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Q: SECTION 1. SHORT TITLE.

This Act may be cited as the ''Rural Microbusiness Investment
Credit Act of 2010''.

SEC. 2. RURAL MICROBUSINESS INVESTMENT CREDIT.

(a) In General.--Subpart D of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 (relating to business related
credits) is amended by adding at the end the following new section:

''SEC. 45S. RURAL MICROBUSINESS INVESTMENT CREDIT.

''(a) In General.--For purposes of section 38, the amount of the
rural microbusiness investment credit determined under this section for
any taxable year with respect to a rural microbusiness is equal to 35
percent of the qualified new investments in the rural microbusiness for
the taxable year.
''(b) Limitations.--
''(1) Per business limitations.--The amount allowed as a
credit under subsection (a) with respect to any rural
microbusiness for a taxable year shall not exceed--
''(A) $10,000, reduced (but not below zero), by
''(B) the amount allowed under subsection (a) to
the rural microbusiness for all preceding taxable
years.
''(2) Per taxpayer limitations.--The amount allowed as a
credit under subsection (a) with respect to any taxpayer with
respect to all rural microbusinesses of the taxpayer for a
taxable year shall not exceed--
''(A) $10,000, reduced (but not below zero), by
''(B) the amount allowed under subsection (a) to
the taxpayer with respect to rural microbusinesses for
all preceding taxable years.
''(c) Definitions.--For purposes of this section--
''(1) Qualified new investment.--The term 'qualified new
investment' means the excess of--
''(A) qualified expenditures paid or incurred for
the taxable year, over
''(B) the greater of--
''(i) qualified expenditures paid or
incurred for the preceding taxable year, or
''(ii) the average annual qualified
expenditures paid or incurred over the
preceding three taxable years.
If the rural microbusiness was not in existence (or
expenditures relating to such microbusiness were not taken into
account under subsection (a)) for the entire 3-year period
referred to in subparagraph (B)(ii), such subparagraph shall be
applied on the basis of the period during which such entity (or
trade or business) was in existence or such expenditures taken
into account.
''(2) Qualified expenditures.--
''(A) In general.--The term 'qualified
expenditures' means any amount which is paid or
incurred with respect to a rural microbusiness which is
not described in subparagraph (B). Such term includes
costs for capital plant and equipment, inventory
expenses, and wages.
''(B) Exception.--Such term does not include--
''(i) any interest cost, or
''(ii) the cost of any vehicle and costs
associated with purchasing a vehicle.
''(3) Rural microbusiness.--
''(A) In general.--The term 'rural microbusiness'
means a trade or business carried on as a
proprietorship, partnership, trust (to the extent that
the trust is a pass-thru entity), S corporation, or
other pass-thru entity if--
''(i) such trade or business is carried on
in a distressed rural area for the first
taxable year in which the credit under
subsection (a) is allowable to the trade or
business,
''(ii) such trade or business meets the
gross revenue test under subparagraph (C) for
the first taxable year in which the credit
under subsection (a) is allowable to the trade
or business,
''(iii) such trade or business employed not
more than 5 full-time equivalent employees
during the taxable year, and
''(iv) in the case of a trade or business
the majority of the activity of which is in
agricultural production, each individual who is
an owner, shareholder, or holds a capital
interest, profits interests, or beneficial
interests (as the case may be) in such trade or
business is a first-time farmer (as defined in
section 147(c)(2)(C)).
All persons treated as a single employer under
subsection (a) or (b) or section 52 or subsection (m)
or (o) of section 414 shall be treated as a trade or
business for purposes of this subparagraph.
''(B) Exceptions.--Such term shall not include--
''(i) any trade or business which includes,
in whole or in part, any private or commercial
golf course, country club, massage parlor, hot
tub facility, suntan facility, racetrack or
other facility used for gambling, or any store
the principal business of which is the sale of
alcoholic beverages for consumption off
premises, or
''(ii) any trade or business with respect
to which records are required under section
2257 of title 18, United States Code, to be
maintained with respect to any performer.
''(C) Gross revenue test.--
''(i) In general.--A trade or business
meets the gross revenue test of this
subparagraph for any taxable year if the
average annual gross revenue of the trade or
business for the 3-taxable year period ending
with the taxable year does not exceed
$1,000,000.
''(ii) Aggregation rules.--All persons
treated as a single employer under subsection
(a) or (b) or section 52 or subsection (m) or
(o) of section 414 shall be treated as a trade
or business for purposes of clause (i).
''(iii) Special rules for entities not in
existence for entire 3-year period, etc.--Rules
similar to the rules of subparagraphs (A), (B),
and (D) of section 448(c)(3) shall apply for
purposes of this subparagraph.
''(D) Self-employed individuals.--For purposes of
this paragraph, if, with respect to a trade or
business, an individual is treated as an employee under
section 401(c), such individual shall be treated as an
employee of such trade or business for purposes of the
preceding sentence.
''(E) Full-time equivalent employee.--For purposes
of this paragraph--
''(i) In general.--The term 'full-time
equivalent employee' means a number of
employees equal to the number determined by
dividing--
''(I) the total number of hours of
service for which wages were paid by
the employer to employees during the
taxable year, by
''(II) 2,080.
Such number shall be rounded to the next lowest
whole number if not otherwise a whole number.
''(ii) Excess hours not counted.--If an
employee works in excess of 2,080 hours of
service during any taxable year, such excess
shall not be taken into account under clause
(i).
''(iii) Hours of service.--The Secretary,
in consultation with the Secretary of Labor,
shall prescribe such regulations, rules, and
guidance as may be necessary to determine the
hours of service of an employee, including
rules for the application of this paragraph to
employees who are not compensated on an hourly
basis.
''(4) Distressed rural area.--
''(A) In general.--The term 'distressed rural area'
means any area in the United States--
''(i) that has lost at least 5 percent of
its population over the last 10 years,
''(ii) that lost at least 10 percent if its
population over the last 20 years,
''(iii) that has median family income below
85 percent of the national median family
income,
''(iv) that has a poverty rate that exceeds
12.5 percent, or
''(v) where average unemployment in the
preceding year exceeds 125 percent of the
national average.
''(B) Exception.--Such term does not include any
area which is--
''(i) a city or town that has a population
of more than 50,000 inhabitants, or
''(ii) an urbanized area contiguous and
adjacent to a city or town described in clause
(i).
''(C) Relevant sources of information.--In
determining whether an area is a distressed rural area
under subparagraph (A) or (B), such determination shall
be made in accordance with the most recent information
from the Bureau of the Census, the Bureau of Labor
Statistics, or other government entity with relevant
information.
''(5) Related persons.--A person shall be treated as
related to another person if the relationship between such
persons would result in the disallowance of losses under
section 267 or 707(b) (but, in applying section 267 (b) and (c)
for purposes of this section, paragraph (4) of section 267(c)
shall be treated as providing that the family of an individual
shall include only his spouse, ancestors, and lineal
descendants).
''(d) Material Participation.--No amount shall be allowed as a
credit under subsection (a) to a taxpayer unless that taxpayer
materially participates in the qualified rural microbusiness with
respect to which the qualified expenditure is paid or incurred. For
purposes of the preceding sentence, material participation shall be
determined under rules similar to the rules of section 469(h).
''(e) Denial of Double Benefit.--No deduction or credit shall be
allowed under any other provision of this chapter for any amount taken
into account in determining the credit under this section.
''(f) Other Rules.--
''(1) Married couple must file joint return.--Rules similar
to the rules of paragraphs (2), (3), and (4) of section 21(e)
shall apply for purposes of this section.
''(2) Denial of credit to dependents.--No credit shall be
allowed under this section to any individual with respect to
whom a deduction is allowed under section 151 is allowable to
another taxpayer for a taxable year beginning in the calendar
year in which such individual's calendar year begins.''.
(b) Credit Allowed as Part of General Business Credit.--Section
38(b) of such Code (defining current year business credit) is amended
by striking ''plus'' at the end of paragraph (35), by striking the
period at the end of paragraph (36) and inserting '', plus'', and by
adding at the end the following new paragraph:
''(37) the rural microbusiness investment credit determined
under section 45R(a).''.
(c) Carryover of Unused Credit.--Subsection (a) of section 39 of
such Code is amended by adding at the end the following new paragraph:
''(4) 5-year carryback for rural microbusiness investment
credit.--Notwithstanding subsection (d), in the case of the
rural microbusiness investment credit--
''(A) this section shall be applied separately from
the business credit and the marginal oil and gas well
production credit (other than the rural microbusiness
investment credit),
''(B) paragraph (1) shall be applied by
substituting 'each of the 5 taxable years' for 'the
taxable year' in subparagraph (A) thereof, and
''(C) paragraph (2) shall be applied--
''(i) by substituting '25 taxable years'
for '21 taxable years' in subparagraph (A)
thereof, and
''(ii) by substituting '24 taxable years'
for '20 taxable years' in subparagraph (B)
thereof.''.
(d) Conforming Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 of such Code is amended by adding
at the end the following new item:

''Sec. 45S. Rural microbusiness investment credit.''.
(e) Effective Date.--The amendments made by this section shall
apply to expenditures made in taxable years beginning after the date of
the enactment of this Act.
A:
Rural Microbusiness Investment Credit Act of 2010 - Amends the Internal Revenue Code to allow a business-related tax credit for 35% of new investment in a rural microbusiness. Imposes limits on such credit for businesses and individual taxpayers.

Defines: (1) "rural microbusiness" as a trade or business that employs not more than 5 full-time employees in a taxable year and is carried on in a distressed rural area; and (2) "distressed rural area" as an area that has lost at least 5% of its population over the last 10 years or 10% of its population over the last 20 years, that has a median family income below 85 % of the national median family income, that has a poverty rate that exceeds 12.5%, or where average unemployment in the preceding year exceeds 125% of the national average.