Summary of the New Homestead Act (S. 602)
|Please note: The New Homestead Act was never passed into law, so currently it does not exist. We're sharing this older information to illustrate how this idea could help repopulate rural America.
This summary was provided to us by Senator Bryon Dorgan's (D-ND) staff. He is one of the bill's sponsors, along with Chuck Hagel (R-NE), Tim Johnson (D-SD), Sam Brownback (R-KS) and eight others. Additional New Homestead Act resources available on our website include a Rural Action Brief, Testimony given on the proposed legislation, and more all available on our New Homestead Act page.
To help renew the promise of the original Homestead Act and to attract new residents and businesses to rural areas suffering from high out-migration, we are sponsoring the New Homestead Act of 2003, which provides:
I. New Homestead Opportunities for individuals who locate in high out-migration counties*
- Repay up to 50% of college loans for recent grads who live and work there for 5 years (maximum of $10,000)
- Provide $5,000 tax credit for the home purchases of individuals who locate there for 5 years (or 10% of purchase price, whichever is lower)
- Protect home values by allowing losses in home value to be deducted from federal income taxes
- Establish Individual Homestead Accounts to help build savings and increase access to credit
Individuals can contribute a maximum of $2,500 per year for up to 5 years. Government can provide a match of 25-100% (depending on income). Tax and penalty-free distributions can be made after 5 years for small business loans, education expenses, first-time home purchases, and unreimbursed medical expenses. Accounts can grow tax-free and all funds are available for withdrawal upon retirement
II. New Incentives for Businesses to expand or locate in high out-migration areas
- Create Rural Investment Tax Credits to target investments in high out-migration counties
States receive $1 million of these credits per high out-migration county. They allocate these credits to businesses that move to or expand there. Businesses use these credits to offset the cost of newly constructed or existing buildings. Over a 10-year period, businesses can use these credits to reduce their taxes by as much as 80% of their total investment.
- Offer Micro-enterprise Tax Credits to aid small businesses in high out-migration counties.
States may choose to allocate up to 20-percent of their total rural investment tax credit. Allocation to qualifying start-up or expanding micro-enterprises with five or fewer employees. Micro-enterprises would use these credits to offset the cost of new funding needed for business expansion. Micro-enterprises can use these credits to reduce their taxes by 30-percent of their qualifying new investment (limited to $25,000 lifetime).
- Accelerated depreciation for equipment purchases tied to Rural Investment Tax Credit projects
III. New Homestead Venture Capital Fund to promote business development in high out-migration areas
- Establish $3 billion venture capital fund to invest in businesses in high out-migration counties
The fund can guarantee up to 40% of private investments in existing business and start-ups, and up to 60% of such investments in manufacturing or high-technology ventures. The fund can take equity positions and extend credit to other approved entities. It can provide technical assistance to potential applicants. The federal government would invest $200 million per year for 10 years. States and private investors would be required to provide yearly match of $50 million each.
* A high out-migration county is defined as any non-metro county that has suffered net out-migration of at least 10% over the past 20 years. A PDF map of these counties, and an Excel file produced by the Economic Research Service at Senator Dorgan's request listing the counties and their net migration are available below. A fact sheet prepared by the Center is also attached.
Contact Chuck Hassebrook for more information, email@example.com.