To amend the Internal Revenue Code of 1986 to modify the qualified small issue bond provisions.

February 25, 2003

Mr. ENGLISH introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to modify the qualified small issue bond provisions.

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 `Bond Financing Renewal Act of 2003'.

SEC. 2. MODIFICATIONS TO SMALL ISSUE BOND PROVISIONS.

(a) INCREASE IN AMOUNT OF QUALIFIED SMALL ISSUE BONDS PERMITTED FOR FACILITIES TO BE USED BY RELATED PRINCIPAL USERS-

(1) IN GENERAL- Clause (i) of section 144(a)(4)(A) of the Internal Revenue Code of 1986 (relating to $10,000,000 limit in certain cases) is amended by striking `$10,000,000' and inserting `$20,000,000'.

(2) COST-OF-LIVING ADJUSTMENT- Section 144(a)(4) of such Code is amended by adding at the end the following:

`(G) COST-OF-LIVING ADJUSTMENT- In the case of a taxable year beginning in a calendar year after 2003, the $20,000,000 amount under subparagraph (A) shall be increased by an amount equal to--

`(i) such dollar amount, multiplied by

`(ii) the cost-of-living adjustment under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting `calendar year 2002' for `calendar year 1992' in subparagraph (B) thereof.'.

(3) CLERICAL AMENDMENT- The heading of paragraph (4) of section 144(a) of such Code is amended by striking `$10,000,000' and inserting `$20,000,000'.

(4) EFFECTIVE DATE- The amendments made by this subsection shall apply to--

(A) obligations issued after the date of the enactment of this Act, and

(B) capital expenditures made after such date with respect to obligations issued on or before such date.

(b) DEFINITION OF MANUFACTURING FACILITY-

(1) IN GENERAL- Section 144(a)(12)(C) of such Code (defining manufacturing facility) is amended to read as follows:

`(C) MANUFACTURING FACILITY- For the purposes of this paragraph, the term `manufacturing facility' means any facility--

`(i) which is used in the manufacture of tangible personal property (including the processing resulting in a change in the condition of such property),

`(ii) which is used in the manufacture, development, or production of specifically developed software products or processes if--

`(I) it takes more than 6 months to develop or produce such products,

`(II) the development or production could not with due diligence be reasonably expected to occur in less than 6 months, and

`(III) the software product or process comprises programs, routines, and attendant documentation developed and maintained for use in computer and telecommunications technology, or

`(iii) which is used in the manufacture, development, or production of specially developed biobased or bioenergy products or processes if--

`(I) it takes more than 6 months to develop or produce,

`(II) the development or production could not with due diligence be reasonably expected to occur in less than 6 months, and

`(III) the biobased or bioenergy product or process comprises products, processes, programs, routines, and attendant documentation developed and maintained or the utilization of biological materials in commercial or industrial products, or renewable domestic agricultural or forestry materials in commercial or industrial products, or for the utilization of biomass materials.

`(D) RELATED FACILITY- For purposes of subparagraph (C), the term `manufacturing facility' includes facilities that are directly and functionally related to a manufacturing facility (determined without regard to this sentence) if--

`(i) such facilities, including an office facility and a research and development facility, are located on the same site as the manufacturing facility, and

`(ii) not more than 40 percent of the net proceeds of the issue are used to provide such facilities, but shall not include a facility solely for research and development activities.'.

(2) EFFECTIVE DATE- The amendment made by this subsection shall apply to obligations issued after the date of the enactment of this Act.

SEC. 3. ACQUISITION INTEREST EXPENSES OF FINANCIAL INSTITUTIONS FOR SMALL ISSUE BONDS MADE DEDUCTIBLE.

(a) IN GENERAL- Clause (ii) of section 265(b)(3)(B) of the Internal Revenue Code of 1986 (relating to certain bonds not treated as private activity bonds) is amended by striking `or' at the end of subclause (I), by striking the period at the end of subclause (II) and inserting `, or', and by inserting after subclause (II) the following new subclause:

`(III) any obligation which is a qualified small issue bond described in section 144(a)(12)(B) if such obligation is part of an issue the aggregate authorized face amount of which is less than $2,000,000.'.

(b) EFFECTIVE DATE- The amendment made by this section shall apply to obligations issued after the date of the enactment of this Act.

END