1.Short title; amendment of
1986 Code
(a)This Act may be cited
as the Rural Renaissance Act II of
2005
.
(b)Except as otherwise
expressly provided, whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision, the
reference shall be considered to be made to a section or other provision of the
Internal Revenue Code of 1986.
2.Credit to holders of
rural renaissance bonds
(a)Part IV of subchapter
A of chapter 1 (relating to credits against tax) is amended by adding at the
end the following new subpart:
HNonrefundable
credit to holders of rural renaissance bonds
Sec. 54. Credit to holders of
rural renaissance bonds.
54.Credit to holders of
rural renaissance bonds
(a)In the case of a
taxpayer who holds a rural renaissance bond on a credit allowance date of such
bond, which occurs during the taxable year, there shall be allowed as a credit
against the tax imposed by this chapter for such taxable year an amount equal
to the sum of the credits determined under subsection (b) with respect to
credit allowance dates during such year on which the taxpayer holds such
bond.
(b)
(1)The amount of the
credit determined under this subsection with respect to any credit allowance
date for a rural renaissance bond is 25 percent of the annual credit determined
with respect to such bond.
(2)The annual credit
determined with respect to any rural renaissance bond is the product of—
(A)the credit rate determined by the Secretary
under paragraph (3) for the day on which such bond was sold, multiplied
by
(B)the outstanding face amount of the
bond.
(3)For purposes of paragraph (2), with respect
to any rural renaissance bond, the Secretary shall determine daily or caused to
be determined daily a credit rate which shall apply to the first day on which
there is a binding, written contract for the sale or exchange of the bond. The
credit rate for any day is the credit rate which the Secretary or the
Secretary's designee estimates will permit the issuance of rural renaissance
bonds with a specified maturity or redemption date without discount and without
interest cost to the qualified issuer.
(4)For purposes
of this section, the term credit allowance date means—
(A)March 15,
(B)June 15,
(C)September 15, and
(D)December 15.
Such term also includes the last day
on which the bond is outstanding.(5)Special rule
for issuance and redemptionIn the case of a bond which is issued
during the 3-month period ending on a credit allowance date, the amount of the
credit determined under this subsection with respect to such credit allowance
date shall be a ratable portion of the credit otherwise determined based on the
portion of the 3-month period during which the bond is outstanding. A similar
rule shall apply when the bond is redeemed or matures.
(c)Limitation
based on amount of tax
(1)The credit allowed
under subsection (a) for any taxable year shall not exceed the excess
of—
(A)the sum of the regular tax liability (as
defined in section 26(b)) plus the tax imposed by section 55, over
(B)the sum of the credits allowable under this
part (other than subpart C thereof, relating to refundable credits).
(2)Carryover of
unused creditIf the credit
allowable under subsection (a) exceeds the limitation imposed by paragraph (1)
for such taxable year, such excess shall be carried to the succeeding taxable
year and added to the credit allowable under subsection (a) for such taxable
year.
(d)For purposes
of this section—
(1)The term rural
renaissance bond means any bond issued as part of an issue if—
(A)the bond is issued by a qualified
issuer,
(B)95 percent or more of the proceeds from the
sale of such issue are to be used for capital expenditures incurred for 1 or
more qualified projects,
(C)the qualified issuer designates such bond
for purposes of this section and the bond is in registered form, and
(D)the issue meets the requirements of
subsections (e) and (g).
(2)Qualified
project; special use rules
(A)The term
qualified project means 1 or more projects described in
subparagraph (B) located in a rural area.
(B)A project described
in this subparagraph is—
(i)a water or waste treatment project,
(ii)an affordable housing project,
(iii)a community facility project, including
hospitals, fire and police stations, and nursing and assisted-living
facilities,
(iv)a value-added agriculture or renewable
energy facility project for agricultural producers or farmer-owned entities,
including any project to promote the production, processing, or retail sale of
ethanol (including fuel at least 85 percent of the volume of which consists of
ethanol), biodiesel, animal waste, biomass, raw commodities, or wind as a
fuel,
(v)a distance learning or telemedicine
project,
(vi)a rural utility infrastructure project,
including any electric or telephone system,
(vii)a project to expand broadband
technology,
(viii)a rural teleworks project, and
(ix)any project described in any preceding
clause carried out by the Delta Regional Authority.
(C)For purposes of this
paragraph—
(i)any project described in subparagraph
(B)(iv) for a farmer-owned entity may be considered a qualified project if such
entity is located in a rural area, or in the case of a farmer-owned entity the
headquarters of which are located in a nonrural area, if the project is located
in a rural area, and
(ii)any project for a farmer-owned entity which
is a facility described in subparagraph (B)(iv) for agricultural producers may
be considered a qualified project regardless of whether the facility is located
in a rural or nonrural area.
(3)
(A)For purposes of
paragraph (1)(B), a qualified project may be refinanced with proceeds of a
rural renaissance bond only if the indebtedness being refinanced (including any
obligation directly or indirectly refinanced by such indebtedness) was
originally incurred after the date of the enactment of this section.
(B)Treatment of
changes in useFor purposes
of paragraph (1)(B), the proceeds of an issue shall not be treated as used for
a qualified project to the extent that a borrower takes any action within its
control which causes such proceeds not to be used for a qualified project. The
Secretary shall prescribe regulations specifying remedial actions that may be
taken (including conditions to taking such remedial actions) to prevent an
action described in the preceding sentence from causing a bond to fail to be a
rural renaissance bond.
(e)
(1)A bond shall not be
treated as a rural renaissance bond if such bond is issued as part of an issue
and—
(A)the average maturity of bonds issued as a
part of such issue, exceeds
(B)120 percent of the average reasonable
expected economic life of the facilities being financed with the proceeds from
the sale of such issue.
(2)Determination
of averagesFor purposes of
paragraph (1), the determination of averages of an issue and economic life of
any facility shall be determined in accordance with section 147(b).
(3)Ratable
principal amortization requiredA bond shall not be treated as a rural
renaissance bond unless it is part of an issue which provides for an equal
amount of principal to be paid by the qualified issuer during each calendar
year that the issue is outstanding.
(f)Credit included
in gross incomeGross income
includes the amount of the credit allowed to the taxpayer under this section
(determined without regard to subsection (c)) and the amount so included shall
be treated as interest income.
(g)Special rules
relating to expenditures
(1)An issue shall be
treated as meeting the requirements of this subsection if—
(A)at least 95 percent of the proceeds from
the sale of the issue are to be spent for 1 or more qualified projects within
the 5-year period beginning on the date of issuance of the rural renaissance
bond,
(B)a binding commitment with a third party to
spend at least 10 percent of the proceeds from the sale of the issue will be
incurred within the 6-month period beginning on the date of issuance of the
rural renaissance bond or, in the case of a rural renaissance bond, the
proceeds of which are to be loaned to 2 or more borrowers, such binding
commitment will be incurred within the 6-month period beginning on the date of
the loan of such proceeds to a borrower, and
(C)such projects will be completed with due
diligence and the proceeds from the sale of the issue will be spent with due
diligence.
(2)Upon submission of a
request prior to the expiration of the period described in paragraph (1)(A),
the Secretary may extend such period if the qualified issuer establishes that
the failure to satisfy the 5-year requirement is due to reasonable cause and
the related projects will continue to proceed with due diligence.
(3)Failure to
spend required amount of bond proceeds within 5 yearsTo the extent that less than 95 percent of
the proceeds of such issue are expended within such 5-year period (and no
extension has been obtained under paragraph (2)), the qualified issuer shall
redeem all of the nonqualified bonds on the earliest call date subsequent to
the expiration of the 5-year period. If such earliest call date is more than 90
days subsequent to the expiration of the 5-year period, the qualified issuer
shall establish a yield-restricted defeasance escrow within such 90 days to
retire such nonqualified bonds on the earlier of the date which is 10 years
after the issue date or the first call date. For purposes of this paragraph,
the term nonqualified bonds means the portion of the outstanding
bonds in an amount that, if the remaining bonds were issued on the fifth
anniversary of the date of the issuance of the issue, at least 95 percent of
the proceeds of the remaining bonds would be used to provide qualified
projects.
(h)Special rules
relating to arbitrage
(1)A bond which is part
of an issue shall not be treated as a rural renaissance bond unless, with
respect to the issue of which the bond is a part, the qualified issuer
satisfies the arbitrage rebate requirements of section 148 with respect to
gross proceeds of the issue (other than any amounts applied in accordance with
subsection (g)). For purposes of such requirements, yield over the term of an
issue shall be determined under the principles of section 148 based on the
qualified issuer's payments of principal, interest (if any), and fees for
qualified guarantees on such issue.
(2)Amounts on deposit in a bona fide debt
service fund with regard to any rural renaissance bond are not subject to the
arbitrage rebate requirements of section 148.
(i)For purposes of this
section—
(1)The term
qualified issuer means any not-for-profit cooperative lender which
has as of the date of the enactment of this section received a guarantee under
section 306 of the Rural Electrification Act and which meets the requirement of
paragraph (2).
(2)The requirement
of this paragraph is met if the issuer of any rural renaissance bond makes
grants for economic and community development projects on a semi-annual basis
every year that such bond is outstanding in an annual amount equal to ½ of the
rate on United States Treasury bills of the same maturity multiplied by the
outstanding principal balance of rural renaissance bonds issued by such
issuer.
(j)Special rules
relating to pool bondsNo
portion of a pooled financing bond may be allocable to loan unless the borrower
has entered into a written loan commitment for such portion prior to the issue
date of such issue.
(k)Other
definitions and special rulesFor purposes of this section—
(1)The term bond includes any
obligation.
(2)The term
pooled financing bond shall have the meaning given such term by
section 149(f)(4)(A).
(3)The term rural
area means any area other than—
(A)a city or town which has a population of
greater than 50,000 inhabitants, or
(B)the urbanized area contiguous and adjacent
to such a city or town.
(4)Partnership; S
corporation; and other pass-thru entitiesUnder regulations prescribed by the
Secretary, in the case of a partnership, trust, S corporation, or other
pass-thru entity, rules similar to the rules of section 41(g) shall apply with
respect to the credit allowable under subsection (a).
(5)Bonds held by
regulated investment companiesIf any rural renaissance bond is held by a
regulated investment company, the credit determined under subsection (a) shall
be allowed to shareholders of such company under procedures prescribed by the
Secretary.
(6)Treatment for
estimated tax purposesSolely
for purposes of sections 6654 and 6655, the credit allowed by this section to a
taxpayer by reason of holding a rural renaissance bond on a credit allowance
date shall be treated as if it were a payment of estimated tax made by the
taxpayer on such date.
(7)Issuers of rural renaissance bonds shall
submit reports similar to the reports required under section
149(e).
.
(b)Subsection (d) of section 6049 (relating to
returns regarding payments of interest) is amended by adding at the end the
following new paragraph:
(8)Reporting of
credit on rural renaissance bonds
(A)For purposes of
subsection (a), the term interest includes amounts includible in
gross income under section 54(f) and such amounts shall be treated as paid on
the credit allowance date (as defined in section 54(b)(4)).
(B)Reporting to
corporations, etcExcept as
otherwise provided in regulations, in the case of any interest described in
subparagraph (A), subsection (b)(4) shall be applied without regard to
subparagraphs (A), (H), (I), (J), (K), and (L)(i) of such subsection.
(C)The Secretary may
prescribe such regulations as are necessary or appropriate to carry out the
purposes of this paragraph, including regulations which require more frequent
or more detailed
reporting.
.
(c)
(1)The table of subparts for part IV of
subchapter A of chapter 1 is amended by adding at the end the following new
item:
Subpart H. Nonrefundable credit
to holders of rural renaissance
bonds.
.
(2)Section 6401(b)(1) is amended by striking
and G
and inserting G, and H
.
(d)The Secretary of
Treasury shall issue regulations required under section 54 of the Internal
Revenue Code of 1986 (as added by this section) not later than 120 days after
the date of the enactment of this Act.
(e)The amendments made by
this section shall apply to bonds issued after the date of the enactment of
this Act.