Below is the language of a section of the Tax Reiief Bill passed in the House in early August. This calls for $200 million of "Rural Renaissance Bonds" patterened after the Clean Renewable Energy Bonds. These bonds can only be issued by "qualified issuers" defined as " any not-for-profit cooperative lender which has as of the date of the enactment of this section received a guarantee under section 306 of the Rural Electrification Act" and proceeds can be used for rural infrastructure improvements, community-owned facilities and FARMER-OWNED renewable energy projects. The total authority is only $200 million.

This program was originally introduced in the Senate by Norm Coleman (MN)--however, it has not yet passed the Senate and is part of a package including repeal of the Estate Tax which may be voted on by the end of this week.

More details to follow.

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 a credit allowance date of such bond, which occurs during the taxable year, there shall be allowed as a credit against the tax imposed by this chapter for such taxable year an amount equal to the sum of the credits determined under subsection (b) with respect to credit allowance dates during such year on which the taxpayer holds such bond.

`(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 subpart C and this section).

`(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,

`(B) 95 percent or more of the proceeds from the sale of such issue are to be used for capital expenditures incurred 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, and

`(D) the issue meets the requirements of subsections (e) and (h).

`(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--

`(i) a water or waste treatment project,

`(ii) an affordable housing project,

`(iii) a community facility project, including hospitals, fire and police stations, and nursing and assisted-living facilities,

`(iv) a value-added agriculture or renewable energy facility project for agricultural producers or farmer-owned entities, including any project to promote the production, processing, or retail sale of ethanol (including fuel at least 85 percent of the volume of which consists of ethanol), biodiesel, animal waste, biomass, raw commodities, or wind as a fuel,

`(v) a distance learning or telemedicine project,

`(vi) a rural utility infrastructure project, including any electric or telephone system,

`(vii) a project to expand broadband technology,

`(viii) a rural teleworks project, and

`(ix) any project described in any preceding clause carried out by the Delta Regional Authority.

`(C) SPECIAL RULES- For purposes of this paragraph--

`(i) any project described in subparagraph (B)(iv) for a farmer-owned entity may be considered a qualified project if such entity is located in a rural area, or in the case of a farmer-owned entity the headquarters of which are located in a nonrural area, if the project is located in a rural area, and

`(ii) any project for a farmer-owned entity which is a facility described in subparagraph (B)(iv) for agricultural producers may be considered a qualified project regardless of whether the facility is located in a rural or nonrural area.

`(3) SPECIAL USE RULES-

`(A) 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 after the date of the enactment of this section.

`(B) REIMBURSEMENT- For purposes of paragraph (1)(B), a rural renaissance bond may be issued to reimburse a 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 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.

`(C) 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 borrower 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.

`(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 rural renaissance bond limitation of $200,000,000.

`(2) ALLOCATION BY SECRETARY- The Secretary shall allocate the amount described in paragraph (1) among qualified projects in such manner as the Secretary determines appropriate.

`(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 borrowers, such binding commitment will be incurred within the 6-month period beginning on the date of the loan of such proceeds to a 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) Qualified Issuer- For purposes of this section--

`(1) IN GENERAL- The term `qualified issuer' means any not-for-profit cooperative lender which has as of the date of the enactment of this section received a guarantee under section 306 of the Rural Electrification Act and which meets the requirement of paragraph (2).

`(2) USER FEE REQUIREMENT- The requirement of this paragraph is met if the issuer of any rural renaissance bond makes grants for qualified projects as defined under subsection (d)(2) on a semi-annual basis every year that such bond is outstanding in an annual amount equal to one-half of the rate on United States Treasury Bills of the same maturity multiplied by the outstanding principal balance of rural renaissance bonds issued by such issuer.

`(k) Special Rules Relating to Pool Bonds- No portion of a pooled financing bond may be allocable to a 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' means any area other than--

`(A) a city or town which has a population of greater than 50,000 inhabitants, or

`(B) the urbanized area contiguous and adjacent to such a city or town.

`(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(l) 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).'.

(b) Reporting- Subsection (d) of section 6049 (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(f) 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 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) is amended by inserting `, section 54A,' after `subpart C'.

(3) Section 1400N(l)(3)(B) 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 and before January 1, 2010.