1.This Act may be cited as the
Rural Microbusiness Investment Credit
Act of 2011
.
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 for the entire 3-year period referred
to in clause (ii) of subparagraph (B), subparagraph (B) shall be applied
without regard to so much of such subparagraph as precedes such clause (ii) and
any taxable years during such 3-year period for which the rural microbusiness
was not in existence shall be taken into account as taxable years during which
there were no qualified expenditures.(2)
(A)The term qualified expenditures means any
amount which is paid or incurred with respect to a rural microbusiness. Such
term includes costs for capital plant and equipment, inventory expenses, and
wages.
(B)Such
term does not include—
(i)any interest
cost,
(ii)the cost of any vehicle which is not a
qualified nonpersonal use vehicle (as defined in section 274(i)), and
(iii)the cost of any compensation or benefits to
the taxpayer claiming the credit, including the taxpayer’s spouse and
dependents.
(3)
(A)The term rural
microbusiness means any trade or business if—
(i)such trade or
business is operated as a proprietorship, partnership, trust (to the extent
that the trust is a pass-thru entity), S corporation, or other pass-thru
entity,
(ii)each of the owners of such trade or
business, with respect to the taxable year for which the credit is
claimed—
(I)materially
participates (as determined under rules similar to the rules of section 469(h))
in such trade or business, and
(II)in the case of any trade or business
substantially all of the activity of which is in agricultural production, is a
first-time farmer (as defined in section 147(c)(2)(C)),
(iii)such trade or
business is carried on, and physically located, in a distressed rural area
during the taxable year for which the credit is claimed,
(iv)such trade or business employs not more
than 5 full time (or full-time equivalent) employees during the taxable year
for which the credit is claimed, and
(v)which meets the
gross revenue test under subparagraph (D) for the first taxable year in which
the credit under subsection (a) is allowable with respect to the trade or
business.
(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
qualified 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 120 percent of the national
average.
(B)For purposes of subparagraph (A), the term qualified
area
means—
(i)any area other
than—
(I)a city or town that has a population of
greater than 50,000 inhabitants, and
(II)any urbanized
area contiguous and adjacent to a city or town described in subclause (I),
and
(ii)any county in
which—
(I)there is no city or town that has a
population of greater than 100,000 inhabitants,
(II)there are no urbanized areas contiguous and
adjacent to a city or town described in subclause (I),
(III)there is not more than one city or town
that has a population of greater than 50,000 inhabitants, and
(IV)the average unemployment in the preceding
year exceeds 140 percent of the national average.
(C)Relevant sources
of informationIn determining whether an area is a distressed
rural area under this paragraph, 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 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.
(e)
(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
45S(a).
.
(c)Carryover of
Unused CreditSubsection (a) of section 39 of such Code is
amended by adding at the end the following new paragraph:
(5)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.