[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 1859 Introduced in Senate (IS)]
106th CONGRESS
1st Session
S. 1859
To amend the Internal Revenue Code of 1986 to provide a tax credit to
taxpayers investing in economically distressed rural communities, and
for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
November 4, 1999
Mr. Grams introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide a tax credit to
taxpayers investing in economically distressed rural communities, and
for other purposes.
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 Revitalization Act of 1999''.
SEC. 2. RURAL REVITALIZATION TAX 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. 45D. RURAL REVITALIZATION TAX CREDIT.
``(a) Allowance of Credit.--
``(1) In general.--For purposes of section 38, the rural
revitalization tax credit determined under this section with
respect to taxpayer for a taxable year is an amount equal to
the sum of--
``(A) the development credit, and
``(B) the wage credit.
``(2) Credits.--For purposes of paragraph (1)--
``(A) Development credit.--The term `development
credit' means, in the case of a taxpayer who holds a
qualified equity investment on a credit allowance date
of such investment which occurs during the taxable
year, 6 percent of the amount paid to the qualified
community development entity for such investment at its
original issue.
``(B) Wage credit.--The term `wage credit' means,
in the case of any employer, the qualified wages paid
or incurred during the calendar year which ends with or
within such taxable year.
``(3) Credit allowance date.--The term `credit allowance
date' means, with respect to any qualified equity investment--
``(A) the date on which such investment is
initially made, and
``(B) each of the 6 annual anniversary dates of
such date thereafter.
``(b) Qualified Equity Investment.--For purposes of this section--
``(1) In general.--The term `qualified equity investment'
means any equity investment in a qualified economic development
entity if--
``(A) such investment is acquired by the taxpayer
at its original issue (directly or through an
underwriter) solely in exchange for cash,
``(B) substantially all of the proceeds from such
investment are used by the qualified economic
development entity to make qualified low-income rural
community investments, and
``(C) such investment is designated for purposes of
this section by the qualified economic development
entity.
Such term shall not include any equity investment issued by a
qualified economic development entity more than 7 years after
the date that such entity receives an allocation under
subsection (g). Any allocation not used within such 7-year
period may be reallocated by the Secretary under subsection
(g).
``(2) Limitation.--The maximum amount of equity investments
issued by a qualified economic development entity which may be
designated under paragraph (1)(C) by such entity shall not
exceed the portion of the limitation amount allocated under
subsection (g) to such entity.
``(3) Safe harbor for determining use of cash.--The
requirement of paragraph (1)(B) shall be treated as met if at
least 85 percent of the aggregate gross assets of the qualified
economic development entity are invested in qualified low-
income rural community investments.
``(4) Treatment of subsequent purchasers.--The term
`qualified equity investment' includes any equity investment
which would (but for paragraph (1)(A)) be a qualified equity
investment in the hands of the taxpayer if such investment was
a qualified equity investment in the hands of a prior holder.
``(5) Redemptions.--A rule similar to the rule of section
1202(c)(3) shall apply for purposes of this subsection.
``(6) Equity investment.--The term `equity investment'
means--
``(A) any stock in a qualified economic development
entity which is a corporation, and
``(B) any capital interest in a qualified economic
development entity which is a partnership.
``(c) Qualified Economic Development Entity.--For purposes of this
section--
``(1) In general.--The term `qualified economic development
entity' means any domestic corporation or partnership if--
``(A) the primary mission of the entity is serving,
or providing investment capital for, low-income rural
communities or low-income persons located in such
communities, and
``(B) the entity is certified by the Secretary for
purposes of this section as being a qualified economic
development entity.
``(2) Special rules for certain organizations.--The
requirements of paragraph (1) shall be treated as met by--
``(A) any specialized small business investment
company (as defined in section 1044(c)(3)), and
``(B) any community development financial
institution (as defined in section 103 of the Community
Development Banking and Financial Institutions Act of
1994 (12 U.S.C. 4702)).
``(d) Qualified Low-Income Rural Community Investments.--For
purposes of this section--
``(1) In general.--The term `qualified low-income rural
community investment' means--
``(A) any equity investment in, or loan to, any
qualified active low-income rural community business,
``(B) the purchase from another economic
development entity of any loan made by such entity
which is a qualified low-income rural community
investment if the amount received by such other entity
from such purchase is used by such other entity to make
qualified low-income rural community investments,
``(C) financial counseling and other services
specified in regulations prescribed by the Secretary to
businesses located in, and residents of, low-income
rural communities, and
``(D) any equity investment in, or loan to, any
qualified economic development entity if substantially
all of the investment or loan is used by such entity to
make qualified low-income rural community investments
described in subparagraphs (A), (B), and (C).
``(2) Qualified active low-income rural community
business.--
``(A) In general.--For purposes of paragraph (1),
the term `qualified active low-income rural community
business' means, with respect to any taxable year, any
corporation or partnership if for such year--
``(i) at least 50 percent of the total
gross income of such entity is derived from the
active conduct of a qualified business within
any low-income rural community,
``(ii) a substantial portion of the use of
the tangible property of such entity (whether
owned or leased) is within any low-income rural
community,
``(iii) a substantial portion of the
services performed for such entity by its
employees are performed in any low-income rural
community,
``(iv) less than 5 percent of the average
of the aggregate unadjusted bases of the
property of such entity is attributable to
collectibles (as defined in section 408(m)(2))
other than collectibles that are held primarily
for sale to customers in the ordinary course of
such business, and
``(v) less than 5 percent of the average of
the aggregate unadjusted bases of the property
of such entity is attributable to nonqualified
financial property (as defined in section
1397B(e)).
``(B) Proprietorship.--Such term shall include any
business carried on by an individual as a proprietor if
such business would meet the requirements of
subparagraph (A) were it incorporated.
``(C) Portions of business may be qualified active
low-income rural community business.--The term
`qualified active low-income rural community business'
includes any trades or businesses which would qualify
as a qualified active low-income rural community
business if such trades or businesses were separately
incorporated.
``(3) Qualified business.--For purposes of this subsection,
the term `qualified business' has the meaning given to such
term by section 1397B(d); except that--
``(A) in lieu of applying paragraph (2)(B) thereof,
the rental to others of real property located in any
low-income rural community shall be treated as a
qualified business if there are substantial
improvements located on such property, and
``(B) paragraph (3) thereof shall not apply.
``(e) Low-Income Rural Community.--For purposes of this section--
``(1) In general.--The term `low-income rural community'
means any population census tract if--
``(A) for the 5 previous calendar years ending
before the date on which the taxable year in which the
investment is made begins--
``(i) the average poverty rate for such
tract is at least 20 percent, or
``(ii) the average median family income for
such tract does not exceed 80 percent of
statewide median family income of the State in
which such tract is located, and
``(B) the tract is not located within a
metropolitan area.
``(2) Areas not within census tracts.--In the case of an
area which is not tracted for population census tracts, the
equivalent county divisions (as defined by the Bureau of the
Census for purposes of defining poverty areas) shall be used
for purposes of determining poverty rates and median family
income.
``(3) Targeted population.--The Secretary may prescribe
regulations under which 1 or more targeted populations (within
the meaning of section 3(20) of the Riegle Community
Development and Regulatory Improvement Act of 1974 (12 U.S.C.
4702(20))) may be treated as low-income rural communities. Such
regulations shall include procedures for identifying the area
covered by any such community for purposes of determining
entities which are qualified active low-income rural community
businesses with respect to such community.
``(f) Qualified Wages.--
``(1) In general.--For purposes of this section, the term
`qualified wages' means any wages paid or incurred by an
employer for services performed by an employee while such
employee is a qualified employee.
``(2) Only first $3,000 of wages per year taken into
account.--With respect to each qualified employee, the amount
of qualified wages which may be taken into account for a
calendar year shall not exceed $3,000.
``(3) Coordination with work opportunity credit and
empowerment zone employment credit.--The term `qualified wages'
shall not include wages taken into account in determining the
credit under section 51 or 1396.
``(4) Other definitions; special rules.--
``(A) Qualified employee.--For purposes of this
section--
``(i) In general.--The term `qualified
employee' means, with respect to any period,
any employee of an employer if--
``(I) substantially all of the
services performed during such period
by such employee for such employer are
performed within a low-income rural
community in a trade or business of the
employer, and
``(II) the principal place of abode
of such employee while performing such
services is within such low-income
rural community.
``(ii) Eligibility rules.--Rules similar to
the rules of paragraphs (2) and (3) of section
1396(d) shall apply.
``(B) Wages.--The term `wages' has the same meaning
as when used in section 1396.
``(C) Certain other rules made applicable.--For
purposes of this section, rules similar to the rules of
subsections (b) and (c) of section 1396 shall apply.
``(g) National Limitation on Amount of Investments Designated.--
``(1) In general.--There is a development credit limitation
of $1,200,000,000 for each of calendar years 2000 through 2004.
``(2) Allocation of limitation.--The limitation under
paragraph (1) shall be allocated by the Secretary among
qualified economic development entities selected by the
Secretary. In making allocations under the preceding sentence,
the Secretary shall give priority to entities with records of
having successfully provided capital or technical assistance to
disadvantaged businesses or communities.
``(3) Carryover of unused limitation.--If the development
credit limitation for any calendar year exceeds the aggregate
amount allocated under paragraph (2) for such year, such
limitation for the succeeding calendar year shall be increased
by the amount of such excess.
``(h) Recapture of Credit in Certain Cases.--
``(1) In general.--If, at any time during the 7-year period
beginning on the date of the original issue of a qualified
equity investment in a qualified economic development entity,
there is a recapture event with respect to such investment,
then the tax imposed by this chapter for the taxable year in
which such event occurs shall be increased by the credit
recapture amount.
``(2) Credit recapture amount.--For purposes of paragraph
(1), the credit recapture amount is an amount equal to the sum
of--
``(A) the aggregate decrease in the credits allowed
to the taxpayer under section 38 for all prior taxable
years which would have resulted if no credit had been
determined under this section with respect to such
investment, plus
``(B) interest at the overpayment rate established
under section 6621 on the amount determined under
subparagraph (A) for each prior taxable year for the
period beginning on the due date for filing the return
for the prior taxable year involved.
No deduction shall be allowed under this chapter for interest
described in subparagraph (B).
``(3) Recapture event.--For purposes of paragraph (1),
there is a recapture event with respect to an equity investment
in a qualified economic development entity if--
``(A) such entity ceases to be a qualified economic
development entity,
``(B) the proceeds of the investment cease to be
used as required of subsection (b)(1)(B), or
``(C) such investment is redeemed by such entity.
``(4) Special rules.--
``(A) Tax benefit rule.--The tax for the taxable
year shall be increased under paragraph (1) only with
respect to credits allowed by reason of this section
which were used to reduce tax liability. In the case of
credits not so used to reduce tax liability, the
carryforwards and carrybacks under section 39 shall be
appropriately adjusted.
``(B) No credits against tax.--Any increase in tax
under this subsection shall not be treated as a tax
imposed by this chapter for purposes of determining the
amount of any credit under this chapter or for purposes
of section 55.
``(i) Basis Reduction.--The basis of any qualified equity
investment shall be reduced by the amount of any credit determined
under this section with respect to such investment.
``(j) Regulations.--The Secretary shall prescribe such regulations
as may be appropriate to carry out this section, including
regulations--
``(1) which limit the development credit for investments
which are directly or indirectly subsidized by other Federal
benefits (including the credit under section 42 and the
exclusion from gross income under section 103),
``(2) which prevent the abuse of the provisions of this
section through the use of related parties,
``(3) which impose appropriate reporting requirements, and
``(4) which apply the provisions of this section to newly
formed entities.''
(b) Credit Made Part of General Business Credit.--
(1) In general.--Subsection (b) of section 38 of the
Internal Revenue Code of 1986 is amended by striking ``plus''
at the end of paragraph (12), by striking the period at the end
of paragraph (13) and inserting ``, plus'', and by adding at
the end the following new paragraph:
``(14) the rural revitalization tax credit determined under
section 45D(a).''
(2) Limitation on carryback.--Subsection (d) of section 39
of such Code is amended by adding at the end the following new
paragraph:
``(10) No carryback of rural revitalization tax credit
before january 1, 2000.--No portion of the unused business
credit for any taxable year which is attributable to the credit
under section 45D may be carried back to a taxable year ending
before January 1, 2000.''
(c) Deduction for Unused Credit.--Subsection (c) of section 196 of
the Internal Revenue Code of 1986 is amended by striking ``and'' at the
end of paragraph (7), by striking the period at the end of paragraph
(8) and inserting ``, and'', and by adding at the end the following new
paragraph:
``(9) the rural revitalization tax credit determined under
section 45D(a).''
(d) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 of the Internal Revenue Code of
1986 is amended by adding at the end the following new item:
``Sec. 45D. Rural revitalization tax
credit.''
(e) Effective Date.--The amendments made by this section shall
apply to investments made after December 31, 1999.
SEC. 3. INCREASE IN EXPENSING FOR QUALIFIED ACTIVE LOW-INCOME RURAL
COMMUNITY BUSINESSES.
(a) In General.--Subsection (b) of section 179 of the Internal
Revenue Code of 1986 (relating to election to expense certain
depreciable business assets) is amended by adding at the end the
following new paragraph:
``(5) Increased limitation for qualified active low-income
rural community businesses.--In the case of a qualified active
low-income rural community business (as defined in section
45D(d)(2)), the applicable amount under paragraph (1) shall be
$37,500.''
(b) Conforming Amendment.--Section 179(b)(1) of the Internal
Revenue Code of 1986 (relating to dollar limitation) is amended by
striking ``The aggregate'' and inserting ``Except as provided in
paragraph (5), the aggregate''.
(c) Effective Date.--The amendments made by this section shall
apply to property placed in service after December 31, 1999.
<all>
Introduced in Senate
Sponsor introductory remarks on measure. (CR S13979-13981)
Read twice and referred to the Committee on Finance.
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