1.This Act may be cited as the
Rural Microbusiness Investment Credit
Act of 2010
.
2.Rural microbusiness
investment credit
(a)Subpart D of part IV
of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to
business related credits) is amended by adding at the end the following new
section:
45S.Rural
microbusiness investment credit
(a)For purposes of
section 38, the amount of the rural microbusiness investment credit determined
under this section for any taxable year with respect to a rural microbusiness
is equal to 35 percent of the qualified new investments in the rural
microbusiness for the taxable year.
(b)
(1)The amount allowed as a credit under subsection (a)
with respect to any rural microbusiness for a taxable year shall not
exceed—
(A)$10,000, reduced
(but not below zero), by
(B)the amount allowed
under subsection (a) to the rural microbusiness for all preceding taxable
years.
(2)The amount allowed as a credit under subsection (a)
with respect to any taxpayer with respect to all rural microbusinesses of the
taxpayer for a taxable year shall not exceed—
(A)$10,000, reduced
(but not below zero), by
(B)the amount allowed
under subsection (a) to the taxpayer with respect to rural microbusinesses for
all preceding taxable years.
(c)For purposes of this section—
(1)The term qualified new investment means
the excess of—
(A)qualified
expenditures paid or incurred for the taxable year, over
(B)the greater
of—
(i)qualified expenditures paid or incurred for
the preceding taxable year, or
(ii)the average
annual qualified expenditures paid or incurred over the preceding three taxable
years.
If the
rural microbusiness was not in existence (or expenditures relating to such
microbusiness were not taken into account under subsection (a)) for the entire
3-year period referred to in subparagraph (B)(ii), such subparagraph shall be
applied on the basis of the period during which such entity (or trade or
business) was in existence or such expenditures taken into account.(2)
(A)The term qualified expenditures means any
amount which is paid or incurred with respect to a rural microbusiness which is
not described in subparagraph (B). Such term includes costs for capital plant
and equipment, inventory expenses, and wages.
(B)Such
term does not include—
(i)any interest cost,
or
(ii)the cost of any
vehicle and costs associated with purchasing a vehicle.
(3)
(A)The term rural
microbusiness means a trade or business carried on as a proprietorship,
partnership, trust (to the extent that the trust is a pass-thru entity), S
corporation, or other pass-thru entity if—
(i)such trade or
business is carried on in a distressed rural area for the first taxable year in
which the credit under subsection (a) is allowable to the trade or
business,
(ii)such trade or
business meets the gross revenue test under subparagraph (C) for the first
taxable year in which the credit under subsection (a) is allowable to the trade
or business,
(iii)such trade or
business employed not more than 5 full-time equivalent employees during the
taxable year, and
(iv)in the case of a
trade or business the majority of the activity of which is in agricultural
production, each individual who is an owner, shareholder, or holds a capital
interest, profits interests, or beneficial interests (as the case may be) in
such trade or business is a first-time farmer (as defined in section
147(c)(2)(C)).
All
persons treated as a single employer under subsection (a) or (b) or section 52
or subsection (m) or (o) of section 414 shall be treated as a trade or business
for purposes of this subparagraph.(B)Such term shall not include—
(i)any trade or business which includes, in
whole or in part, any private or commercial golf course, country club, massage
parlor, hot tub facility, suntan facility, racetrack or other facility used for
gambling, or any store the principal business of which is the sale of alcoholic
beverages for consumption off premises, or
(ii)any trade or business with respect to which
records are required under section 2257 of title 18, United States Code, to be
maintained with respect to any performer.
(C)
(i)A trade or business meets the gross revenue test of this
subparagraph for any taxable year if the average annual gross revenue of the
trade or business for the 3-taxable year period ending with the taxable year
does not exceed $1,000,000.
(ii)All persons treated as a single employer under subsection
(a) or (b) or section 52 or subsection (m) or (o) of section 414 shall be
treated as a trade or business for purposes of clause (i).
(iii)Special rules
for entities not in existence for entire 3-year period, etcRules
similar to the rules of subparagraphs (A), (B), and (D) of section 448(c)(3)
shall apply for purposes of this subparagraph.
(D)Self-employed
individualsFor purposes of this paragraph, if, with respect to a
trade or business, an individual is treated as an employee under section
401(c), such individual shall be treated as an employee of such trade or
business for purposes of the preceding sentence.
(E)Full-time
equivalent employeeFor
purposes of this paragraph—
(i)The term full-time equivalent employee means
a number of employees equal to the number determined by dividing—
(I)the total number
of hours of service for which wages were paid by the employer to employees
during the taxable year, by
(II)2,080.
Such number
shall be rounded to the next lowest whole number if not otherwise a whole
number.(ii)If an employee works in excess of 2,080 hours of
service during any taxable year, such excess shall not be taken into account
under clause (i).
(iii)The Secretary, in consultation with the Secretary of
Labor, shall prescribe such regulations, rules, and guidance as may be
necessary to determine the hours of service of an employee, including rules for
the application of this paragraph to employees who are not compensated on an
hourly basis.
(4)
(A)The term distressed rural area means any
area in the United States—
(i)that has lost at
least 5 percent of its population over the last 10 years,
(ii)that lost at
least 10 percent if its population over the last 20 years,
(iii)that has median
family income below 85 percent of the national median family income,
(iv)that has a
poverty rate that exceeds 12.5 percent, or
(v)where average
unemployment in the preceding year exceeds 125 percent of the national
average.
(B)Such term does not include any area which
is—
(i)a
city or town that has a population of more than 50,000 inhabitants, or
(ii)an urbanized area
contiguous and adjacent to a city or town described in clause (i).
(C)Relevant sources
of informationIn determining whether an area is a distressed
rural area under subparagraph (A) or (B), such determination shall be made in
accordance with the most recent information from the Bureau of the Census, the
Bureau of Labor Statistics, or other government entity with relevant
information.
(5)A person shall be
treated as related to another person if the relationship between such persons
would result in the disallowance of losses under section 267 or 707(b) (but, in
applying section 267 (b) and (c) for purposes of this section, paragraph (4) of
section 267(c) shall be treated as providing that the family of an individual
shall include only his spouse, ancestors, and lineal descendants).
(d)No amount shall be allowed as a credit under
subsection (a) to a taxpayer unless that taxpayer materially participates in
the qualified rural microbusiness with respect to which the qualified
expenditure is paid or incurred. For purposes of the preceding sentence,
material participation shall be determined under rules similar to the rules of
section 469(h).
(e)No deduction or credit shall be allowed under any other
provision of this chapter for any amount taken into account in determining the
credit under this section.
(f)
(1)Married couple
must file joint returnRules similar to the rules of paragraphs
(2), (3), and (4) of section 21(e) shall apply for purposes of this
section.
(2)Denial of credit
to dependentsNo credit shall be allowed under this section to
any individual with respect to whom a deduction is allowed under section 151 is
allowable to another taxpayer for a taxable year beginning in the calendar year
in which such individual's calendar year
begins.
.
(b)Credit allowed
as part of general business creditSection 38(b) of such Code
(defining current year business credit) is amended by striking
plus
at the end of paragraph (35), by striking the period at the
end of paragraph (36) and inserting , plus
, and by adding at the
end the following new paragraph:
(37)the rural microbusiness investment credit
determined under section
45R(a).
.
(c)Carryover of
Unused CreditSubsection (a) of section 39 of such Code is
amended by adding at the end the following new paragraph:
(4)5-year carryback
for rural microbusiness investment creditNotwithstanding subsection (d), in the case
of the rural microbusiness investment credit—
(A)this section shall be applied separately
from the business credit and the marginal oil and gas well production credit
(other than the rural microbusiness investment credit),
(B)paragraph (1)
shall be applied by substituting each of the 5 taxable years
for
the taxable year
in subparagraph (A) thereof, and
(C)paragraph (2)
shall be applied—
(i)by
substituting 25 taxable years
for 21 taxable
years
in subparagraph (A) thereof, and
(ii)by substituting
24 taxable years
for 20 taxable years
in
subparagraph (B)
thereof.
.
(d)The table of sections for subpart D of part IV of
subchapter A of chapter 1 of such Code is amended by adding at the end the
following new item:
Sec. 45S. Rural microbusiness investment
credit.
.
(e)The amendments made by this section shall apply to
expenditures made in taxable years beginning after the date of the enactment of
this Act.