Rural Broadband Financing Flexibility Act

II 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 Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Rural Broadband Fi- 4 nancing Flexibility Act’’. 5 VerDate Sep 11 2014 03:47 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1676.IS S1676 pbinns on DSKJLVW7X2PROD with BILLS 2 •S 1676 IS TITLE I—TAX-PREFERRED 1 BONDS 2 SEC. 101. PRIVATE ACTIVITY BONDS FOR QUALIFIED 3 BROADBAND PROJECTS. 4 (a) IN GENERAL.—Section 142(a) of the Internal 5 Revenue Code of 1986 is amended by striking ‘‘or’’ at the 6 end of paragraph (14), by striking the period at the end 7 of paragraph (15) and inserting ‘‘, or’’, and by adding at 8 the end the following new paragraph: 9 ‘‘(16) qualified broadband projects.’’. 10 (b) QUALIFIED BROADBAND PROJECTS.—Section 11 142 of such Code is amended by adding at the end the 12 following new subsection: 13 ‘‘(n) QUALIFIED BROADBAND PROJECT.— 14 ‘‘(1) IN GENERAL.—For purposes of subsection 15 (a)(16), the term ‘qualified broadband project’ 16 means any project which— 17 ‘‘(A) is designed to provide broadband 18 service solely to 1 or more areas— 19 ‘‘(i) which are rural areas (as defined 20 in section 343(a)(13) of the Consolidated 21 Farm and Rural Development Act (7 22 U.S.C. 1991(a)(13) without regard to sub- 23 paragraph (B) or (C) thereof), and 24 VerDate Sep 11 2014 03:47 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1676.IS S1676 pbinns on DSKJLVW7X2PROD with BILLS 3 •S 1676 IS ‘‘(ii) in which more than 50 percent of 1 residential households do not have access 2 to fixed, terrestrial broadband service 3 which delivers at least 25 megabits per 4 second downstream and at least 3 mega- 5 bits service upstream, and 6 ‘‘(B) results in gigabit capable internet ac- 7 cess to residential locations, commercial loca- 8 tions, or a combination of residential and com- 9 mercial locations, but only if at least 90 percent 10 of the locations provided such access under the 11 project are locations where, before the project, 12 a broadband service provider— 13 ‘‘(i) did not provide service, or 14 ‘‘(ii) did not provide service meeting 15 the minimum speed requirements described 16 in subparagraph (A)(ii). 17 ‘‘(2) NOTICE TO BROADBAND PROVIDERS.—A 18 project shall not be treated as a qualified broadband 19 project unless, before the issue date of any issue the 20 proceeds of which are to be used to fund the project, 21 the issuer— 22 ‘‘(A) notifies each broadband service pro- 23 vider providing broadband service in the area 24 within which broadband services are to be pro- 25 VerDate Sep 11 2014 03:47 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1676.IS S1676 pbinns on DSKJLVW7X2PROD with BILLS 4 •S 1676 IS vided under the project of the project and its 1 intended scope, 2 ‘‘(B) includes in such notice a request for 3 information from each such provider with re- 4 spect to the provider’s ability to deploy, man- 5 age, and maintain a broadband network capable 6 of providing gigabit capable Internet access to 7 residential or commercial locations, and 8 ‘‘(C) allows each such provider at least 90 9 days to respond to such notice and request.’’. 10 (c) PARTIAL EXCEPTION FROM VOLUME CAP.— 11 (1) IN GENERAL.—Section 146(g) of the Inter- 12 nal Revenue Code of 1986 is amended by striking 13 ‘‘and’’ at the end of paragraph (3), by striking the 14 period at the end of paragraph (4) and inserting ‘‘, 15 and’’, and by inserting immediately after paragraph 16 (4) the following new paragraph: 17 ‘‘(5) 75 percent of any exempt facility bond 18 issued as part of an issue described in paragraph 19 (16) of section 142(a) (relating to qualified 20 broadband projects).’’. 21 (2) GOVERNMENT-OWNED PROJECTS.—The last 22 sentence of section 146(g) of such Code is amended 23 by striking ‘‘Paragraph (4)’’ and inserting ‘‘Para- 24 graphs (4) and (5)’’. 25 VerDate Sep 11 2014 03:47 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1676.IS S1676 pbinns on DSKJLVW7X2PROD with BILLS 5 •S 1676 IS (d) EFFECTIVE DATE.—The amendments made by 1 this section shall apply to obligations issued in calendar 2 years beginning after the date of the enactment of this 3 Act. 4 SEC. 102. CREDIT FOR BROADBAND INFRASTRUCTURE 5 BONDS ALLOWED TO ISSUERS. 6 (a) IN GENERAL.—Subchapter B of chapter 65 of the 7 Internal Revenue Code of 1986 is amended by inserting 8 after section 6430 the following new section: 9 ‘‘SEC. 6431. CREDIT FOR BROADBAND INFRASTRUCTURE 10 BONDS ALLOWED TO ISSUER. 11 ‘‘(a) IN GENERAL.—In the case of a broadband infra- 12 structure bond, the issuer of such bond shall be allowed 13 a credit with respect to each interest payment under such 14 bond which shall be payable by the Secretary as provided 15 in subsection (b). 16 ‘‘(b) PAYMENT OF CREDIT.—The Secretary shall pay 17 (contemporaneously with each interest payment date 18 under such bond) to the issuer of such bond (or to any 19 person who makes such interest payments on behalf of the 20 issuer) 35 percent of the interest payable under such bond 21 on such date. 22 ‘‘(c) BROADBAND INFRASTRUCTURE BOND.—For 23 purposes of this section— 24 VerDate Sep 11 2014 03:47 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1676.IS S1676 pbinns on DSKJLVW7X2PROD with BILLS 6 •S 1676 IS ‘‘(1) IN GENERAL.—The term ‘broadband infra- 1 structure bond’ means any obligation— 2 ‘‘(A) the interest on which would (but for 3 this section) be excludable from gross income 4 under section 103, 5 ‘‘(B) which is issued by a qualified issuer, 6 ‘‘(C) which is issued as part of an issue 7 with respect to which— 8 ‘‘(i) the requirements of paragraph 9 (2) are met, 10 ‘‘(ii) all of the property to be financed 11 by the net proceeds of the issue is to be 12 owned by a governmental unit (within the 13 meaning of section 142(b)(1)), and 14 ‘‘(iii) the aggregate face amount of 15 bonds issued pursuant to the issue, when 16 added to the aggregate face amount of 17 broadband infrastructure bonds previously 18 issued by the issuing authority during the 19 calendar year, does not exceed such issuing 20 authority’s allocation of its State’s volume 21 cap under subsection (d) for such year, 22 and 23 VerDate Sep 11 2014 03:47 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1676.IS S1676 pbinns on DSKJLVW7X2PROD with BILLS 7 •S 1676 IS ‘‘(D) with respect to which the issuer 1 makes an irrevocable election to have this sec- 2 tion apply. 3 ‘‘(2) SPECIAL RULES RELATING TO EXPENDI- 4 TURES.— 5 ‘‘(A) IN GENERAL.—An issue shall be 6 treated as meeting the requirements of this 7 paragraph if, as of the date of issuance, the 8 issuer reasonably expects— 9 ‘‘(i) 95 percent of the available project 10 proceeds to be spent in connection with 1 11 or more qualified broadband projects with- 12 in the 3-year period beginning on such 13 date of issuance, and 14 ‘‘(ii) a binding commitment with a 15 third party to spend at least 10 percent of 16 such available project proceeds will be in- 17 curred within the 6-month period begin- 18 ning on such date of issuance. 19 ‘‘(B) FAILURE TO SPEND REQUIRED 20 AMOUNT OF BOND PROCEEDS WITHIN 3 21 YEARS.— 22 ‘‘(i) IN GENERAL.—To the extent that 23 less than 95 percent of the available 24 project proceeds of the issue are expended 25 VerDate Sep 11 2014 03:47 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1676.IS S1676 pbinns on DSKJLVW7X2PROD with BILLS 8 •S 1676 IS by the close of the expenditure period, the 1 issuer shall redeem all of the nonqualified 2 bonds within 90 days after the end of such 3 period. For purposes of this paragraph, the 4 amount of the nonqualified bonds required 5 to be redeemed shall be determined in the 6 same manner as under section 142. 7 ‘‘(ii) EXPENDITURE PERIOD.—For 8 purposes of this section, the term ‘expendi- 9 ture period’ means, with respect to any 10 issue, the 3-year period beginning on the 11 date of issuance. Such term shall include 12 any extension of such period under clause 13 (iii). 14 ‘‘(iii) EXTENSION OF PERIOD.— Upon 15 submission of a request prior to the expira- 16 tion of the expenditure period (determined 17 without regard to any extension under this 18 clause), the Secretary may extend such pe- 19 riod if the issuer establishes that the fail- 20 ure to expend the proceeds within the 21 original expenditure period is due to rea- 22 sonable cause and the expenditures in con- 23 nection with 1 or more qualified broadband 24 VerDate Sep 11 2014 03:47 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1676.IS S1676 pbinns on DSKJLVW7X2PROD with BILLS 9 •S 1676 IS projects will continue to proceed with due 1 diligence. 2 ‘‘(C) REIMBURSEMENT.—For purposes of 3 this subtitle, available project proceeds of an 4 issue shall be treated as spent in connection 5 with 1 or more qualified broadband projects if 6 such proceeds are used to reimburse the issuer 7 for amounts paid in connection with such 8 projects after the date that an allocation of a 9 State’s volume cap under subsection (d) has 10 been made with respect to such issue, but only 11 if- 12 ‘‘(i) prior to the payment of the origi- 13 nal expenditure, the issuer declared its in- 14 tent to reimburse such expenditure with 15 the proceeds of such issue, 16 ‘‘(ii) not later than 60 days after pay- 17 ment of the original expenditure, the issuer 18 adopts an official intent to reimburse the 19 original expenditure with such proceeds, 20 and 21 ‘‘(iii) the reimbursement is made not 22 later than 18 months after the date the 23 original expenditure is paid. 24 VerDate Sep 11 2014 03:47 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1676.IS S1676 pbinns on DSKJLVW7X2PROD with BILLS 10 •S 1676 IS ‘‘(3) LIMITATION ON ISSUE PRICE.—An obliga- 1 tion shall not be treated as a broadband infrastruc- 2 ture bond if the issue price has more than a de mini- 3 mis amount (determined under rules similar to the 4 rules of section 1273(a)(3)) of premium over the 5 stated principal amount of the obligation. 6 ‘‘(4) AVAILABLE PROJECT PROCEEDS.—For 7 purposes of this subsection, the term ‘available 8 project proceeds’ means, with respect to any issue, 9 the sum of— 10 ‘‘(A) the excess of— 11 ‘‘(i) the proceeds from the sale of an 12 issue, over 13 ‘‘(ii) the issuance costs financed by 14 the issue (to the extent that such costs do 15 not exceed 2 percent of such proceeds), 16 plus 17 ‘‘(B) the proceeds from any investment of 18 the excess described in subparagraph (A). 19 ‘‘(5) QUALIFIED BROADBAND PROJECT.— For 20 purposes of this subsection, the term ‘qualified 21 broadband project’ has the meaning given such term 22 by section 142(n). 23 ‘‘(d) LIMITATION ON AMOUNT OF BONDS DES- 24 IGNATED.— 25 VerDate Sep 11 2014 03:47 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1676.IS S1676 pbinns on DSKJLVW7X2PROD with BILLS 11 •S 1676 IS ‘‘(1) NATIONAL LIMITATION.—There is a na- 1 tional broadband infrastructure bond limitation for 2 each calendar year of $2,500,000,000. 3 ‘‘(2) STATE VOLUME CAP; ALLOCATION.—For 4 purposes of this subsection, the broadband infra- 5 structure bonds volume cap of a State for any cal- 6 endar year is the portion of the national broadband 7 infrastructure bond limitation under paragraph (1) 8 equal to the sum of— 9 ‘‘(A) $25,000,000, plus 10 ‘‘(B) the amount which bears the same 11 ratio to $1,250,000,000 as the— 12 ‘‘(i) number of individuals in such 13 State who reside in rural areas (as defined 14 in section 343(a)(13) of the Consolidated 15 Farm and Rural Development Act (7 16 U.S.C. 1991(a)(13) without regard to sub- 17 paragraph (B) or (C) thereof), bears to 18 ‘‘(ii) the total number of individuals 19 living in such rural areas in all States. 20 ‘‘(3) ALLOCATION OF VOLUME CAP.— 21 ‘‘(A) IN GENERAL.—For purposes of this 22 section— 23 ‘‘(i) except as provided in subpara- 24 graph (C), 50 percent of the State 25 VerDate Sep 11 2014 03:47 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1676.IS S1676 pbinns on DSKJLVW7X2PROD with BILLS 12 •S 1676 IS broadband infrastructure bonds volume cap 1 of a State for any calendar year shall be 2 allocated to qualified issuers that are not 3 agencies of the State in the amount deter- 4 mined under subparagraph (B), and 5 ‘‘(ii) the remaining 50 percent of such 6 volume cap shall be allocated to qualified 7 issuers in such manner as the State pro- 8 vides. 9 ‘‘(B) AMOUNT OF ALLOCATION.— 10 ‘‘(i) IN GENERAL.—The amount of 11 the State broadband infrastructure bonds 12 volume cap for any calendar year allocated 13 under this subparagraph to any qualified 14 issuer described in subparagraph (A)(i) 15 shall be equal to the amount which bears 16 the same ratio to the amount described in 17 subparagraph (A)(i) for such calendar year 18 as— 19 ‘‘(I) the number of individuals in 20 such State who reside in rural areas 21 (as defined in section 343(a)(13) of 22 the Consolidated Farm and Rural De- 23 velopment Act (7 U.S.C. 1991(a)(13) 24 without regard to subparagraph (B) 25 VerDate Sep 11 2014 03:47 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S1676.IS S1676 pbinns on DSKJLVW7X2PROD with BILLS 13 •S 1676 IS or (C) thereof) within the jurisdiction 1 of such qualified issuer, bears to 2 ‘‘(II) the total number of individ- 3 uals living in such rural areas in the 4 State. 5 ‘‘(ii) SPECIAL RULE FOR OVERLAP- 6 PING JURISDICTIONS.—For purposes of 7 clause (i)(I), if an area is within the juris- 8 diction of 2 or more governmental units, 9 such area shall be treated as only within 10 the jurisdiction of the unit having jurisdic- 11 tion over the smallest geographical area 12 unless such un [Text truncated for display. 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