[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5579 Introduced in House (IH)]







107th CONGRESS
  2d Session
                                H. R. 5579

         To promote rural development, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 8, 2002

 Mr. Shuster introduced the following bill; which was referred to the 
   Committee on Ways and Means, and in addition to the Committees on 
 Education and the Workforce, and Energy and Commerce, for a period to 
      be subsequently determined by the Speaker, in each case for 
consideration of such provisions as fall within the jurisdiction of the 
                          committee concerned

_______________________________________________________________________

                                 A BILL


 
         To promote rural development, 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 Development Act of 2002''.

                  TITLE I--RURAL INVESTMENT TAX CREDIT

SEC. 101. RURAL INVESTMENT 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:

``SEC. 42A. RURAL INVESTMENT CREDIT.

    ``(a) In General.--For purposes of section 38, the amount of the 
rural investment credit determined under this section for any taxable 
year in the credit period shall be an amount equal to the applicable 
percentage of the eligible basis of each qualified rural investment 
building.
    ``(b) Applicable Percentage: 50 Percent Present Value Credit for 
New Buildings; 50 Percent Present Value Credit for Existing 
Buildings.--For purposes of this section--
            ``(1) In general.--The term `applicable percentage' means 
        the appropriate percentage prescribed by the Secretary for the 
        earlier of--
                    ``(A) the first month of the credit period with 
                respect to a rural investment building, or
                    ``(B) at the election of the taxpayer, the month in 
                which the taxpayer and the rural investment credit 
                agency enter into an agreement with respect to such 
                building (which is binding on such agency, the 
                taxpayer, and all successors in interest) as to the 
                rural investment credit dollar amount to be allocated 
                to such building.
        A month may be elected under subparagraph (B) only if the 
        election is made not later than the 5th day after the close of 
        such month. Such an election, once made, shall be irrevocable.
            ``(2) Method of prescribing percentages.--The percentages 
        prescribed by the Secretary for any month shall be percentages 
        which will yield over a 10-year period amounts of credit under 
        subsection (a) which have a present value equal to--
                    ``(A) 50 percent of the eligible basis of a new 
                building, and
                    ``(B) 50 percent of the eligible basis of an 
                existing building.
            ``(3) Method of discounting.--The present value under 
        paragraph (2) shall be determined--
                    ``(A) as of the last day of the 1st year of the 10-
                year period referred to in paragraph (2),
                    ``(B) by using a discount rate equal to 72 percent 
                of the average of the annual Federal mid-term rate and 
                the annual Federal long-term rate applicable under 
                section 1274(d)(1) to the month applicable under 
                subparagraph (A) or (B) of paragraph (1) and compounded 
                annually, and
                    ``(C) by assuming that the credit allowable under 
                this section for any year is received on the last day 
                of such year.
    ``(c) Eligible Basis; Qualified Rural Investment Building.--For 
purposes of this section--
            ``(1) Eligible basis.--
                    ``(A) In general.--The eligible basis of any 
                qualified rural investment building for any taxable 
                year shall be determined under rules similar to the 
                rules under section 42(d), except that--
                            ``(i) the determination of the adjusted 
                        basis of any building shall be made as of the 
                        beginning of the credit period, and
                            ``(ii) such basis shall include development 
                        costs properly attributable to such building.
                    ``(B) Development costs.--For purposes of 
                subparagraph (A)(ii), the term `development costs' 
                includes--
                            ``(i) site preparation costs,
                            ``(ii) State and local impact fees,
                            ``(iii) reasonable development costs,
                            ``(iv) professional fees related to basis 
                        items,
                            ``(v) construction financing costs related 
                        to basis items other than land, and
                            ``(vi) on-site and adjacent improvements 
                        required by State and local governments.
            ``(2) Qualified rural investment building.--The term 
        `qualified rural investment building' means any building which 
        is part of a qualified rural investment project at all times 
        during the period--
                    ``(A) beginning on the 1st day in the compliance 
                period on which such building is part of such an 
                investment project, and
                    ``(B) ending on the last day of the compliance 
                period with respect to such building.
    ``(d) Rehabilitation Expenditures Treated as Separate New 
Building.--Rehabilitation expenditures paid or incurred by the taxpayer 
with respect to any building shall be treated for purposes of this 
section as a separate new building under the rules of section 42(e).
    ``(e) Definition and Special Rules Relating to Credit Period.--
            ``(1) Credit period defined.--For purposes of this section, 
        the term `credit period' means, with respect to any building, 
        the period of 10 taxable years beginning with the taxable year 
        in which the building is first placed in service.
            ``(2) Special rule for 1st year of credit period.--
                    ``(A) In general.--The credit allowable under 
                subsection (a) with respect to any building for the 1st 
                taxable year of the credit period shall be determined 
                by multiplying such credit by the fraction--
                            ``(i) the numerator of which is the number 
                        of full months of such year during which such 
                        building was in service, and
                            ``(ii) the denominator of which is 12.
                    ``(B) Disallowed 1st year credit allowed in 11th 
                year.--Any reduction by reason of subparagraph (A) in 
                the credit allowable (without regard to subparagraph 
                (A)) for the 1st taxable year of the credit period 
                shall be allowable under subsection (a) for the 1st 
                taxable year following the credit period.
            ``(3) Credit period for existing buildings not to begin 
        before rehabilitation credit allowed.--The credit period for an 
        existing building shall not begin before the 1st taxable year 
        of the credit period for rehabilitation expenditures with 
        respect to the building.
    ``(f) Qualified Rural Investment Project; Qualifying County.--For 
purposes of this section--
            ``(1) Qualified rural investment project.--The term 
        `qualified rural investment project' means any investment 
        project of 1 or more qualified rural investment buildings 
        located in a qualifying county (and, if necessary to the 
        project, any contiguous county) and selected by the State 
        according to its qualified rural investment plan.
            ``(2) Qualifying county.--The term `qualifying county' 
        means any county which--
                    ``(A) is outside a metropolitan statistical area 
                (defined as such by the Office of Management and 
                Budget), and
                    ``(B) during the 20-year period ending with the 
                calendar year preceding the date of the enactment of 
                this section, has a net out-migration of inhabitants 
                from the county of at least 10 percent of the 
                population of the county at the beginning of such 
                period.
    ``(g) Limitation on Aggregate Credit Allowable With Respect to 
Investment Projects Located in a State.--
            ``(1) Credit may not exceed credit amount allocated to 
        building.--The amount of the credit determined under this 
        section for any taxable year with respect to any building shall 
        not exceed the rural investment credit dollar amount allocated 
        to such building under rules similar to the rules of section 
        42(h)(1).
            ``(2) Allocated credit amount to apply to all taxable years 
        ending during or after credit allocation year.--Any rural 
        investment credit dollar amount allocated to any building for 
        any calendar year--
                    ``(A) shall apply to such building for all taxable 
                years in the credit period ending during or after such 
                calendar year, and
                    ``(B) shall reduce the aggregate rural investment 
                credit dollar amount of the allocating agency only for 
                such calendar year.
            ``(3) Rural investment credit dollar amount for agencies.--
                    ``(A) In general.--The aggregate rural investment 
                credit dollar amount which a rural investment credit 
                agency may allocate for any calendar year is the 
                portion of the State rural investment credit ceiling 
                allocated under this paragraph for such calendar year 
                to such agency.
                    ``(B) State ceiling initially allocated to state 
                rural investment credit agencies.--Except as provided 
                in subparagraphs (D) and (E), the State rural 
                investment credit ceiling for each calendar year shall 
                be allocated to the rural investment credit agency of 
                such State. If there is more than 1 rural investment 
                credit agency of a State, all such agencies shall be 
                treated as a single agency.
                    ``(C) State rural investment credit ceiling.--The 
                State rural investment credit ceiling applicable to any 
                State and any calendar year shall be an amount equal to 
                the sum of--
                            ``(i) the unused State rural investment 
                        credit ceiling (if any) of such State for the 
                        preceding calendar year,
                            ``(ii) $1,000,000 for each qualifying 
                        county in the State,
                            ``(iii) the amount of State rural 
                        investment credit ceiling returned in the 
                        calendar year, plus
                            ``(iv) the amount (if any) allocated under 
                        subparagraph (D) to such State by the 
                        Secretary.
                For purposes of clause (i), the unused State rural 
                investment credit ceiling for any calendar year is the 
                excess (if any) of the sum of the amounts described in 
                clauses (ii) through (iv) over the aggregate rural 
                investment credit dollar amount allocated for such 
                year. For purposes of clause (iii), the amount of State 
                rural investment credit ceiling returned in the 
                calendar year equals the rural investment credit dollar 
                amount previously allocated within the State to any 
                investment project which fails to meet the 10 percent 
                test under section 42(h)(1)(E)(ii) on a date after the 
                close of the calendar year in which the allocation was 
                made or which does not become a qualified rural 
                investment project within the period required by this 
                section or the terms of the allocation or to any 
                investment project with respect to which an allocation 
                is canceled by mutual consent of the  rural investment 
credit agency and the allocation recipient.
                    ``(D) Unused rural investment credit carryovers 
                allocated among certain states.--
                            ``(i) In general.--The unused rural 
                        investment credit carryover of a State for any 
                        calendar year shall be assigned to the 
                        Secretary for allocation among qualified States 
                        for the succeeding calendar year.
                            ``(ii) Unused rural investment credit 
                        carryover.--For purposes of this subparagraph, 
                        the unused rural investment credit carryover of 
                        a State for any calendar year is the excess (if 
                        any) of the unused State rural investment 
                        credit ceiling for such year (as defined in 
                        subparagraph (C)(i)) over the excess (if any) 
                        of --
                                    ``(I) the unused State rural 
                                investment credit ceiling for the year 
                                preceding such year, over
                                    ``(II) the aggregate rural 
                                investment credit dollar amount 
                                allocated for such year.
                            ``(iii) Formula for allocation of unused 
                        rural investment credit carryovers among 
                        qualified states.--The amount allocated under 
                        this subparagraph to a qualified State for any 
                        calendar year shall be the amount determined by 
                        the Secretary to bear the same ratio to the 
                        aggregate unused rural investment credit 
                        carryovers of all States for the preceding 
                        calendar year as such State's population for 
                        the calendar year bears to the population of 
                        all qualified States for the calendar year. For 
                        purposes of the preceding sentence, population 
                        shall be determined in accordance with section 
                        146(j).
                            ``(iv) Qualified state.--For purposes of 
                        this subparagraph, the term `qualified State' 
                        means, with respect to a calendar year, any 
                        State--
                                    ``(I) which allocated its entire 
                                State rural investment credit ceiling 
                                for the preceding calendar year, and
                                    ``(II) for which a request is made 
                                (not later than May 1 of the calendar 
                                year) to receive an allocation under 
                                clause (iii).
                    ``(E) State may provide for different allocation.--
                Rules similar to the rules of section 146(e) (other 
                than paragraph (2)(B) thereof) shall apply for purposes 
                of this paragraph.
                    ``(F) Population.--For purposes of this paragraph, 
                population shall be determined in accordance with 
                section 146(j).
                    ``(G) Cost-of-living adjustment.--
                            ``(i) In general.--In the case of a 
                        calendar year after 2002, the $1,000,000 amount 
                        in subparagraph (C) shall be increased by an 
                        amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                1(f)(3) for such calendar year by 
                                substituting `calendar year 2001' for 
                                `calendar year 1992' in subparagraph 
                                (B) thereof.
                            ``(ii) Rounding.--Any increase under clause 
                        (i) which is not a multiple of $5,000 shall be 
                        rounded to the next lowest multiple of $5,000.
            ``(4) Portion of state ceiling set-aside for certain 
        investment projects involving qualified nonprofit 
        organizations.--
                    ``(A) In general.--At least 10 percent of the State 
                rural investment credit ceiling for any State for any 
                calendar year shall be allocated to qualified rural 
                investment projects described in subparagraph (B).
                    ``(B) Investment projects involving qualified 
                nonprofit organizations.--For purposes of subparagraph 
                (A), a qualified rural investment project is described 
                in this subparagraph if a qualified nonprofit 
                organization is to materially participate (within the 
                meaning of section 469(h)) in the development and 
                operation of the investment project throughout the 
                compliance period.
                    ``(C) Qualified nonprofit organization.--For 
                purposes of this paragraph, the term `qualified 
                nonprofit organization' means any organization if--
                            ``(i) such organization is described in any 
                        paragraph of section 501(c) and is exempt from 
                        tax under section 501(a),
                            ``(ii) such organization is determined by 
                        the State rural investment credit agency not to 
                        be affiliated with or controlled by a for-
                        profit organization; and
                            ``(iii) 1 of the exempt purposes of such 
                        organization includes the fostering of rural 
                        investment.
                    ``(D) Treatment of certain subsidiaries.--
                            ``(i) In general.--For purposes of this 
                        paragraph, a qualified nonprofit organization 
                        shall be treated as satisfying the ownership 
                        and material participation test of subparagraph 
                        (B) if any qualified corporation in which such 
                        organization holds stock satisfies such test.
                            ``(ii) Qualified corporation.--For purposes 
                        of clause (i), the term `qualified corporation' 
                        means any corporation if 100 percent of the 
                        stock of such corporation is held by 1 or more 
                        qualified nonprofit organizations at all times 
                        during the period such corporation is in 
                        existence.
                    ``(E) State may not override set-aside.--Nothing in 
                subparagraph (F) of paragraph (3) shall be construed to 
                permit a State not to comply with subparagraph (A) of 
                this paragraph.
                    ``(F) Credits for qualified nonprofit 
                organizations.--
                            ``(i) Allowance of credit.--Any credit 
                        which would be allowable under subsection (a) 
                        with respect to a qualified rural investment 
                        building of a qualified nonprofit organization 
                        if such organization were not exempt from tax 
                        under this chapter shall be treated as a credit 
                        allowable under subpart C to such organization.
                            ``(ii) Use of credit.--A qualified 
                        nonprofit organization may assign, trade, sell, 
                        or otherwise transfer any credit allowable to 
                        such organization under clause (i) to any 
                        taxpayer.
                            ``(iii) Credit not income.--A transfer 
                        under clause (ii) of any credit allowable under 
clause (i) shall not result in income for purposes of section 511.
            ``(5) Special rules.--
                    ``(A) Building must be located within jurisdiction 
                of credit agency.--A rural investment credit agency may 
                allocate its aggregate rural investment credit dollar 
                amount only to buildings located in the jurisdiction of 
                the governmental unit of which such agency is a part.
                    ``(B) Agency allocations in excess of limit.--If 
                the aggregate rural investment credit dollar amounts 
                allocated by a rural investment credit agency for any 
                calendar year exceed the portion of the State rural 
                investment credit ceiling allocated to such agency for 
                such calendar year, the rural investment credit dollar 
                amounts so allocated shall be reduced (to the extent of 
                such excess) for buildings in the reverse of the order 
                in which the allocations of such amounts were made.
                    ``(C) Credit reduced if allocated credit dollar 
                amount is less than credit which would be allowable 
                without regard to sales convention, etc.--
                            ``(i) In general.--The amount of the credit 
                        determined under this section with respect to 
                        any building shall not exceed the clause (ii) 
                        percentage of the amount of the credit which 
                        would (but for this subparagraph) be determined 
                        under this section with respect to such 
                        building.
                            ``(ii) Determination of percentage.--For 
                        purposes of clause (i), the clause (ii) 
                        percentage with respect to any building is the 
                        percentage which--
                                    ``(I) the rural investment credit 
                                dollar amount allocated to such 
                                building bears to
                                    ``(II) the credit amount determined 
                                in accordance with clause (iii).
                            ``(iii) Determination of credit amount.--
                        The credit amount determined in accordance with 
                        this clause is the amount of the credit which 
                        would (but for this subparagraph) be determined 
                        under this section with respect to the building 
                        if this section were applied without regard to 
                        paragraph (2)(A) of subsection (e).
                    ``(D) Rural investment credit agency to specify 
                applicable percentage and maximum eligible basis.--In 
                allocating a rural investment credit dollar amount to 
                any building, the rural investment credit agency shall 
                specify the applicable percentage and the maximum 
                eligible basis which may be taken into account under 
                this section with respect to such building. The 
                applicable percentage and maximum eligible basis so 
                specified shall not exceed the applicable percentage 
                and eligible basis determined under this section 
                without regard to this subsection.
            ``(6) Other definitions.--For purposes of this subsection--
                    ``(A) Rural investment credit agency.--The term 
                `rural investment credit agency' means any agency 
                authorized to carry out this subsection.
                    ``(B) Possessions treated as States.--The term 
                `State' includes a possession of the United States.
    ``(h) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Compliance period.--The term `compliance period' 
        means, with respect to any building, the period of 10 taxable 
        years beginning with the 1st taxable year of the credit period 
        with respect thereto.
            ``(2) New building.--The term `new building' means a 
        building the original use of which begins with the taxpayer.
            ``(3) Existing building.--The term `existing building' 
        means any building which is not a new building.
            ``(4) Application to estates and trusts.--In the case of an 
        estate or trust, the amount of the credit determined under 
        subsection (a) and any increase in tax under subsection (i) 
        shall be apportioned between the estate or trust and the 
        beneficiaries on the basis of the income of the estate or trust 
        allocable to each.
    ``(i) Recapture of Credit.--If--
            ``(1) as of the close of any taxable year in the compliance 
        period, the amount of the eligible basis of any building with 
        respect to the taxpayer is less than
            ``(2) the amount of such basis as of the close of the 
        preceding taxable year,
        then the taxpayer's tax under this chapter for the taxable year 
        shall be increased by the credit recapture amount determined 
        under rules similar to the rules of section 42(j).
    ``(j) Certifications and Other Reports to Secretary.--
            ``(1) Certification with respect to 1st year of credit 
        period.--Following the close of the 1st taxable year in the 
        credit period with respect to any qualified rural investment 
        building, the taxpayer shall certify to the Secretary (at such 
        time and in such form and in such manner as the Secretary 
        prescribes)--
                    ``(A) the taxable year, and calendar year, in which 
                such building was first placed in service,
                    ``(B) the eligible basis of such building as of the 
                beginning of the credit period,
                    ``(C) the maximum applicable percentage and 
                eligible basis permitted to be taken into account by 
                the appropriate rural investment credit agency under 
                subsection (g),
                    ``(D) the election made under subsection (f) with 
                respect to the qualified rural investment project of 
                which such building is a part, and
                    ``(E) such other information as the Secretary may 
                require.
        In the case of a failure to make the certification required by 
        the preceding sentence on the date prescribed therefor, unless 
        it is shown that such failure is due to reasonable cause and 
        not to willful neglect, no credit shall be allowable by reason 
        of subsection (a) with respect to such building for any taxable 
        year ending before such certification is made.
            ``(2) Annual reports to the Secretary.--The Secretary may 
        require taxpayers to submit an information return (at such time 
        and in such form and manner as the Secretary prescribes) for 
        each taxable year setting forth--
                    ``(A) the eligible basis for the taxable year of 
                each qualified rural investment building of the 
                taxpayer,
                    ``(B) the information described in paragraph (1)(C) 
                for the taxable year, and
                    ``(C) such other information as the Secretary may 
                require.
        The penalty under section 6652(j) shall apply to any failure to 
        submit the return required by the Secretary under the preceding 
        sentence on the date prescribed therefor.
            ``(3) Annual reports from rural investment credit 
        agencies.--Each agency which allocates any rural investment 
        credit amount to any building for any calendar year shall 
        submit to the Secretary (at such time and in such manner as the 
        Secretary shall prescribe) an annual report specifying--
                    ``(A) the amount of rural investment credit amount 
                allocated to each building for such year,
                    ``(B) sufficient information to identify each such 
                building and the taxpayer with respect thereto, and
                    ``(C) such other information as the Secretary may 
                require.
        The penalty under section 6652(j) shall apply to any failure to 
        submit the report required by the preceding sentence on the 
        date prescribed therefor.
    ``(k) Responsibilities of Rural Investment Credit Agencies.--
            ``(1) Plans for allocation of credit among investment 
        projects.--
                    ``(A) In general.--Notwithstanding any other 
                provision of this section, the rural investment credit 
                dollar amount with respect to any building shall be 
                zero unless--
                            ``(i) such amount was allocated pursuant to 
                        a qualified rural investment plan of the agency 
                        which is approved by the governmental unit (in 
                        accordance with rules similar to the rules of 
                        section 147(f)(2) (other than subparagraph 
                        (B)(ii) thereof)) of which such agency is a 
                        part,
                            ``(ii) such agency notifies the chief 
                        executive officer (or the equivalent) of the 
                        local jurisdiction within which the building is 
                        located of such investment project and provides 
                        such individual a reasonable opportunity to 
                        comment on the investment project,
                            ``(iii) a comprehensive market study of the 
                        development needs of individuals in the 
                        qualifying county to be served by the 
                        investment project is conducted before the 
                        credit allocation is made and at the 
                        developer's expense by a disinterested party 
                        who is approved by such agency, and
                            ``(iv) a written explanation is available 
                        to the general public for any allocation of a 
                        rural investment credit dollar amount which is 
                        not made in accordance with established 
                        priorities and selection criteria of the rural 
                        investment credit agency.
                    ``(B) Qualified rural investment plan.--For 
                purposes of this section, the term `qualified rural 
                investment plan' means any plan--
                            ``(i) which sets forth selection criteria 
                        to be used to determine priorities of the rural 
                        investment credit agency which are appropriate 
                        to qualifying counties,
                            ``(ii) which also gives preference in 
                        allocating rural investment credit dollar 
                        amounts among selected investment projects to--
                                    ``(I) investment projects that 
                                target those small rural counties with 
                                consistently high rates of net out-
                                migration,
                                    ``(II) investment projects that 
                                link the economic development and job 
                                creation efforts of 2 or more small 
                                rural counties with high rates of net 
                                out-migration, and
                                    ``(III) investment projects that 
                                link the economic development and job 
                                creation efforts of 1 or more small 
                                rural counties in the State with high 
                                rates of net out-migration to related 
                                efforts in regions of such State 
                                experiencing economic growth, and
                            ``(iii) which provides a procedure that the 
                        agency (or an agent or other private contractor 
                        of such agency) will follow in monitoring for 
                        noncompliance with the provisions of this 
                        section and in notifying the Internal Revenue 
                        Service of such noncompliance which such agency 
                        becomes aware of and in monitoring for 
                        noncompliance through regular site visits.
                    ``(C) Certain selection criteria must be used.--The 
                selection criteria set forth in a qualified rural 
                investment plan must include--
                            ``(i) investment project location,
                            ``(ii) technology and transportation 
                        infrastructure needs, and
                            ``(iii) private development trends.
            ``(2) Credit allocated to building not to exceed amount 
        necessary to assure investment project feasibility.--
                    ``(A) In general.--The rural investment credit 
                dollar amount allocated to an investment project shall 
                not exceed the amount the rural investment credit 
                agency determines is necessary for the financial 
                feasibility of the investment project and its viability 
                as a qualified rural investment project throughout the 
                compliance period.
                    ``(B) Agency evaluation.--In making the 
                determination under subparagraph (A), the rural 
                investment credit agency shall consider--
                            ``(i) the sources and uses of funds and the 
                        total financing planned for the investment 
                        project,
                            ``(ii) any proceeds or receipts expected to 
                        be generated by reason of tax benefits,
                            ``(iii) the percentage of the rural 
                        investment credit dollar amount used for 
                        investment project costs other than the cost of 
                        intermediaries, and
                            ``(iv) the reasonableness of the 
                        developmental and operational costs of the 
                        investment project.
                Clause (iii) shall not be applied so as to impede the 
                development of investment projects in hard-to-develop 
                areas.
                    ``(C) Determination made when credit amount applied 
                for and when building placed in service.--
                            ``(i) In general.--A determination under 
                        subparagraph (A) shall be made as of each of 
                        the following times:
                                    ``(I) The application for the rural 
                                investment credit dollar amount.
                                    ``(II) The allocation of the rural 
                                investment credit dollar amount.
                                    ``(III) The date the building is 
                                first placed in service.
                            ``(ii) Certification as to amount of other 
                        subsidies.--Prior to each determination under 
                        clause (i), the taxpayer shall certify to the 
                        rural investment credit agency the full extent 
                        of all Federal, State, and local subsidies 
                        which apply (or which the taxpayer expects to 
                        apply) with respect to the building.
    ``(l) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section, including regulations--
            ``(1) dealing with--
                    ``(A) investment projects which include more than 1 
                building or only a portion of a building, and
                    ``(B) buildings which are sold in portions,
            ``(2) providing for the application of this section to 
        short taxable years,
            ``(3) preventing the avoidance of the rules of this 
        section, and
            ``(4) providing the opportunity for rural investment credit 
        agencies to correct administrative errors and omissions with 
        respect to allocations and record keeping within a reasonable 
        period after their discovery, taking into account the 
        availability of regulations and other administrative guidance 
        from the Secretary.''.
    (b) Current Year Business Credit Calculation.--Section 38(b) of 
such Code (relating to current year business credit) is amended by 
striking ``plus'' at the end of paragraph (14), by striking the period 
at the end of paragraph (15) and inserting ``, plus'', and by adding at 
the end the following:
            ``(16) the rural investment credit determined under section 
        42A(a).''.
    (c) Limitation on Carryback.--Subsection (d) of section 39 of such 
Code (relating to carryback and carryforward of unused credits) is 
amended by adding at the end the following:
            ``(11) No carryback of rural investment credit before 
        effective date.--No amount of unused business credit available 
        under section 42A may be carried back to a taxable year ending 
        the date of the enactment of this paragraph.''.
    (d) Conforming Amendments.--
            (1) Section 55(c)(1) of such Code is amended by inserting 
        ``or subsection (i) or (j) of section 42A'' after ``section 
        42''.
            (2) Subsections (i)(c)(3), (i)(c)(6)(B)(i), and (k)(1) of 
        section 469 of such Code are each amended by inserting ``or 
        42A'' after ``section 42''.
            (3) Section 772(a) of such Code is amended by striking 
        ``and'' at the end of paragraph (10), by redesignating 
        paragraph (11) as paragraph (12), and by inserting after 
        paragraph (10) the following:
            ``(11) the rural investment credit determined under section 
        42A, and''.
            (4) Section 774(b)(4) of such Code is amended by inserting 
        ``, 42A(i),'' after ``section 42(j)''.
    (e) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such Code is amended by 
inserting after the item relating to section 42 the following:

                              ``Sec. 42A. Rural investment credit.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to expenditures made in taxable years beginning after December 
31, 2001.

            TITLE II--RURAL EDUCATION DEVELOPMENT INITIATIVE

SEC. 201. FINDINGS AND PURPOSE.

    (a) Findings.--The Congress finds the following:
            (1) While there are rural education initiatives identified 
        at the State and local level, no Federal education policy 
        focuses on the specific needs of rural school districts and 
        schools, especially those that serve poor students.
            (2) The National Center for Educational Statistics (NCES) 
        reports that while 46 percent of our Nation's public schools 
        serve rural areas, they only receive 22 percent of the Nation's 
        education funds annually.
            (3) A critical problem for rural school districts involves 
        the hiring and retention of qualified administrators and 
        certified teachers (especially in special education, science, 
        and mathematics). Consequently, teachers in rural schools are 
        almost twice as likely to provide instruction in two or more 
        subjects than teachers in urban schools. Rural schools also 
        face other tough challenges, such as shrinking local tax bases, 
        high transportation costs, aging buildings, limited course 
        offerings, and limited resources.
            (4) Data from the National Assessment of Educational 
        Progress (NAEP) consistently shows large gaps between the 
        achievement of students in high-poverty schools and those in 
        other schools. High-poverty schools face special challenges in 
        preparing their students to reach high standards of performance 
        on State and national assessments.
    (b) Purpose.--The purpose of this title is to provide rural school 
students in the United States with increased learning opportunities.

SEC. 202. DEFINITIONS.

     In this title:
            (1) The terms ``elementary school'', ``local educational 
        agency'', and ``State educational agency'', and ``poverty 
        line'' have the meanings given such terms in section 9101 of 
        the Elementary and Secondary Education Act of 1965 (20 U.S.C. 
        7801).
            (2) The term ``eligible local educational agency'' means a 
        local educational agency that serves--
                    (A) a school-age population, 20 percent or more of 
                whom are from families with incomes below the poverty 
                line; and
                    ``(B)(i) only schools designated by the Secretary 
                with a school locale code of 6, 7, or 8; or
                    (ii) a school-age population of 800 or fewer.
            (3) The term ``rural area'' means the area defined by the 
        Secretary using school locale codes 6, 7, and 8.
            (4) The term ``school-age population'' means the number of 
        students aged 5 through 17.
            (5) The term ``school locale code'' has the meaning given 
        such term by the Secretary.
            (6) The term ``Secretary'' means the Secretary of 
        Education.
            (7) The term ``specially qualified agency'' means an 
        eligible local educational agency, located in a State that does 
        not participate in a program under this title in a fiscal year, 
        that may apply directly to the Secretary for a grant in such 
        year under section 203(a)(3).

SEC. 203. RURAL EDUCATION INITIATIVE AUTHORIZED.

    (a) Grants to States.--
            (1) In general.--Except as provided in paragraph (3), from 
        the amount appropriated under section 209 and not reserved 
        under subsection (c) for a fiscal year, the Secretary shall 
        award grants to State educational agencies that have 
        applications approved under section 204 to enable such agencies 
        to award grants to eligible local educational agencies for 
        local authorized activities described in subsection (c).
            (2) Formula.--
                    (A) In general.--Each State educational agency that 
                receives a grant under this section shall receive an 
                amount that bears the same relation to the amount of 
                funds appropriated under section 209 that are not 
                reserved under subsection (c) for a fiscal year as the 
                number of students in average daily attendance served 
                by eligible local education agencies in the State bears 
                to the number of all such students served by eligible 
                local education agencies in all States for that fiscal 
                year.
                    (B) Data.--In determining the school-age population 
                under subparagraph (A) the Secretary shall use the most 
                recent data available from the Bureau of the Census.
            (3) Direct awards to specially qualified agencies.--If a 
        State educational agency elects not to participate in the 
        program under this title or does not have an application 
        approved under section 204, the Secretary may award, on a 
        competitive basis, the amount the State educational agency is 
        eligible to receive under paragraph (2) directly to specially 
        qualified agencies in the State.
    (b) Local Authorized Activities.--Funds made available under this 
title may be used for--
            (1) local educational technology efforts as described in 
        section 2416 of the Elementary and Secondary Education Act of 
        1965 (20 U.S.C. 6766);
            (2) professional development activities designed to prepare 
        teachers who are teaching out of their primary subject area;
            (3) academic enrichment programs described in section 5464 
        of the Elementary and Secondary Education Act of 1965 (20 
        U.S.C. 7253c);
            (4) innovative academic enrichment programs related to the 
        educational needs of students at-risk of academic failure, 
        including remedial instruction in one or more of the core 
        subject areas of English, mathematics, science, and history; 
        and
            (5) activities to recruit and retain highly qualified 
        teachers in special education, mathematics, or science.
    (c) Reservation of Funds.--From the amount appropriated under 
section 209 for a fiscal year, the Secretary shall reserve \1/2\ of 1 
percent to make awards to elementary or secondary schools operated or 
supported by the Bureau of Indian Affairs to carry out the purpose of 
this title.
    (d) Relation to Other Federal Funding.--Funds received under this 
title by a State educational agency or a specially qualified agency 
shall not be taken into consideration in determining the eligibility 
for, or amount of, any other Federal funding awarded to such agency.

SEC. 204. APPLICATIONS.

     Each State educational agency or specially qualified agency 
desiring a grant under this title shall submit an application to the 
Secretary at such time, in such manner, and accompanied by such 
information as the Secretary may require. Such application shall 
include specific measurable goals and objectives relating to increased 
student  academic achievement, decreased student drop-out rates, or 
such other factors that the State educational agency or specially 
qualified agency may choose to measure.

SEC. 205. STATE DISTRIBUTION OF FUNDS.

    (a) Award Basis.--A State educational agency that receives funds 
under this title shall award grants to eligible local educational 
agencies or provide assistance to schools described in subsection 
(b)(2)--
            (1) on a competitive basis; or
            (2) according to a formula based on the number of students 
        served by the eligible local educational agencies or schools 
        (as appropriate) in the State, as determined by the State.

SEC. 206. ADMINISTRATIVE COSTS.

     A State educational agency or specially qualified agency that 
receives funds under this title may not use more than 5 percent of the 
grant funds for State activities or administrative costs related to the 
program.

SEC. 207. REPORTS.

    (a) State Educational Agency Reports.--
            (1) Contents.--Each State educational agency that receives 
        a grant under this title shall submit an annual report to the 
        Secretary describing--
                    (A) the methods the State educational agency used 
                to award grants to eligible local educational agencies 
                under this title;
                    (B) how eligible local educational agencies and 
                schools used funds provided under this title; and
                    (C) the degree to which progress has been made 
                toward meeting the goals and objectives described the 
                application submitted under section 204.
            (2) Availability.--The Secretary shall make available the 
        annual State reports received under paragraph (1) for 
        dissemination to the Congress, interested parties (including 
        educators, parents, students, and advocacy and civil rights 
        organizations), and the public.
    (b) Specially Qualified Agency Reports.--Each specially qualified 
agency that receives a grant under this title shall submit an annual 
report to the Secretary describing how such agency used funds received 
under this title to coordinate with other Federal, State, and local 
programs.
    (c) Report by Secretary to Congress.--The Secretary shall prepare 
and submit to Congress an annual report which shall describe--
            (1) the methods the State educational agency used to award 
        grants to eligible local educational agencies and to provide 
        assistance to schools under this title;
            (2) how eligible local educational agencies used funds 
        provided under this title; and
            (3) progress made by State educational agencies and 
        eligible local educational agencies receiving assistance under 
        this title in meeting specific, annual, measurable performance 
        goals and objectives established by such agencies for 
        activities assisted under this title.

SEC. 208. ACCOUNTABILITY.

    If, at the end of the third consecutive year in which a State 
educational agency or specially qualified agency receives funds under 
this title, the Secretary determines that such agency has not 
substantially met its performance goals and objectives described in the 
application submitted under section 204, such agency shall be 
ineligible to receive additional funds under this title for a period of 
one year after the date of such determination.

SEC. 209. AUTHORIZATION OF APPROPRIATIONS.

     There are authorized to be appropriated to carry out this title 
$100,000,000 for each of fiscal years 2003 through 2006.

   TITLE III--NATIONAL PHYSICIAN AND NURSE SERVICE CORPS SCHOLARSHIP 
                                PROGRAM

SEC. 301. SCHOLARSHIP PROGRAM TO ENCOURAGE PHYSICIANS AND NURSES TO 
              SERVE IN RURAL AREAS.

    Subpart III of part D of title III of the Public Health Service Act 
(42 U.S.C. 254l et seq.) is amended by adding at the end the following:

``SEC. 338M. NATIONAL PHYSICIAN AND NURSE SERVICE CORPS SCHOLARSHIP 
              PROGRAM.

    ``(a) Program Authorized.--The Secretary shall establish a National 
Physician and Nurse Service Corps Scholarship Program (referred to in 
this section as the `program') that provides scholarships to 
individuals seeking medical or nursing education in exchange for 
service by such individuals in rural areas (as such areas are 
determined by the Secretary).
    ``(b) Preference.--In awarding scholarships under this section, the 
Secretary shall give preference to applicants with the greatest 
financial need, and applicants who agree to serve in health facilities 
experiencing physician or nursing shortages in medically underserved 
areas.
    ``(c) Requirements.--To be eligible to participate in the program, 
an individual must--
            ``(1) be accepted for enrollment, or be enrolled, in an 
        accredited (as determined by the Secretary) medical school or 
        an accredited (as that term is defined in section 801) nursing 
        school, to take courses leading to a degree of doctor of 
        medicine, a baccalaureate or associate degree in nursing, or a 
        diploma in nursing;
            ``(2) submit an application to participate in the program; 
        and
            ``(3) enter into an agreement with the Secretary, at the 
        time of submittal of such application, to--
                    ``(A) accept payment of a scholarship and remain 
                enrolled in medical or nursing school;
                    ``(B) maintain an acceptable level of academic 
                standing; and
                    ``(C) serve as a physician or a nurse for a period 
                of not less than 4 years in a rural area.
    ``(d) Applications.--
            ``(1) In general.--The application forms for the program 
        shall include--
                    ``(A) a fair summary of the rights and liabilities 
                of an individual whose application is approved by the 
                Secretary; and
                    ``(B) information respecting meeting a service 
                obligation and such other information as may be 
                necessary for the individual to understand the program.
            ``(2) Accessibility.--The application form and all other 
        information furnished by the Secretary shall be written so that 
        it may be understood by the average individual applying to 
        participate in the program. The Secretary shall make such 
        application forms and other information available to 
        individuals desiring to participate in the program, on a date 
        sufficiently early to ensure that such individuals have 
        adequate time to carefully review and evaluate such forms and 
        information.
            ``(3) Distribution.--The Secretary shall distribute to 
        medical and nursing schools materials providing information on 
        the program and shall encourage such schools to disseminate the 
        materials to students of such schools.
    ``(e) Scholarship.--
            ``(1) In general.--A scholarship provided to a student for 
        a school year under a written contract under the program shall 
        consist of--
                    ``(A) payment to, or (in accordance with paragraph 
                (2)) on behalf of, the student of--
                            ``(i) an amount equal to \1/2\ of the 
                        tuition of the student in such school year; and
                            ``(ii) all other reasonable educational 
                        expenses and support services, including fees, 
                        books, and laboratory expenses incurred by the 
                        student in such school year; and
                    ``(B) payment to the student of a stipend of $400 
                per month (adjusted in accordance with paragraph (3)) 
                for each 12 consecutive months beginning with the first 
                month of the school year.
            ``(2) Contract.--The Secretary may contract with a medical 
        or nursing school, in which a participant in the program is 
        enrolled, for the payment to the school of the amounts of 
        tuition and other reasonable educational expenses and support 
        services described in paragraph (1)(A).
            ``(3) Monthly stipend.--The amount of the monthly stipend, 
        specified in paragraph (1)(B) and as previously adjusted (if at 
        all) in accordance with this paragraph, shall be increased by 
        the Secretary as the Secretary determines to be reasonable.
    ``(f) Breach of Agreement.--
            ``(1) In general.--In the case of an individual who enters 
        into an agreement under this section to provide services as a 
        physician or a nurse in consideration for receiving a 
        scholarship to attend a medical or nursing school, such 
        individual is liable to the Federal Government for the amount 
        of the scholarship, and for interest on such amount at the 
        maximum legal prevailing rate, if the individual--
                    ``(A) fails to maintain an acceptable level of 
                academic standing at the medical or nursing school;
                    ``(B) is dismissed from the medical or nursing 
                school for disciplinary reasons;
                    ``(C) voluntarily terminates enrollment at the 
                medical or nursing school; or
                    ``(D) fails to provide services in accordance with 
                the agreement entered into pursuant to subsection 
                (c)(3)(C), including the applicable period of obligated 
                service.
            ``(2) Waiver or suspension of liability.--The Secretary 
        shall provide for the waiver or suspension of liability under 
        an agreement entered into pursuant to subsection (c)(3) if 
        compliance by the individual with the agreement is impossible, 
        or would involve extreme hardship to the individual, or if 
        enforcement of the agreement with respect to the individual 
        would be unconscionable.
            ``(3) Date certain for recovery.--Subject to paragraph (2), 
        any amount that the Federal Government is entitled to recover 
        under paragraph (1) shall be paid to the United States not 
        later than the expiration of the 3-year period beginning on the 
        date the United States becomes so entitled.
            ``(4) Availability.--Amounts recovered under paragraph (1) 
        shall be available for the purposes of the program, and shall 
        remain available for such purposes until expended.
    ``(g) Authorization of Appropriations.--For the purpose of payments 
under agreements entered into under subsection (a), there are 
authorized to be appropriated $10,000,000 for each of the fiscal years 
2003 through 2005.''.

SEC. 302. LOAN REPAYMENT FOR NURSES SERVING IN A NURSING HOME, A 
              HOSPICE, OR A HOME HEALTH AGENCY.

    Section 846(a)(3) of the Public Health Service Act (42 U.S.C. 297n) 
is amended by inserting ``in a nursing home, in a hospice, in a home 
health agency,'' after ``in a public hospital,''.
                                 <all>