by an 
        eligible recipient under this subsection may be used for the 
        following costs incurred in connection with an eligible 
        project:
                    ``(A) Project development.
                    ``(B) Environmental studies.
                    ``(C) Legal and administrative expenses.
                    ``(D) Project design.
                    ``(E) Such other costs as the Administrator 
                determines appropriate, as prescribed by regulation.
            ``(3) Ineligible use.--A preloan received by an eligible 
        recipient under this subsection may not be used for costs 
        related to land acquisition.
            ``(4) Maximum individual preloan amount.--The amount of a 
        preloan made under this subsection in connection with an 
        eligible project may not exceed 10 percent of the estimated 
        cost of the project.
            ``(5) Maximum aggregate preloan amount.--Not to exceed 15 
        percent of the funds received by a State in capitalization 
        grants under this title for a fiscal year may be used to 
        provide preloans under this subsection.
            ``(6) Repayment of preloans.--
                    ``(A) In general.--For purposes of repayment, a 
                preloan made to an eligible recipient in connection 
                with an eligible project shall be treated as part of 
                the principal amount of the primary loan made by the 
                State for the project. Except as provided by 
                subparagraph (B), repayment of preloan amounts shall 
                not be required until payments begin for the primary 
                loan amount and interest on preloan amounts shall not 
                begin to accrue until interest begins to accrue on the 
                primary loan amount.
                    ``(B) Deadline for primary loan application.--
                            ``(i) In general.--If an eligible recipient 
                        under this subsection in connection with an 
                        eligible project does not apply for a primary 
                        loan for the project in the 3-year period 
                        beginning on the date of issuance of the 
                        preloan, the State may require, at the 
                        discretion of the State, repayment of the 
                        preloan with interest.
                            ``(ii) Exceptions.--A State shall not 
                        impose a penalty under clause (i) on an 
                        eligible recipient that receives a preloan for 
                        an eligible project, if the State determines 
                        that the eligible recipient did not comply with 
                        the 3-year deadline established by clause (i) 
                        due to--
                                    ``(I) a delay in environmental 
                                reviews conducted by a Federal or State 
                                agency; or
                                    ``(II) insufficient funds in the 
                                State's water pollution control 
                                revolving fund established under this 
                                title for the State to make a primary 
                                loan for the project.
            ``(7) Definitions.--In this subsection, the following 
        definitions apply:
                    ``(A) Eligible project.--The term `eligible 
                project' means a project eligible for assistance under 
                section 603(c)(1) for construction of a public owned 
                treatment works that will regularly serve 50,000 or 
                fewer persons.
                    ``(B) Eligible recipient.--The term `eligible 
                recipient' means a municipality or intermunicipal, 
                interstate, or State agency seeking assistance for an 
                eligible project.
                    ``(C) Preloan.--The term `preloan' means financial 
                assistance provided by a State from the State's water 
                pollution control revolving loan fund established under 
                this title for an eligible project before approval of a 
                primary loan for the project.
                    ``(D) Primary loan.--The term `primary loan' means 
                a loan made by a State from the State's water pollution 
                control revolving loan fund under this title for an 
                eligible project after a preloan is made for that 
                project.
    ``(c) Additional Assistance for Disadvantaged Communities.--
            ``(1) Criteria for designation of disadvantaged 
        communities.--The Governor of a State, after providing an 
        opportunity for public review and comment, may establish 
        criteria to designate disadvantaged communities that--
                    ``(A) have a population of 50,000 persons or fewer; 
                and
                    ``(B) would experience a significant hardship 
                raising the revenue necessary to finance a project 
                eligible for assistance under section 603(c)(1) if 
                assistance is not provided under this subsection.
            ``(2) Additional assistance.--
                    ``(A) In general.--In any case in which a State 
                provides loan assistance to a municipality or 
                intermunicipal, interstate, or State agency for a 
                project under section 603(d), the State may provide 
                additional assistance in connection with the loan if 
                the project is to benefit a disadvantaged community 
                identified by the State using the criteria developed 
                under paragraph (1).
                    ``(B) Types of additional assistance.--Additional 
                assistance under subparagraph (A) shall consist of--
                            ``(i) forgiveness of all or a portion of 
                        the principal of the loan;
                            ``(ii) not requiring or reducing interest 
                        to be paid in connection with the loan;
                            ``(iii) extending the loan repayment period 
                        to not to exceed 30 years; or
                            ``(iv) any combination thereof.''.

SEC. 3. APPLICATION PROCESS REFORM.

    (a) In General.--Not later than 3 years after the date of enactment 
of this Act, the Administrator of the Environmental Protection Agency 
shall--
            (1) consult with States, utilities, nonprofit 
        organizations, and other Federal agencies providing finance 
        assistance to identify ways to expedite and improve the 
        application and review process for obtaining financing from a 
        State water pollution control revolving loan fund under title 
        VI of the Federal Water Pollution Control Act (33 U.S.C. 1381 
        et seq.); and
            (2) take such administrative actions as the Administrator 
        determines appropriate to expedite and improve the process.
    (b) Report to Congress.--Not later than 3 years after the date of 
enactment of this Act, the Administrator shall submit to Congress a 
report that contains recommendations to further expedite and improve 
the application and review process referred to in subsection (a)(1), 
including recommendations for any legislative actions that may be 
needed.
Output: Small and Rural Communities Wastewater Infrastructure Act - Amends the Federal Water Pollution Control Act (commonly known as the Clean Water Act) to allocate at least 5%, 10%, or 15% of funds received by a state in capitalization grants to provide assistance to publicly owned treatment works that serve populations of 5,000 or fewer persons, 5,001 to 20,000 persons, or 20,001 to 50,000 persons, respectively.

Authorizes a state to use funds received in capitalization grants for making preloans (financial assistance from the state's water pollution control revolving loan fund) to municipalities or intermunicipal, interstate, or state agencies for costs incurred in connection with project development, environmental studies, legal and administrative expenses, and project design for construction of a public owned treatment works that will regularly serve 50,000 or fewer persons. Prohibits a preloan from being used for costs related to land acquisition.

Authorizes a state agency to provide additional assistance in connection with a state water pollution control revolving loan if a project is to benefit a disadvantaged community with a population of 50,000 persons or fewer by: (1) forgiving all or a portion of the principal of the loan; (2) not requiring or reducing interest to be paid in connection with the loan; and (3) extending the loan repayment period to not to exceed 30 years.

Requires the Administrator of the Environmental Protection Agency (EPA) to identify, implement, and make further recommendations regarding ways to expedite and improve the application and review process for obtaining financing from a state water pollution control revolving loan fund.