[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 1676 Introduced in Senate (IS)]
<DOC>
117th CONGRESS
1st Session
S. 1676
To amend the Internal Revenue Code of 1986 to allow tax-exempt private
activity bonds to be used for qualified broadband projects, to provide
for tax credit payments to issuers of tax-exempt bonds used to finance
broadband infrastructure projects, and to provide an investment credit
for qualified broadband projects.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
May 18, 2021
Ms. Hassan (for herself and Mrs. Capito) 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 allow tax-exempt private
activity bonds to be used for qualified broadband projects, to provide
for tax credit payments to issuers of tax-exempt bonds used to finance
broadband infrastructure projects, and to provide an investment credit
for qualified broadband projects.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Rural Broadband Financing
Flexibility Act''.
TITLE I--TAX-PREFERRED BONDS
SEC. 101. PRIVATE ACTIVITY BONDS FOR QUALIFIED BROADBAND PROJECTS.
(a) In General.--Section 142(a) of the Internal Revenue Code of
1986 is amended by striking ``or'' at the end of paragraph (14), by
striking the period at the end of paragraph (15) and inserting ``,
or'', and by adding at the end the following new paragraph:
``(16) qualified broadband projects.''.
(b) Qualified Broadband Projects.--Section 142 of such Code is
amended by adding at the end the following new subsection:
``(n) Qualified Broadband Project.--
``(1) In general.--For purposes of subsection (a)(16), the
term `qualified broadband project' means any project which--
``(A) is designed to provide broadband service
solely to 1 or more areas--
``(i) which are rural areas (as defined in
section 343(a)(13) of the Consolidated Farm and
Rural Development Act (7 U.S.C. 1991(a)(13)
without regard to subparagraph (B) or (C)
thereof), and
``(ii) in which more than 50 percent of
residential households do not have access to
fixed, terrestrial broadband service which
delivers at least 25 megabits per second
downstream and at least 3 megabits service
upstream, and
``(B) results in gigabit capable internet access to
residential locations, commercial locations, or a
combination of residential and commercial locations,
but only if at least 90 percent of the locations
provided such access under the project are locations
where, before the project, a broadband service
provider--
``(i) did not provide service, or
``(ii) did not provide service meeting the
minimum speed requirements described in
subparagraph (A)(ii).
``(2) Notice to broadband providers.--A project shall not
be treated as a qualified broadband project unless, before the
issue date of any issue the proceeds of which are to be used to
fund the project, the issuer--
``(A) notifies each broadband service provider
providing broadband service in the area within which
broadband services are to be provided under the project
of the project and its intended scope,
``(B) includes in such notice a request for
information from each such provider with respect to the
provider's ability to deploy, manage, and maintain a
broadband network capable of providing gigabit capable
Internet access to residential or commercial locations,
and
``(C) allows each such provider at least 90 days to
respond to such notice and request.''.
(c) Partial Exception From Volume Cap.--
(1) In general.--Section 146(g) of the Internal Revenue
Code of 1986 is amended by striking ``and'' at the end of
paragraph (3), by striking the period at the end of paragraph
(4) and inserting ``, and'', and by inserting immediately after
paragraph (4) the following new paragraph:
``(5) 75 percent of any exempt facility bond issued as part
of an issue described in paragraph (16) of section 142(a)
(relating to qualified broadband projects).''.
(2) Government-owned projects.--The last sentence of
section 146(g) of such Code is amended by striking ``Paragraph
(4)'' and inserting ``Paragraphs (4) and (5)''.
(d) Effective Date.--The amendments made by this section shall
apply to obligations issued in calendar years beginning after the date
of the enactment of this Act.
SEC. 102. CREDIT FOR BROADBAND INFRASTRUCTURE BONDS ALLOWED TO ISSUERS.
(a) In General.--Subchapter B of chapter 65 of the Internal Revenue
Code of 1986 is amended by inserting after section 6430 the following
new section:
``SEC. 6431. CREDIT FOR BROADBAND INFRASTRUCTURE BONDS ALLOWED TO
ISSUER.
``(a) In General.--In the case of a broadband infrastructure bond,
the issuer of such bond shall be allowed a credit with respect to each
interest payment under such bond which shall be payable by the
Secretary as provided in subsection (b).
``(b) Payment of Credit.--The Secretary shall pay
(contemporaneously with each interest payment date under such bond) to
the issuer of such bond (or to any person who makes such interest
payments on behalf of the issuer) 35 percent of the interest payable
under such bond on such date.
``(c) Broadband Infrastructure Bond.--For purposes of this
section--
``(1) In general.--The term `broadband infrastructure bond'
means any obligation--
``(A) the interest on which would (but for this
section) be excludable from gross income under section
103,
``(B) which is issued by a qualified issuer,
``(C) which is issued as part of an issue with
respect to which--
``(i) the requirements of paragraph (2) are
met,
``(ii) all of the property to be financed
by the net proceeds of the issue is to be owned
by a governmental unit (within the meaning of
section 142(b)(1)), and
``(iii) the aggregate face amount of bonds
issued pursuant to the issue, when added to the
aggregate face amount of broadband
infrastructure bonds previously issued by the
issuing authority during the calendar year,
does not exceed such issuing authority's
allocation of its State's volume cap under
subsection (d) for such year, and
``(D) with respect to which the issuer makes an
irrevocable election to have this section apply.
``(2) Special rules relating to expenditures.--
``(A) In general.--An issue shall be treated as
meeting the requirements of this paragraph if, as of
the date of issuance, the issuer reasonably expects--
``(i) 95 percent of the available project
proceeds to be spent in connection with 1 or
more qualified broadband projects within the 3-
year period beginning on such date of issuance,
and
``(ii) a binding commitment with a third
party to spend at least 10 percent of such
available project proceeds will be incurred
within the 6-month period beginning on such
date of issuance.
``(B) Failure to spend required amount of bond
proceeds within 3 years.--
``(i) In general.--To the extent that less
than 95 percent of the available project
proceeds of the issue are expended by the close
of the expenditure period, the 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.
``(ii) Expenditure period.--For purposes of
this section, the term `expenditure period'
means, with respect to any issue, the 3-year
period beginning on the date of issuance. Such
term shall include any extension of such period
under clause (iii).
``(iii) Extension of period.-- Upon
submission of a request prior to the expiration
of the expenditure period (determined without
regard to any extension under this clause), the
Secretary may extend such period if the issuer
establishes that the failure to expend the
proceeds within the original expenditure period
is due to reasonable cause and the expenditures
in connection with 1 or more qualified
broadband projects will continue to proceed
with due diligence.
``(C) Reimbursement.--For purposes of this
subtitle, available project proceeds of an issue shall
be treated as spent in connection with 1 or more
qualified broadband projects if such proceeds are used
to reimburse the issuer for amounts paid in connection
with such projects after the date that an allocation of
a State's volume cap under subsection (d) has been made
with respect to such issue, but only if-
``(i) prior to the payment of the original
expenditure, the issuer declared its intent to
reimburse such expenditure with the proceeds of
such issue,
``(ii) not later than 60 days after payment
of the original expenditure, the 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.
``(3) Limitation on issue price.--An obligation shall not
be treated as a broadband infrastructure bond if the issue
price has more than a de minimis amount (determined under rules
similar to the rules of section 1273(a)(3)) of premium over the
stated principal amount of the obligation.
``(4) Available project proceeds.--For purposes of this
subsection, the term `available project proceeds' means, with
respect to any issue, the sum of--
``(A) the excess of--
``(i) the proceeds from the sale of an
issue, over
``(ii) the issuance costs financed by the
issue (to the extent that such costs do not
exceed 2 percent of such proceeds), plus
``(B) the proceeds from any investment of the
excess described in subparagraph (A).
``(5) Qualified broadband project.-- For purposes of this
subsection, the term `qualified broadband project' has the
meaning given such term by section 142(n).
``(d) Limitation on Amount of Bonds Designated.--
``(1) National limitation.--There is a national broadband
infrastructure bond limitation for each calendar year of
$2,500,000,000.
``(2) State volume cap; allocation.--For purposes of this
subsection, the broadband infrastructure bonds volume cap of a
State for any calendar year is the portion of the national
broadband infrastructure bond limitation under paragraph (1)
equal to the sum of--
``(A) $25,000,000, plus
``(B) the amount which bears the same ratio to
$1,250,000,000 as the--
``(i) number of individuals in such State
who reside in rural areas (as defined in
section 343(a)(13) of the Consolidated Farm and
Rural Development Act (7 U.S.C. 1991(a)(13)
without regard to subparagraph (B) or (C)
thereof), bears to
``(ii) the total number of individuals
living in such rural areas in all States.
``(3) Allocation of volume cap.--
``(A) In general.--For purposes of this section--
``(i) except as provided in subparagraph
(C), 50 percent of the State broadband
infrastructure bonds volume cap of a State for
any calendar year shall be allocated to
qualified issuers that are not agencies of the
State in the amount determined under
subparagraph (B), and
``(ii) the remaining 50 percent of such
volume cap shall be allocated to qualified
issuers in such manner as the State provides.
``(B) Amount of allocation.--
``(i) In general.--The amount of the State
broadband infrastructure bonds volume cap for
any calendar year allocated under this
subparagraph to any qualified issuer described
in subparagraph (A)(i) shall be equal to the
amount which bears the same ratio to the amount
described in subparagraph (A)(i) for such
calendar year as--
``(I) the number of individuals in
such State who reside in rural areas
(as defined in section 343(a)(13) of
the Consolidated Farm and Rural
Development Act (7 U.S.C. 1991(a)(13)
without regard to subparagraph (B) or
(C) thereof) within the jurisdiction of
such qualified issuer, bears to
``(II) the total number of
individuals living in such rural areas
in the State.
``(ii) Special rule for overlapping
jurisdictions.--For purposes of clause (i)(I),
if an area is within the jurisdiction of 2 or
more governmental units, such area shall be
treated as only within the jurisdiction of the
unit having jurisdiction over the smallest
geographical area unless such unit agrees to
surrender all or part of such jurisdiction for
such calendar year to the unit with overlapping
jurisdiction which has the next smallest
geographical area.
``(C) Reallocation.--The amount allocated under
this paragraph to any qualified issuer may be
reallocated by such issuer to the State for
reallocation to other qualified issuers (including
agencies of the State).
``(4) Carryover of unused limitation.--
``(A) In general.--If, for any calendar year, a
State's broadband infrastructure bonds volume cap
exceeds the amount of bonds issued during such year
which are designated as broadband infrastructure bonds
under subsection (c)(1)(D) with respect to broadband
projects within such State, the broadband
infrastructure bonds volume cap for such State for the
following calendar year shall be increased by the
amount of such excess.
``(B) Limitation on carryover.--Any carryforward of
an excess amount may be carried only to the first 2
years following the unused volume cap year. For
purposes of the preceding sentence, a volume cap amount
shall be treated as used on a first-in first-out basis.
``(e) Other Rules and Definitions.--
``(1) Interest includible in income.--For purposes of this
title, interest on any broadband infrastructure bond shall be
includible in gross income.
``(2) Credit not a federal guarantee.--For purposes of
section 149(b), a broadband infrastructure bond shall not be
treated as Federally guaranteed by reason of the credit allowed
under this section.
``(3) Coordination with section 148.--
``(A) Yield reduced by credit.--For purposes of
section 148, the yield on a broadband infrastructure
bond shall be determined by reducing the otherwise
effective yield by the amount of the credit allowed to
the issuer under this section.
``(B) Investment during extension period.--An issue
shall not be treated as failing to meet the
requirements of section 148 by reason of any investment
of available project proceeds during the expenditure
period.
``(4) Rural populations.--For purposes of this section, the
determination of the number of individuals living in rural
areas shall be made in consultation with the Secretary of
Agriculture.
``(5) Definitions.--For purposes of this section--
``(A) Qualified issuer.--The term `qualified
issuer' means a State or any political subdivision or
instrumentality thereof having authority to issue
private activity bonds.
``(B) State.--Notwithstanding section 7701(a)(10),
the term `State' only includes the 50 States.
``(f) Regulations.--The Secretary may prescribe such regulations
and other guidance as may be necessary or appropriate to carry out this
section.''.
(b) Conforming Amendments.--
(1) Section 6401(b)(1) of the Internal Revenue Code of 1986
is amended by striking ``under subparts A, B, D, and G of such
part IV'' and inserting ``under all subparts of such part IV
other than such subpart C''.
(2) The table of sections for subchapter B of chapter 65 of
such Code is amended by inserting after the item related to
section 6430 the following new section:
``Sec. 6431. Credit for broadband infrastructure bonds allowed to
issuer.''.
(c) Gross-Up of Payment to Issuers in Case of Sequestration.--The
amount of any payment under section 6431(b) of the Internal Revenue
Code of 1986 made after the date of the enactment of this Act to which
sequestration applies shall be increased by the amount necessary to
preserve the full amount of such payment payable to the issuer before
sequestration. For purposes of this subsection, the term
``sequestration'' means any reduction in direct spending ordered in
accordance with a sequestration report prepared by the Director of the
Office and Management and Budget pursuant to the Balanced Budget and
Emergency Deficit Control Act of 1985 or the Statutory Pay-As-You-Go
Act of 2010.
(d) Effective Date.--The amendments made by this section shall
apply to bonds issued in calendar years beginning after the date of the
enactment of this Act.
TITLE II--INVESTMENT TAX CREDIT
SEC. 201. INVESTMENT CREDIT FOR QUALIFYING BROADBAND PROJECTS.
(a) In General.--Subpart E of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 is amended by inserting after
section 48C the following new section:
``SEC. 48D. QUALIFYING BROADBAND PROJECT CREDIT.
``(a) In General.--For purposes of section 46, the qualifying
broadband project credit for any taxable year is an amount equal to 10
percent of the qualified investment for such taxable year with respect
to any qualifying broadband project.
``(b) Qualified Investment.--
``(1) In general.--For purposes of subsection (a), the
qualified investment for any taxable year is the basis of
eligible property placed in service by the taxpayer during such
taxable year which is part of a qualifying broadband project--
``(A)(i) the construction, reconstruction, or
erection of which is completed by the taxpayer, or
``(ii) which is acquired by the taxpayer if the
original use of such property commences with the
taxpayer, and
``(B) with respect to which depreciation (or
amortization in lieu of depreciation) is allowable.
``(2) Special rule for certain subsidized property.--Rules
similar to section 48(a)(4) (without regard to subparagraph (D)
thereof) shall apply for purposes of this section.
``(3) Certain qualified progress expenditures rules made
applicable.--Rules similar to the rules of subsections (c)(4)
and (d) of section 46 (as in effect on the day before the
enactment of the Revenue Reconciliation Act of 1990) shall
apply for purposes of this section.
``(c) Limitation.--
``(1) In general.--The amount of the credit allowed under
subsection (a) for any taxable year with respect to any
qualifying broadband project shall not exceed the broadband
credit dollar amount allocated to such project by a State under
this section.
``(2) Broadband credit dollar amount.--
``(A) In general.--The aggregate broadband credit
dollar amount which may be allocated for any calendar
year by any State shall not exceed the sum of--
``(i) $5,000,000, plus
``(ii) the amount that bears the same ratio
to $2,500,000 as the population of individuals
in the state residing in rural areas bears the
population of individuals residing in rural
areas in all States.
``(B) Broadband credit dollar amount
carryforward.--
``(i) In general.--If the limitation under
subparagraph (A) (determined without regard to
this subparagraph) exceeds the aggregate amount
of broadband credit dollar amounts allocated
for any calendar year, such excess shall be
treated as a broadband credit dollar amount
carryforward and added to the limitation under
such subparagraph for the 2 succeeding calendar
years.
``(ii) Ordering rules.--Broadband credit
dollar amount carryforwards shall be treated as
used in the order in which they arose.
``(d) Qualifying Broadband Project.--For purposes of this section--
``(1) In general.--The term `qualifying broadband project'
means any project which--
``(A) is designed to provide broadband service
solely to 1 or more areas--
``(i) which are rural areas, and
``(ii) in which more than 50 percent of
residential households do not have access to
fixed, terrestrial broadband service which
delivers at least 25 megabits per second
downstream and at least 3 megabits service
upstream,
``(B) results in gigabit capable Internet access to
residential locations, commercial locations, or a
combination of residential and commercial locations,
but only if at least 90 percent of the locations
provided such access under the project are locations
where, before the project, a broadband service
provider--
``(i) did not provide service, or
``(ii) did not provide service which meets
the minimum speed requirements described in
subparagraph (A)(ii), and
``(C) is certified by the Secretary pursuant to
paragraph (2).
``(2) Qualifying broadband project certification program.--
``(A) In general.--Not later than 180 days after
the date of enactment of this section, the Secretary,
in consultation with the Chairman of the Federal
Communications Commission and the Secretary of
Agriculture, shall establish a qualifying broadband
project certification program to consider and award
certifications for qualified investments eligible for
credits under this section.
``(B) Application period.--
``(i) In general.--Each applicant for
certification under this paragraph shall submit
an application containing such information as
the Secretary may require during each annual
application period.
``(ii) Annual application period.--For
purposes of this paragraph, the term `annual
application period' means a 60-day period
beginning each calendar year on the date
determined by the Secretary.
``(C) Nomination.--A project may not be certified
under this paragraph unless--
``(i) the project is nominated by a State
or local government in a single, uniform
application that is submitted to the Secretary
by each State on behalf of projects nominated
by the State and by its localities, and
``(ii) such State or local government
provides written assurances within the
application under clause (i) that the project
satisfies the requirements of subparagraphs (A)
and (B) of paragraph (1).
``(D) Certification.--Not later than 60 days after
the end of the annual application period, the
Secretary, in consultation with the Chairman of the
Federal Communications Commission and the Secretary of
Agriculture, shall award certifications under this
section.
``(e) Definitions.--For purposes of this section--
``(1) Eligible property.--The term `eligible property'
means any property which is a part of a qualifying broadband
project.
``(2) Rural area.--The term `rural area' has the meaning
given such term under section 343(a)(13) of the Consolidated
Farm and Rural Development Act (7 U.S.C. 1991(a)(13)),
determined without regard to subparagraph (B) or (C) thereof.
``(3) State.--The term `State' means the 50 States.''.
(b) Conforming Amendments.--
(1) Section 46 of the Internal Revenue Code of 1986 is
amended by striking ``and'' at the end of paragraph (5), by
striking the period at the end of paragraph (6) and inserting
``, and'', and by adding at the end the following new
paragraph:
``(7) the qualifying broadband project credit.''.
(2) Section 49(a)(1)(C) of such Code is amended by striking
``and'' at the end of clause (iv), by striking the period at
the end of clause (v) and inserting ``, and'', and by adding at
the end the following new clause:
``(vi) the basis of any property which is
part of a qualifying broadband project under
section 48D.''.
(3) Section 50(a)(2)(E) of such Code is amended by striking
``or 48C(b)(2)'' and inserting ``48C(b)(2), or 48D(b)(3)''.
(4) The table of sections for subpart E of part IV of
subchapter A of chapter 1 of such Code is amended by inserting
after the item relating to section 48C the following new item:
``Sec. 48D. Qualifying broadband project credit.''.
(c) Effective Date.--The amendments made by this section shall
apply to periods after December 31, 2021, in taxable years ending after
such date, under rules similar to the rules of section 48(m) of such
Code (as in effect on the day before the date of the enactment of the
Revenue Reconciliation Act of 1990).
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