Senators Want $3B for Rural VC as Part of New Homestead Act

A bi-partisan group of Senators have cosponsored the "New Homestead Economic Opportunity Act" to help renew the promise of the original Homestead Act to attract new residents and businesses to rural areas suffering from high out-migration. Introduced by Senator Bryon Dorgan (D-ND) and Chuck Hagel (R-NE) this week, the bill provides incentive tools including a $3 billion venture capital fund.

S. 602 calls for a federal injection of $200 million annually between 2004-2013 into the New Homestead Venture Capital Fund, after $100 million in investments have been made each year from private and nonfederal sources. The purpose of the fund would be to strengthen the economies of qualifying counties – those which have seen a net outmigration exceeding 10 percent over the past 20 years – by:

• providing equity funding for existing and startup rural businesses with high potential for job creation that are or will be located in qualifying counties;
• supporting technical and other similar assistance to rural businesses; and,
• providing incentives to greater participation by authorized private investors through provision of guarantees of up to 60 percent of the investments of the authorized private investors in qualifying counties.

The act also would establish a Rural Investment Tax Credit to help fund construction of new buildings or improvements to older ones. Overall, states with heavy out-migration would have up to $1 million for tax credits per county.

In addition to the capital and investment elements, the New Homestead Act includes the following provisions:

• loan forgiveness of up to 50 percent for recent graduates who stay and work in qualifying counties for five years;
• creation of a $5,000 tax credit for homebuyers to help offset some of the financial burdens for rural Americans;
• deduction of any depreciation in home value in counties with high out-migration; and,
• establishment of Individual Homestead Accounts to help build savings and increase access to credit.

A similar version of the bill was introduced in the previous Congress. Co-sponsors include: Sen. Tim Johnson (D-SD), Sen. Sam Brownback (R-KS), Sen. Tom Daschle (D-SD), Sen. Conrad Burns (R-MT), Sen. Mark Dayton (D-MN), Sen. Kent Conrad (D-ND), Sen. Dick Durbin (D-IL), Sen. Mary Landrieu (D-LA), Sen. Norm Coleman (R-MN), John Rockefeller (D-WV) and Sen. Zell Miller (D-GA).

S. 602, referred to the Senate Committee on Finance, can be downloaded at: http://thomas.loc.gov/