Text: H.R.5990 — 111th Congress (2009-2010)All Bill Information (Except Text)

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Introduced in House (07/30/2010)


111th CONGRESS
2d Session
H. R. 5990

To amend the Internal Revenue Code of 1986 to allow a business credit for investments in rural microbusinesses.


IN THE HOUSE OF REPRESENTATIVES
July 30, 2010

Mr. Kind (for himself and Mr. Herger) introduced the following bill; which was referred to the Committee on Ways and Means


A BILL

To amend the Internal Revenue Code of 1986 to allow a business credit for investments in rural microbusinesses.

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 Microbusiness Investment Credit Act of 2010”.

SEC. 2. Rural microbusiness investment credit.

(a) In general.—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:

“SEC. 45S. Rural microbusiness investment credit.

“(a) In general.—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) Limitations.—

“(1) PER BUSINESS LIMITATIONS.—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) PER TAXPAYER LIMITATIONS.—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) Definitions.—For purposes of this section—

“(1) QUALIFIED NEW INVESTMENT.—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) QUALIFIED EXPENDITURES.—

“(A) IN GENERAL.—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) EXCEPTION.—Such term does not include—

“(i) any interest cost, or

“(ii) the cost of any vehicle and costs associated with purchasing a vehicle.

“(3) RURAL MICROBUSINESS.—

“(A) IN GENERAL.—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) EXCEPTIONS.—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) GROSS REVENUE TEST.—

“(i) IN GENERAL.—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) AGGREGATION RULES.—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, ETC.—Rules 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 INDIVIDUALS.—For 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 EMPLOYEE.—For purposes of this paragraph—

“(i) IN GENERAL.—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) EXCESS HOURS NOT COUNTED.—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) HOURS OF SERVICE.—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) DISTRESSED RURAL AREA.—

“(A) IN GENERAL.—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) EXCEPTION.—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 INFORMATION.—In 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) RELATED PERSONS.—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) Material participation.—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) Denial of double benefit.—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) Other rules.—

“(1) MARRIED COUPLE MUST FILE JOINT RETURN.—Rules 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 DEPENDENTS.—No 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 credit.—Section 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 Credit.—Subsection (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 CREDIT.—Notwithstanding 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) Conforming amendment.—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) Effective date.—The amendments made by this section shall apply to expenditures made in taxable years beginning after the date of the enactment of this Act.