II 109th CONGRESS 2d Session S. 2485 IN THE SENATE OF THE UNITED STATES March 30, 2006 Mr. Baucus (for himself and Mr. Wyden) 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 source for payments to States and counties under the Secure Rural Schools and Community Self-Determination Act of 2000.

1.

Short title

This Act may be cited as the Secure Rural Schools and Communities Funding Act of 2006.

2.

Funding source for rural schools and communities payments

(a)

Rural schools and communities trust fund

(1)

In general

Subchapter A of chapter 98 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

9511.

Rural Schools and Communities Trust Fund

(a)

Creation of trust fund

There is established in the Treasury of the United States a trust fund to be known as the Rural Schools and Communities Trust Fund, consisting of such amounts as may be appropriated or credited to such Trust Fund as provided in this section or section 9602(b). (b)

Transfers to Trust Fund

There are hereby appropriated to the Rural Schools and Communities Trust Fund amounts equivalent to the amounts estimated by the Secretary by which Federal revenues are increased, before October 1, 2016, as a result of the provisions of section 3402(t). (c)

Expenditures from Trust Fund

Amounts in the Rural Schools and Communities Trust Fund shall be available only for— (1)payments to eligible States under section 102(a)(2) of the Secure Rural Schools and Community Self-Determination Act of 2000; and (2)payments to eligible counties under section 103(a)(2) of the Secure Rural Schools and Community Self-Determination Act of 2000.

. (2)

Conforming amendments

(A)

Payments to States

Paragraph (3) of section 102(b) of the Secure Rural Schools and Community Self-Determination Act of 2000 (Public Law 106–393; 16 U.S.C. 500 note) is amended by striking out of any funds in the Treasury not otherwise appropriated and inserting out of the Rural Schools and Communities Trust Fund under section 9511 of the Internal Revenue Code of 1986. (B)

Payments to counties

Paragraph (2) of section 103(b) of the Secure Rural Schools and Community Self-Determination Act of 2000 (Public Law 106–393; 16 U.S.C. 500 note) is amended by striking out of any funds in the Treasury not otherwise appropriated and inserting out of the Rural Schools and Communities Trust Fund under section 9511 of the Internal Revenue Code of 1986. (3)

Clerical amendment

The table of sections for subchapter A of chapter 98 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item: Sec. 9511. Rural Schools and Communities Trust Fund. . (b)

Imposition of withholding on certain payments made by government entities

Section 3402 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection: (t)

Extension of withholding to certain payments made by government entities

(1)

General rule

The Government of the United States shall deduct and withhold from any payment for goods and services which is subject to withholding a tax in an amount equal to 3 percent of such payment. (2)

Exceptions

Paragraph (1) shall not apply to any payment— (A)except as provided in subparagraph (B), which is subject to withholding under any other provision of this chapter or chapter 3, (B)which is subject to withholding under section 3406 and from which amounts are being withheld under such section, (C)of interest, (D)for real property, (E)to any tax-exempt entity, foreign government, or other entity subject to the requirements of paragraph (1), and (F)made pursuant to a classified or confidential contract (as defined in section 6050M(e)(3)). (3)

Coordination with other sections

For purposes of sections 3403 and 3404 and for purposes of so much of subtitle F (except section 7205) as relates to this chapter, payments to any person of any payment for goods and services which is subject to withholding shall be treated as if such payments were wages paid by an employer to an employee. . (c)

Effective dates

(1)

Subsection (a)

The amendments made by subsection (a) shall take effect on October 1, 2006. (2)

Subsection (b)

The amendment made by subsection (b) shall apply to payments made after September 30, 2006.