HR 1220 IH

To amend the Internal Revenue Code of 1986 to encourage a strong community-based banking system.

March 27, 2001

Mr. SESSIONS (for himself, Mr. POMEROY, and Mr. HALL of Texas) introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to encourage a strong community-based banking system.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

This Act may be cited as the `Community Savings and Investment Act of 2001'.

SEC. 2. INCOME TAX ON QUALIFIED COMMUNITY LENDERS.

(a) IN GENERAL- Section 11 of the Internal Revenue Code of 1986 (relating to tax imposed on corporations) is amended by redesignating subsection (d) as subsection (e) and by inserting after subsection (c) the following new subsection:

`(d) QUALIFIED COMMUNITY LENDERS-

`(1) IN GENERAL- In the case of a qualified community lender, in lieu of the amount of tax under subsection (b) the amount of tax imposed by subsection (a) for a taxable year shall be the sum of--

`(A) 15 percent of so much of the taxable income as exceeds $250,000 but does not exceed $1,000,000, and

`(B) the highest rate of tax imposed by subsection (b) multiplied by so much of the taxable income as exceeds $1,000,000.

`(2) QUALIFIED COMMUNITY LENDER- For purposes of paragraph (1), the term `qualified community lender' means a bank--

`(A) which achieved a rating of `satisfactory record of meeting community credit needs', or better, at the most recent examination of such bank under the Community Reinvestment Act of 1977,

`(B) whose outstanding local community loans at all times during the taxable year comprised not less than 60 percent of the total outstanding loans,

`(C) meets the ownership requirements of paragraph (3), and

`(D) at all times during the taxable year has total assets of not more than $1,000,000,000.'.

`(3) OWNERSHIP REQUIREMENTS-

`(A) IN GENERAL- The ownership requirements of this paragraph are met with respect to any bank if--

`(i) no shares of, or other ownership interests in, the bank are publicly traded, or

`(ii) in the case of a bank the shares of which or ownership interests in which are publicly traded, the last known address of the holders of at least 2/3 of all such shares or interests, including persons for whose benefit such shares or interests are held by another, is in the home State of the bank or a State contiguous to such home State.

`(B) HOME STATE DEFINED- For purposes of subparagraph (A), the term `home State' means--

`(i) with respect to a national bank or Federal savings association, the State in which the main office of the bank or savings association is located, and

`(ii) with respect to a State bank or State savings association, the State by which the bank or savings association is chartered.

`(4) OTHER DEFINITIONS- For purposes of this subsection--

`(A) BANK- The term `bank'--

`(i) has the meaning given to such term in section 581, and

`(ii) includes any bank--

`(I) in which at least 80 percent of the shares of, or other ownership interests in the bank are owned by other qualified community lenders, and

`(II) the sole purpose of which is to serve the banking needs of such lenders.

`(B) LOCAL COMMUNITY LOAN- The term `local community loan' means--

`(i) any loan originated by a bank to any person, other than a related person with respect to the bank, who is a resident of a community in which the bank is chartered or in which it operates an office at which deposits are accepted, and

`(ii) any loan originated by a bank to any person, other than a related person with respect to the bank, who is engaged in a trade or business in any such community, to the extent that all or substantially all of the proceeds of such loan are expended in connection with the trade or business of such person in any such community.

`(C) RELATED PERSON- The term `related person' means, with respect to any bank, any affiliate of the bank, any person who is a director, officer, or principal shareholder of the bank, and any member of the immediate family of any such person.'.

(b) S CORPORATION INCOME-

(1) IN GENERAL- Section 1 of such Code (relating to tax imposed) is amended by adding at the end the following new subsection:

`(i) COMMUNITY LENDER INCOME FROM S CORPORATION-

`(1) IN GENERAL- If a taxpayer has community lender income from a S corporation for any taxable year, the tax imposed by this section for such taxable year shall be the sum of--

`(A) the tax computed at the rates and in the same manner as if this subsection had not been enacted on the greater of--

`(i) taxable income reduced by community lender income, or

`(ii) the lesser of--

`(I) the amount of taxable income taxed at a rate below 28 percent, or

`(II) taxable income reduced by community lender income, and

`(B) a tax on community lender income computed at--

`(i) a rate of zero on zero-rate community lender income,

`(ii) a rate of 15 percent on 15 percent community lender income, and

`(iii) the highest rate in effect under this section with respect to the taxpayer on the excess of community lender income on which a tax is determined under clause (i) or (ii).

`(2) COMMUNITY LENDER INCOME- For purposes of paragraph (1)--

`(A) IN GENERAL- The term `qualified community lender income' means taxable income (if any) of a qualified community lender (as defined in section 11(d)(2)) that is an S corporation, determined at the entity level.

`(B) ZERO-RATE COMMUNITY LENDER INCOME- The term `zero-rate community lender income' means the taxpayer's pro rata share of so much of community lender income as does not exceed $250,000.

`(C) 15 PERCENT COMMUNITY LENDER INCOME- The term `15 percent community lender income' means the taxpayer's pro rata share of so much of community lender income as exceeds $250,000 but does not exceed $1,000,000.

`(D) SPECIAL RULES-

`(i) For purposes of this paragraph, the taxpayer's pro rata share of community lender income shall be determined under part II of subchapter S.

`(ii) This subsection shall be applied after the application of subsection (h).'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2001.

SEC. 3. EXCLUSION FROM INCOME TAXATION FOR INCOME DERIVED FROM BANKING SERVICES WITHIN DISTRESSED COMMUNITIES.

(a) FEDERAL TAXATION- Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to items specifically excluded from gross income) is amended by redesignating section 139 as section 140 and by inserting after section 138 the following new section:

`SEC. 139. BANKING SERVICES WITHIN DISTRESSED COMMUNITIES.

`(a) IN GENERAL- At the election of the taxpayer, gross income shall not include distressed community banking income.

`(b) DISTRESSED COMMUNITY BANKING INCOME- For purposes of subsection (a), the term `distressed community banking income' means net income of a qualified depository institution which is derived from the active conduct of a banking business in a distressed community.

`(c) QUALIFIED DEPOSITORY INSTITUTION- An institution is a qualified depository institution if--

`(1) such institution is an insured depository institution (as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)),

`(2) such institution is located in, or has a branch located in, a qualified distressed community, and

`(3) as of the last day of the taxable year, at least 85 percent of its loans from its location within the qualified distressed community are local community loans (as defined in section 11(d)(4)(B)).

`(d) DISTRESSED COMMUNITY- The term `distressed community' has the meaning given the term `qualified distressed community' by section 233 of the Bank Enterprise Act of 1991 (12 U.S.C. 1834a(b)).'.

(b) CLERICAL AMENDMENT- The table of sections for part III of subchapter B of chapter 1 of such Code is amended by striking the item relating to section 139 and inserting after the item relating to section 138 the following new items:

`Sec. 139. Banking services within distressed communities.

`Sec. 140. Cross references to other Acts.'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

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