[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 1264 Introduced in Senate (IS)]







110th CONGRESS
  1st Session
                                S. 1264

   To amend the Internal Revenue Code of 1986 to provide a credit to 
                  holders of rural renaissance bonds.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 2, 2007

Mr. Coleman (for himself and Mr. Pryor) 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 credit to 
                  holders of rural renaissance bonds.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. CREDIT TO HOLDERS OF RURAL RENAISSANCE BONDS.

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

``SEC. 54A. CREDIT TO HOLDERS OF RURAL RENAISSANCE BONDS.

    ``(a) Allowance of Credit.--In the case of a taxpayer who holds a 
rural renaissance bond on 1 or more credit allowance dates of the bond 
occurring during any taxable year, there shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year an amount 
equal to the sum of the credits determined under subsection (b) with 
respect to such dates.
    ``(b) Amount of Credit.--
            ``(1) In general.--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) Annual credit.--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) Determination.--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) Credit allowance date.--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 redemption.--In 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.--The credit allowed under 
subsection (a) for any taxable year shall not exceed the excess of--
            ``(1) the sum of the regular tax liability (as defined in 
        section 26(b)) plus the tax imposed by section 55, over
            ``(2) the sum of the credits allowable under this part 
        (other than this subpart, subpart C, and section 1400N(l)).
    ``(d) Rural Renaissance Bond.--For purposes of this section--
            ``(1) In general.--The term `rural renaissance bond' means 
        any bond issued as part of an issue if--
                    ``(A) the bond is issued by a qualified issuer 
                pursuant to an allocation by the Secretary to such 
                issuer of a portion of the national rural renaissance 
                bond limitation under subsection (f)(2),
                    ``(B) 95 percent or more of the proceeds from the 
                sale of such issue are to be used for capital 
                expenditures incurred by qualified borrowers 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,
                    ``(D) the issue meets the requirements of 
                subsection (h), and
                    ``(E) such bond is not a federally guaranteed bond 
                (within the meaning of section 149(b)(2)).
            ``(2) Qualified project; special use rules.--
                    ``(A) In general.--The term `qualified project' 
                means 1 or more projects described in subparagraph (B) 
                located in a rural area.
                    ``(B) Projects described.--A project described in 
                this subparagraph is a project eligible for assistance 
                under--
                            ``(i) the utilities programs described in 
                        section 381E(d)(2) of the Consolidated Farm and 
                        Rural Development Act (7 U.S.C. 2009d(d)(2)),
                            ``(ii) the distance learning or 
                        telemedicine programs authorized pursuant to 
                        chapter 1 of subtitle D of title XXIII of the 
                        Food, Agriculture, Conservation, and Trade Act 
                        of 1990 (7 U.S.C. 950aaa et seq.),
                            ``(iii) the rural electric programs 
                        authorized pursuant to the Rural 
                        Electrification Act of 1936 (7 U.S.C. 901 et 
                        seq.),
                            ``(iv) the rural telephone programs 
                        authorized pursuant to the Rural 
                        Electrification Act of 1936 (7 U.S.C. 901 et 
                        seq.),
                            ``(v) the broadband access programs 
                        authorized pursuant to title VI of the Rural 
                        Electrification Act of 1936 (7 U.S.C. 950bb et 
                        seq.), and
                            ``(vi) the rural community facility 
                        programs as described in section 381E(d)(1) of 
                        the Consolidated Farm and Rural Development Act 
                        (7 U.S.C. 2009d(d)(1)).
                    ``(C) Refinancing rules.--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 by a qualified borrower after 
                the date of the enactment of this section.
                    ``(D) Reimbursement.--For purposes of paragraph 
                (1)(B), a rural renaissance bond may be issued to 
                reimburse a qualified borrower for amounts paid after 
                the date of the enactment of this section with respect 
                to a qualified project, but only if--
                            ``(i) prior to the payment of the original 
                        expenditure, the qualified borrower declared 
                        its intent to reimburse such expenditure with 
                        the proceeds of a rural renaissance bond,
                            ``(ii) not later than 60 days after payment 
                        of the original expenditure, the qualified 
                        issuer adopts an official intent to reimburse 
                        the original expenditure with such proceeds, 
                        and
                            ``(iii) the reimbursement is made not later 
                        than 18 months after the date the original 
                        expenditure is paid.
                    ``(E) Treatment of changes in use.--For 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 qualified borrower or qualified issuer 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.
                    ``(F) Treatment of other subsidies.--For purposes 
                of subparagraph (B), a qualified project does not 
                include any portion of a project financed by grants or 
                subsidized financing provided (directly or indirectly) 
                under a Federal program, including any State or local 
                obligation used to provide financing for such portion 
                the interest on which is exempt from tax under section 
                103.
    ``(e) Maturity Limitations.--
            ``(1) Duration of term.--A bond shall not be treated as a 
        rural renaissance bond if the maturity of such bond exceeds the 
        maximum term determined by the Secretary under paragraph (2) 
        with respect to such bond.
            ``(2) Maximum term.--During each calendar month, the 
        Secretary shall determine the maximum term permitted under this 
        paragraph for bonds issued during the following calendar month. 
        Such maximum term shall be the term which the Secretary 
        estimates will result in the present value of the obligation to 
        repay the principal on the bond being equal to 50 percent of 
        the face amount of such bond. Such present value shall be 
        determined without regard to the requirements of paragraph (3) 
        and using as a discount rate the average annual interest rate 
        of tax-exempt obligations having a term of 10 years or more 
        which are issued during the month. If the term as so determined 
        is not a multiple of a whole year, such term shall be rounded 
        to the next highest whole year.
            ``(3) Ratable principal amortization required.--A 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) Limitation on Amount of Bonds Designated.--
            ``(1) National limitation.--There is a national rural 
        renaissance bond limitation of $400,000,000.
            ``(2) Allocation by secretary.--
                    ``(A) In general.--In accordance with subparagraph 
                (B), the Secretary shall allocate the amount described 
                in paragraph (1) among at least 20 qualified projects, 
                or such lesser number of qualified projects with proper 
                applications filed after 12 months after the adoption 
                of the selection process under subparagraph (B).
                    ``(B) Selection process.--In consultation with the 
                Secretary of Agriculture, the Secretary shall adopt a 
                process to select projects described in subparagraph 
                (A). Under such process, no State may receive more than 
                15 percent of the allocation under subparagraph (A).
    ``(g) Credit Included in Gross Income.--Gross 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.
    ``(h) Special Rules Relating to Expenditures.--
            ``(1) In general.--An issue shall be treated as meeting the 
        requirements of this subsection if, as of the date of issuance, 
        the qualified issuer reasonably expects--
                    ``(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 qualified borrowers, such binding commitment will 
                be incurred within the 6-month period beginning on the 
                date of the loan of such proceeds to a qualified 
                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) Extension of period.--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 years.--To the extent that less than 95 percent of the 
        proceeds of such issue are expended by the close of the 5-year 
        period beginning on the date of issuance (or if an extension 
        has been obtained under paragraph (2), by the close of the 
        extended period), the qualified issuer shall redeem all of the 
        nonqualified bonds within 90 days after the end of such period. 
        For purposes of this paragraph, the amount of the nonqualified 
        bonds required to be redeemed shall be determined in the same 
        manner as under section 142.
    ``(i) Special Rules Relating to Arbitrage.--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 requirements of section 148 with respect to 
proceeds of the issue.
    ``(j) Definitions and Special Rules Relating to Issuers and 
Borrowers.--For purposes of this section--
            ``(1) Qualified issuer.--The term `qualified issuer' 
        means--
                    ``(A) a rural renaissance bond lender,
                    ``(B) a cooperative electric company, or
                    ``(C) a governmental body.
            ``(2) Qualified borrower.--The term `qualified borrower' 
        means--
                    ``(A) a mutual or cooperative electric company 
                described in section 501(c)(12) or 1381(a)(2)(C), or
                    ``(B) a governmental body.
            ``(3) Rural renaissance bond lender.--The term `rural 
        renaissance bond lender' means a lender which is a cooperative 
        which is owned by, or has outstanding loans to, 100 or more 
        cooperative electric companies and is in existence on February 
        1, 2002, and shall include any affiliated entity which is 
        controlled by such lender.
            ``(4) Cooperative electric company.--The term `cooperative 
        electric company' means a mutual or cooperative electric 
        company described in section 501(c)(12) or section 
        1381(a)(2)(C), or a not-for-profit electric utility which has 
        received a loan or loan guarantee under the Rural 
        Electrification Act.
            ``(5) Governmental body.--The term `governmental body' 
        means any State, territory, possession of the United States, 
        the District of Columbia, Indian tribal government, and any 
        political subdivision thereof.
    ``(k) Special Rules Relating to Pool Bonds.--No 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.
    ``(l) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Bond.--The term `bond' includes any obligation.
            ``(2) Pooled financing bond.--The term `pooled financing 
        bond' shall have the meaning given such term by section 
        149(f)(4)(A).
            ``(3) Rural area.--The term `rural area' shall have the 
        meaning given such term by section 1393(a)(2).
            ``(4) Partnership; s corporation; and other pass-thru 
        entities.--
                    ``(A) In general.--Under 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).
                    ``(B) No basis adjustment.--In the case of a bond 
                held by a partnership or an S corporation, rules 
                similar to the rules under section 1397E(i) shall 
                apply.
            ``(5) Bonds held by regulated investment companies.--If 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) Reporting.--Issuers of rural renaissance bonds shall 
        submit reports similar to the reports required under section 
        149(e).
            ``(7) Termination.--This section shall not apply with 
        respect to any bond issued after December 31, 2008.''.
    (b) Reporting.--Subsection (d) of section 6049 of the Internal 
Revenue Code of 1986 (relating to returns regarding payments of 
interest) is amended by adding at the end the following new paragraph:
            ``(9) Reporting of credit on rural renaissance bonds.--
                    ``(A) In general.--For purposes of subsection (a), 
                the term `interest' includes amounts includible in 
                gross income under section 54A(g) and such amounts 
                shall be treated as paid on the credit allowance date 
                (as defined in section 54A(b)(4)).
                    ``(B) Reporting to corporations, etc.--Except 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) Regulatory authority.--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) Conforming Amendments.--
            (1) The table of sections for subpart H 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. 54A. Credit to holders of rural renaissance bonds.''.
            (2) Section 54(c)(2) of such Code is amended by inserting 
        ``, section 54A,'' after ``subpart C''.
    (d) Issuance of Regulations.--The Secretary of Treasury shall issue 
regulations required under section 54A 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) Effective Date.--The amendments made by this section shall 
apply to bonds issued after the date of the enactment of this Act.
                                 <all>