SUBCHAPTER III—RURAL ELECTRIC AND TELEPHONE DIRECT LOAN PROGRAMS

§930. Congressional declaration of policy

It is hereby declared to be the policy of the Congress that adequate funds should be made available to rural electric and telephone systems through direct, insured and guaranteed loans at interest rates which will allow them to achieve the objectives of the Rural Electrification Act of 1936, as amended [7 U.S.C. 901 et seq.], and that such rural electric and telephone systems should be encouraged and assisted to develop their resources and ability to achieve the financial strength needed to enable them to satisfy their credit needs from their own financial organizations and other sources at reasonable rates and terms consistent with the loan applicant's ability to pay and achievement of the Act's objectives.

(Pub. L. 93–32, §1, May 11, 1973, 87 Stat. 65.)

Editorial Notes

References in Text

The Rural Electrification Act of 1936 and the Act, referred to in text, are act May 20, 1936, ch. 432, 49 Stat. 1363, which is classified generally to this chapter. For complete classification of this Act to the Code, see section 901 of this title and Tables.

Codification

Section is comprised of the first sentence of section 1 of Pub. L. 93–32. The last sentence of section 1 of Pub. L. 93–32 provided that: "The Rural Electrification Act of 1936, as amended (7 U.S.C. 901–950(b)), is therefore further amended as hereinafter provided."

Section was not enacted as part of the Rural Electrification Act of 1936 which comprises this chapter.

Statutory Notes and Related Subsidiaries

Effective Date

Pub. L. 93–32, §12, May 14, 1973, 87 Stat. 71, provided that: "This Act [enacting sections 906a, 930, and 933 to 940 of this title, amending sections 903, 931, 932, 945, 946, 947, and 948 of this title, and enacting provisions set out as notes under this section] shall take effect upon enactment [May 11, 1973]."

Reservation of Right To Repeal, Alter, or Amend Pub. L. 93–32

Pub. L. 93–32, §11, May 14, 1973, 87 Stat. 71, provided that: "The right to repeal, alter, or amend, this Act [enacting sections 906a, 930, and 933 to 940 of this title, amending sections 903, 931, 932, 945, 946, 947, and 948 of this title, and enacting provisions set out as notes under this section] is expressly reserved."

§931. Rural Electrification and Telephone Revolving Fund

There is hereby established in the Treasury of the United States a fund, to be known as the Rural Electrification and Telephone Revolving Fund (hereinafter referred to as the "fund"), consisting of:

(1) all notes, bonds, obligations, liens, mortgages, and property delivered or assigned to the Secretary pursuant to loans heretofore or hereafter made under sections 904, 905,¹ and 922 of this title and under this subchapter, as of May 11, 1973, and all proceeds from the sales hereunder of such notes, bonds, obligations, liens, mortgages, and property, which shall be transferred to and be assets of the funds;

(2) undisbursed balances of electric and telephone loans made under sections 904, 905,¹ and 922 of this title, which as of May 11, 1973, shall be transferred to and be assets of the fund;

(3) all collections of principal and interest received on and after July 1, 1972, on notes, bonds, judgments, or other obligations made or held under subchapters I and II of this chapter and under this subchapter, which shall be paid into and be assets of the fund;

(4) all appropriations for interest subsidies and losses required under this subchapter which may hereafter be made by the Congress and the unobligated balances of any funds made available for loans under the item "Rural Electrification Administration" in the Department of Agriculture and Agriculture-Environmental and Consumer Protection Appropriations Acts; or

(5) moneys borrowed from the Secretary of the Treasury pursuant to section 934(a) of this title.

(May 20, 1936, ch. 432, title III, §301, as added Pub. L. 92–12, §2, May 7, 1971, 85 Stat. 29; amended Pub. L. 93–32, §2, May 11, 1973, 87 Stat. 66; Pub. L. 94–570, §2, Oct. 20, 1976, 90 Stat. 2701; Pub. L. 103–354, title II, §235(a)(13), Oct. 13, 1994, 108 Stat. 3221; Pub. L. 104–127, title VII, §772(b)(1), Apr. 4, 1996, 110 Stat. 1149; Pub. L. 115–334, title VI, §6602(b)(7), Dec. 20, 2018, 132 Stat. 4776.)

Editorial Notes

References in Text

Section 905 of this title, referred to in pars. (1) and (2), was repealed by Pub. L. 104–127, title VII, §774(a), Apr. 4, 1996, 110 Stat. 1150.

Amendments

2018—Par. (3). Pub. L. 115–334, §6602(b)(7)(A), struck out "except for net collection proceeds previously appropriated for the purchase of class A stock in the Rural Telephone Bank," after "under this subchapter,".

Par. (6). Pub. L. 115–334, §6602(b)(7)(B)–(D), struck out par. (6) which read as follows: "shares of the capital stock of the Rural Telephone Bank purchased by the United States pursuant to section 946(a) of this title and moneys received from said bank upon retirement of said shares of stock in accordance with the provisions of subchapter IV of this chapter, which said shares and moneys shall be assets of the fund."

1996—Pub. L. 104–127 struck out "(a)" before "There is hereby" in introductory provisions and struck out "notwithstanding section 903(a) of this title," before "all collections" in par. (3).

1994—Subsec. (a)(1). Pub. L. 103–354 substituted "Secretary" for "Administrator".

1976—Subsec. (a)(4). Pub. L. 94–570 provided for inclusion in the fund the unobligated balances of any funds made available for loans under item "Rural Electrification Administration" in the Department of Agriculture and Agriculture-Environmental and Consumer Protection Appropriation Acts.

1973—Pub. L. 93–32 substituted provisions establishing the Rural Electrification and Telephone Revolving Fund and enumerating its constituent parts, for provisions establishing a rural telephone account in the United States Treasury.

Statutory Notes and Related Subsidiaries

Effective Date of 1976 Amendment

Amendment by Pub. L. 94–570 effective Oct. 20, 1976, see section 4 of Pub. L. 94–570, set out as a note under section 935 of this title.

Effective Date of 1973 Amendment

Amendment by Pub. L. 93–32 effective May 11, 1973, see section 12 of Pub. L. 93–32, set out as an Effective Date note under section 930 of this title.

Effective Date

Pub. L. 92–12, §7, May 14, 1971, 85 Stat. 37, provided that: "This Act [enacting this section and sections 921a, 932, and 941 to 950b of this title, amending sections 903 and 922 of this title and sections 856 and 868 of former Title 31, and enacting provisions set out as notes under sections 856 and 868 of former Title 31] shall take effect upon enactment [May 7, 1971]."

Reservation of Right To Repeal, Alter, or Amend Pub. L. 92–12

Pub. L. 92–12, §6, May 14, 1971, 85 Stat. 37, provided that: "The right to repeal, alter, or amend this Act [enacting this section and sections 921a, 932, and 941 to 950b of this title, amending sections 903 and 922 of this title and sections 856 and 868 of former Title 31, and enacting provisions set out as notes under sections 856 and 868 of former Title 31] is expressly reserved."

¹ See References in Text note below.

§931a. Level of loan programs under Rural Electrification and Telephone Revolving Fund

On and after October 28, 1991, no funds in this Act or any other Act shall be available to carry out loan programs under the Rural Electrification and Telephone Revolving Fund at levels other than those provided for in advance in appropriations Acts.

(Pub. L. 102–142, title III, Oct. 28, 1991, 105 Stat. 903.)

Editorial Notes

Codification

Section was enacted as part of the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 1992, and not as part of the Rural Electrification Act of 1936 which comprises this chapter.

§932. Liabilities and uses of Rural Electrification and Telephone Revolving Fund

(a) Liabilities and obligations of fund

The notes of the Secretary to the Secretary of the Treasury to obtain funds for loans under sections 904, 905,¹ and 922 of this title, and all other liabilities against the appropriations or assets in the fund in connection with electrification and telephone loan operations shall be liabilities of the fund, and all other obligations against such appropriations or assets in the fund arising out of electrification and telephone loan operations shall be obligations of the fund.

(b) Uses of fund assets

The assets of the fund shall be available only for the following purposes:

(1) loans which could be insured under this subchapter, and for advances in connection with such loans and loans previously made, as of May 11, 1973, under sections 904, 905,¹ and 922 of this title;

(2) payment of principal when due (without interest) on outstanding loans to the Secretary from the Secretary of the Treasury for electrification and telephone purposes and payment of principal and interest when due on loans to the Secretary from the Secretary of the Treasury pursuant to section 934(a) of this title;

(3) payment of amounts to which the holder of notes is entitled on insured loans: Provided, That payments other than final payments need not be remitted to the holder until due or until the next agreed annual, semiannual, or quarterly remittance date;

(4) payment to the holder of insured notes of any defaulted installment or, upon assignment of the note to the Secretary at his request, the entire balance due on the note;

(5) purchase of notes in accordance with contracts of insurance entered into by the Secretary;

(6) payment in compliance with contracts of guarantee;

(7) payment of taxes, insurance, prior liens, expenses necessary to make fiscal adjustments in connection with the application, and transmittal of collections or necessary to obtain credit reports on applicants or borrowers, expenses for necessary services, including construction inspections, commercial appraisals, loan servicing, consulting business advisory or other commercial and technical services, and other program services, and other expenses and advances authorized in section 907 of this title in connection with insured loans. Such items may be paid in connection with guaranteed loans after or in connection with the acquisition of such loans or security thereof after default, to the extent determined to be necessary to protect the interest of the Government, or in connection with any other activity authorized in this chapter;

(8) payment of the purchase price and any costs and expenses incurred in connection with the purchase, acquisition, or operation of property pursuant to section 907 of this title.

(c) Separate electric and telephone accounts

(1) The Secretary shall maintain two separate accounts within the fund, which shall be known as the electric account and the telephone account, respectively.

(2)(A) The Secretary shall account for the assets, liabilities, income, expenses, and equity of the fund attributable to electrification loan operations in the electric account.

(B) The Secretary shall account for the assets, liabilities, income, expenses, and equity of the fund attributable to telephone loan operations in the telephone account.

(3)(A) The assets accounted for in the electric account shall be available solely for electrification loan operations under this chapter.

(B) The assets accounted for in the telephone account shall be available solely for telephone loan operations under this chapter (other than under subchapter IV).

(May 20, 1936, ch. 432, title III, §302, as added Pub. L. 92–12, §2, May 7, 1971, 85 Stat. 30; amended Pub. L. 93–32, §2, May 11, 1973, 87 Stat. 66; Pub. L. 101–624, title XXIII, §2359, Nov. 28, 1990, 104 Stat. 4041; Pub. L. 103–354, title II, §235(a)(13), Oct. 13, 1994, 108 Stat. 3221; Pub. L. 104–127, title VII, §772(b)(2), Apr. 4, 1996, 110 Stat. 1149.)

Editorial Notes

References in Text

Section 905 of this title, referred to in subsecs. (a) and (b)(1), was repealed by Pub. L. 104–127, title VII, §774(a), Apr. 4, 1996, 110 Stat. 1150.

Amendments

1996—Subsec. (b)(2). Pub. L. 104–127 struck out "pursuant to section 903(a) of this title" after "purposes".

1994—Subsecs. (a), (b)(2), (4), (5), (c)(1), (2). Pub. L. 103–354 substituted "Secretary" for "Administrator" wherever appearing.

1990—Subsec. (c). Pub. L. 101–624 added subsec. (c).

1973—Pub. L. 93–32 substituted provisions setting out the liabilities of the Rural Electrification and Telephone Revolving Fund and the allowable purposes for which fund assets shall be available, for provisions, that the monies in the rural telephone account should remain on deposit in the Treasury of the United States until disbursed.

Statutory Notes and Related Subsidiaries

Effective Date of 1973 Amendment

Amendment by Pub. L. 93–32 effective May 11, 1973, see section 12 of Pub. L. 93–32, set out as an Effective Date note under section 930 of this title.

Effective Date

Section effective May 7, 1971, see section 7 of Pub. L. 92–12, set out as a note under section 931 of this title.

¹ See References in Text note below.

§933. Moneys in the Rural Electrification and Telephone Revolving Fund

Moneys in the fund shall remain on deposit in the Treasury of the United States until disbursed.

(May 20, 1936, ch. 432, title III, §303, as added Pub. L. 93–32, §2, May 11, 1973, 87 Stat. 67.)

Statutory Notes and Related Subsidiaries

Effective Date

Section effective May 11, 1973, see section 12 of Pub. L. 93–32, set out as a note under section 930 of this title.

§934. Authorized financial transactions; interim notes; purchase of obligations for resale; sale of notes and certificates; liens

(a) The Secretary is authorized to make and issue interim notes to the Secretary of the Treasury for the purpose of obtaining funds necessary for discharging obligations of the fund and for making loans, advances and authorized expenditures out of the fund. Such notes shall be in such form and denominations and have such maturities and be subject to such terms and conditions as may be agreed upon by the Secretary and the Secretary of the Treasury. Such notes shall bear interest at a rate fixed by the Secretary of the Treasury, taking into consideration the current average market yield of outstanding marketable obligations of the United States having maturities comparable to the notes issued by the Secretary under this section. The Secretary of the Treasury is authorized and directed to purchase any notes of the Secretary issued hereunder, and, for that purpose, the Secretary of the Treasury is authorized to use as a public debt transaction the proceeds from the sale of any securities issued under chapter 31 of title 31, and the purposes for which such securities may be issued under such chapter are extended to include the purchase of notes issued by the Secretary. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes shall be treated as public debt transactions of the United States: Provided, however, That such interim notes to the Secretary of the Treasury shall not be included in the totals of the budget of the United States Government and shall be exempt from any general limitation imposed by statute on expenditures and net lending (budget outlays) of the United States.

(b) The Secretary of the Treasury is authorized and directed to purchase for resale obligations insured through the fund when offered by the Secretary. Such resales shall be upon such terms and conditions as the Secretary of the Treasury shall determine. Purchases and resales by the Secretary of the Treasury hereunder shall not be included in the totals of the budget of the United States Government and shall be exempt from any general limitation imposed by statute on expenditures and not lending (budget outlays) of the United States.

(c) The Secretary may, on an insured basis or otherwise, sell and assign any notes in the fund or sell certificates of beneficial ownership therein to the Secretary of the Treasury or in the private market. Any sale by the Secretary of notes individually or in blocks shall be treated as a sale of assets for the purposes of chapter 11 of title 31, notwithstanding the fact that the Secretary, under an agreement with the purchaser or purchasers, holds the debt instruments evidencing the loans and holds or reinvests payments thereon as trustee and custodian for the purchaser or purchasers of the individual note or of the certificate of beneficial ownership in a number of such notes. Security instruments taken by the Secretary in connection with any notes in the fund may constitute liens running to the United States notwithstanding the fact that such notes may be thereafter held by purchasers thereof.

(May 20, 1936, ch. 432, title III, §304, as added Pub. L. 93–32, §2, May 11, 1973, 87 Stat. 67; amended Pub. L. 103–354, title II, §235(a)(13), Oct. 13, 1994, 108 Stat. 3221.)

Editorial Notes

Codification

In subsecs. (a) and (c), "chapter 31 of title 31", "such chapter", and "chapter 11 of title 31" substituted for "the Second Liberty Bond Act, as amended", "such Act, as amended", and "the Budget and Accounting Act, 1921 [31 U.S.C. 1 et seq.]", respectively, on authority of Pub. L. 97–258, §4(b), Sept. 13, 1982, 96 Stat. 1067, the first section of which enacted Title 31, Money and Finance.

Amendments

1994—Pub. L. 103–354 substituted "Secretary" for "Administrator" wherever appearing.

Statutory Notes and Related Subsidiaries

Effective Date

Section effective May 11, 1973, see section 12 of Pub. L. 93–32, set out as a note under section 930 of this title.

§935. Insured loans; interest rates and lending levels

(a) In general

The Secretary is authorized to make insured loans under this subchapter and at the interest rates hereinafter provided to the full extent of the assets available in the fund, subject only to limitations as to amounts authorized for loans and advances as may be from time to time imposed by the Congress of the United States for loans to be made in any one year, which amounts shall remain available until expended: Provided, That the Congress in the annual appropriation Act may also authorize the transfer of any excess cash in the fund for deposit into the Treasury as miscellaneous receipts: And provided further, That any such loans and advances shall not be included in the totals of the budget of the United States Government and shall be exempt from any general limitation imposed by statute on expenditures and net lending (budget outlays) of the United States.

(b) Insured loans

Loans made under this section shall be insured by the Secretary when purchased by a lender. As used in this chapter, an insured loan is one which is made, held, and serviced by the Secretary, and sold and insured by the Secretary hereunder; such loans shall be sold and insured by the Secretary without undue delay.

(c) Insured electric loans

(1) Hardship loans

(A) In general

The Secretary shall make insured electric loans, to the extent of qualifying applications for the loans, at an interest rate of 5 percent per year to any applicant for a loan who meets each of the following requirements:

(i) The average revenue per kilowatt-hour sold by the applicant is not less than 120 percent of the average revenue per kilowatt-hour sold by all utilities in the State in which the applicant provides service.

(ii) The average residential revenue per kilowatt-hour sold by the applicant is not less than 120 percent of the average residential revenue per kilowatt-hour sold by all utilities in the State in which the applicant provides service.

(iii) The average per capita income of the residents receiving electric service from the applicant is less than the average per capita income of the residents of the State in which the applicant provides service, or the median household income of the households receiving electric service from the applicant is less than the median household income of the households in the State.

(B) Severe hardship loans

In addition to hardship loans that are made under subparagraph (A), the Secretary may make an insured electric loan at an interest rate of 5 percent per year to an applicant for a loan if, in the sole discretion of the Secretary, the applicant has experienced a severe hardship.

(C) Limitation

Except as provided in subparagraph (D), the Secretary may not make a loan under this paragraph to an applicant for the purpose of furnishing or improving electric service to a consumer located in an urban area (as defined by the Bureau of the Census) if the average number of consumers per mile of line of the total electric system of the applicant exceeds 17.

(D) Extremely high rates

In addition to hardship loans that are made under subparagraphs (A) and (B), the Secretary shall make insured electric loans, to the extent of qualifying applications for the loans, at an interest rate of 5 percent per year to any applicant for a loan whose residential revenue exceeds 15.0 cents per kilowatt-hour sold. A qualifying application from such an applicant for the purpose of furnishing or improving electric service to a consumer located outside of an urbanized area shall not be subject to the conditions or limitation of subparagraph (A) or (C).

(2) Municipal rate loans

(A) In general

The Secretary shall make insured electric loans, to the extent of qualifying applications for the loans, at the interest rate described in subparagraph (B) for the term or terms selected by the applicant pursuant to subparagraph (C).

(B) Interest rate

(i) In general

Subject to clause (ii), the interest rate described in this subparagraph on a loan to a qualifying applicant shall be—

(I) the interest rate determined by the Secretary to be equal to the current market yield on outstanding municipal obligations with remaining periods to maturity similar to the term selected by the applicant pursuant to subparagraph (C), but not greater than the rate determined under section 1927(a)(3)(A) of this title that is based on the current market yield on outstanding municipal obligations; plus

(II) if the applicant for the loan makes an election pursuant to subparagraph (D) to include in the loan agreement the right of the applicant to prepay the loan, a rate equal to the amount by which—

(aa) the interest rate on commercial loans for a similar period that afford the borrower such a right; exceeds

(bb) the interest rate on commercial loans for the period that do not afford the borrower such a right.

(ii) Maximum rate

The interest rate described in this subparagraph on a loan to an applicant for the loan shall not exceed 7 percent if—

(I) the average number of consumers per mile of line of the total electric system of the applicant is less than 5.50; or

(II)(aa) the average revenue per kilowatt-hour sold by the applicant is more than the average revenue per kilowatt-hour sold by all utilities in the State in which the applicant provides service; and

(bb) the average per capita income of the residents receiving electric service from the applicant is less than the average per capita income of the residents of the State in which the applicant provides service, or the median household income of the households receiving electric service from the applicant is less than the median household income of the households in the State.

(iii) Exception

Clause (ii) shall not apply to a loan to be made to an applicant for the purpose of furnishing or improving electric service to consumers located in an urban area (as defined by the Bureau of the Census) if the average number of consumers per mile of line of the total electric system of the applicant exceeds 17.

(C) Loan term

(i) In general

Subject to clause (ii), the applicant for a loan under this paragraph may select the term for which an interest rate shall be determined pursuant to subparagraph (B), and, at the end of the term (and any succeeding term selected by the applicant under this subparagraph), may renew the loan for another term selected by the applicant.

(ii) Maximum term

(I) Applicant

The applicant may not select a term that ends more than 35 years after the beginning of the first term the applicant selects under clause (i).

(II) Secretary

The Secretary may prohibit an applicant from selecting a term that would result in the total term of the loan being greater than the expected useful life of the assets being financed.

(D) Call provision

The Secretary shall offer any applicant for a loan under this paragraph the option to include in the loan agreement the right of the applicant to prepay the loan on terms consistent with similar provisions of commercial loans.

(3) Other source of credit not required in certain cases

The Secretary may not require any applicant for a loan made under this subsection who is eligible for a loan under paragraph (1) to obtain a loan from another source as a condition of approving the application for the loan or advancing any amount under the loan.

(d) Insured telephone loans

(1) Hardship loans

(A) In general

The Secretary shall make insured telephone loans, to the extent of qualifying applications for the loans, at an interest rate of 5 percent per year, to any applicant who meets each of the following requirements:

(i) The average number of subscribers per mile of line in the service area of the applicant is not more than 4.

(ii) The applicant is capable of producing net income or margins before interest of not less than 100 percent (but not more than 300 percent) of the interest requirements on all of the outstanding and proposed loans of the applicant.

(iii) The Secretary has approved a telecommunications modernization plan for the State under paragraph (3) and, if the plan was developed by telephone borrowers under this subchapter, the applicant is a participant in the plan.

(iv) The average number of subscribers per mile of line in the area included in the proposed loan is not more than 17.

(B) Authority to waive tier requirement

The Secretary may waive the requirement of subparagraph (A)(ii) in any case in which the Secretary determines (and sets forth the reasons for the waiver in writing) that the requirement would prevent emergency restoration of the telephone system of the applicant or result in severe hardship to the applicant.

(C) Effect of lack of funds

On request of any applicant who is eligible for a loan under this paragraph for which funds are not available, the applicant shall be considered to have applied for a loan under subchapter IV.

(2) Cost-of-money loans

(A) In general

The Secretary may make insured telephone loans for the acquisition, purchase, and installation of telephone lines, systems, and facilities (other than buildings used primarily for administrative purposes, vehicles not used primarily in construction, and customer premise equipment) related to the furnishing, improvement, or extension of rural telecommunications service, at an interest rate equal to the then current cost of money to the Government of the United States for loans of similar maturity, but not more than 7 percent per year, to any applicant for a loan who meets the following requirements:

(i) The average number of subscribers per mile of line in the service area of the applicant is not more than 15, or the applicant is capable of producing net income or margins before interest of not less than 100 percent (but not more than 500 percent) of the interest requirements on all of the outstanding and proposed loans of the applicant.

(ii) The Secretary has approved a telecommunications modernization plan for the State under paragraph (3) and, if the plan was developed by telephone borrowers under this subchapter, the applicant is a participant in the plan.

(B) Concurrent loan authority

On request of any applicant for a loan under this paragraph during any fiscal year, the Secretary shall—

(i) consider the application to be for a loan under this paragraph; and

(ii) if the applicant is eligible for a loan, make a loan to the applicant under this paragraph in an amount equal to the amount that bears the same ratio to the total amount of loans for which the applicant is eligible under this paragraph, as the amount made available for loans under this paragraph for the fiscal year bears to the total amount made available for loans under this paragraph for the fiscal year.

(C) Effect of lack of funds

On request of any applicant who is eligible for a loan under this paragraph for which funds are not available, the applicant shall be considered to have applied for a loan guarantee under section 936 of this title.

(3) State telecommunications modernization plans

(A) Approval

If, not later than 1 year after final regulations are promulgated to carry out this paragraph, any State, either by statute or through the public utility commission of the State, develops a telecommunications modernization plan that meets the requirements of subparagraph (B), the Secretary shall approve the plan for the State. If a State does not develop a plan in accordance with the requirements of the preceding sentence, the Secretary shall approve any telecommunications modernization plan for the State that meets the requirements that is developed by a majority of the borrowers of telephone loans made under this subchapter who are located in the State.

(B) Requirements

For purposes of subparagraph (A), a telecommunications modernization plan must, at a minimum, meet the following objectives:

(i) The plan must provide for the elimination of party line service.

(ii) The plan must provide for the availability of telecommunications services for improved business, educational, and medical services.

(iii) The plan must encourage and improve computer networks and information highways for subscribers in rural areas.

(iv) The plan must provide for—

(I) subscribers in rural areas to be able to receive through telephone lines—

(aa) conference calling;

(bb) video images; and

(cc) data at a rate of at least 1,000,000 bits of information per second; and

(II) the proper routing of information to subscribers.

(v) The plan must provide for uniform deployment schedules to ensure that advanced services are deployed at the same time in rural and nonrural areas.

(vi) The plan must provide for such additional requirements for service standards as may be required by the Secretary.

(C) Finality of approval

A telecommunications modernization plan approved under subparagraph (A) may not subsequently be disapproved. Notwithstanding paragraphs (1)(A)(iii) and (2)(A)(iii),¹ and the Secretary may make a loan to a borrower serving a State that does not have a telecommunication modernization plan approved by the Secretary if the loan is made less than 1 year after the Secretary has adopted final regulations implementing this paragraph.

(May 20, 1936, ch. 432, title III, §305, as added Pub. L. 93–32, §2, May 11, 1973, 87 Stat. 68; amended Pub. L. 94–570, §3, Oct. 20, 1976, 90 Stat. 2701; Pub. L. 97–35, title I, §165(a), Aug. 13, 1981, 95 Stat. 379; Pub. L. 101–624, title XXIII, §2361, Nov. 28, 1990, 104 Stat. 4042; Pub. L. 103–129, §2(a)(1), (c)(6), Nov. 1, 1993, 107 Stat. 1356, 1364; Pub. L. 103–354, title II, §235(a)(8), (13), Oct. 13, 1994, 108 Stat. 3221; Pub. L. 115–334, title VI, §6602(b)(8), (9), Dec. 20, 2018, 132 Stat. 4776, 4777.)

Editorial Notes

Amendments

2018—Subsec. (d)(2)(B)(i). Pub. L. 115–334, §6602(b)(8)(A), struck out "and a loan under section 948 of this title" after "under this paragraph".

Subsec. (d)(2)(B)(ii). Pub. L. 115–334, §6602(b)(8)(B), struck out "and under section 948 of this title" after "under this paragraph" in two places.

Subsec. (d)(3)(C). Pub. L. 115–334, §6602(b)(9), substituted "the Secretary" for "and section 948(b)(4)(C) of this title, the Secretary and the Governor of the telephone bank".

1994—Pub. L. 103–354 substituted "Secretary" for "Administrator" in heading for subsec. (c)(2)(C)(ii)(II) and wherever appearing in text.

1993—Pub. L. 103–129, §2(c)(6)(A), amended section catchline generally.

Subsec. (a). Pub. L. 103–129, §2(c)(6)(A), inserted heading.

Subsec. (b). Pub. L. 103–129, §2(a)(1)(A), (B), (c)(6)(B), redesignated subsec. (c) as (b), inserted heading, and struck out former subsec. (b) which read as follows: "Insured loans made under this subchapter shall bear interest at 5 per centum per annum, except that the Administrator may make insured loans to electric or telephone borrowers at a lesser interest rate, but not less than 2 per centum per annum, if, in the Administrator's sole discretion, the Administrator finds that the borrower—

"(1) has experienced extreme financial hardship; or

"(2) cannot, in accordance with generally accepted management and accounting principles and without charging rates to its customers or subscribers so high as to create a substantial disparity between such rates and the rates charged for similar service in the same or nearby areas by other suppliers, provide service consistent with the objectives of this chapter."

Subsec. (c). Pub. L. 103–129, §2(a)(1)(C), added subsec. (c). Former subsec. (c) redesignated (b).

Subsec. (d). Pub. L. 103–129, §2(a)(1)(A), (C), added subsec. (d) and struck out former subsec. (d) which read as follows: "The Administrator shall make a telephone loan under this subchapter to an applicant therefor who is otherwise qualified to receive such a loan at the highest interest rate (but not less than the lowest interest rate, nor higher than the highest interest rate, specified in subsection (b) of this section) at which the borrower would be capable of producing net income or margins before interest payments of at least 100 percent (but not more than 150 percent) of the interest requirements on all of the applicant's outstanding and proposed loans."

1990—Subsec. (d). Pub. L. 101–624 added subsec. (d).

1981—Subsec. (b). Pub. L. 97–35 substituted provisions establishing an interest rate at 5 per centum per annum and a lower rate, but not less than 2 per cent, under the enumerated criteria, for provisions establishing standard and special rates, with special rates applicable under enumerated criteria.

1976—Subsec. (b). Pub. L. 94–570 struck out from introductory text "meets either of the following conditions" after "borrower which"; limited par. (1) to the telephone borrowers, substituting provision for an average subscriber density of three or fewer per mile at the end of the most recent calendar year ending at least six months before approval of the loan for prior provision for an average consumer or subscriber density of two or fewer per mile; substituted in par. (2) provision, limited to electric borrowers, respecting having an average consumer density of two or fewer per mile or an average adjusted plant revenue ratio of over 9.0 at end of the most recent calendar year ending at least six months before approval of the loan, determination of such ratio, and defining sum of distribution plant and general plant, gross revenue, and cost of power for prior provision for and average gross revenue per mile which is at least $450 below the average gross revenue per mile of REA-financed electric systems, in the case of electric borrowers, or at least $300 below the average gross revenue per mile of REA-financed telephone systems, in the case of telephone borrowers; and inserted in proviso of par. (2) "to a telephone or electric borrower" after "make a loan".

Statutory Notes and Related Subsidiaries

Effective Date of 1981 Amendment

Pub. L. 97–35, title I, §165(d), Aug. 13, 1981, 95 Stat. 379, provided that: "The amendments made by subsection (a) of this section [amending this section] shall apply to loans the applications for which are received by the Rural Electrification Administration after July 24, 1981."

Effective Date of 1976 Amendment; Interest Rate

Pub. L. 94–570, §4, Oct. 20, 1976, 90 Stat. 2702, provided that: "This Act [amending this section and section 931 of this title and enacting provisions set out as a note under section 901 of this title] shall take effect upon enactment [Oct. 20, 1976] except that insured loans made pursuant to applications for such loans which would otherwise lose eligibility for special rate financing upon such enactment, received by the Rural Electrification Administration and still pending on the date of enactment of this Act [Oct. 20, 1976], shall bear interest as determined under section 305(b) of the Rural Electrification Act of 1936 before its amendment by this Act [former provisions of subsec. (b) of this section]."

Effective Date

Section effective May 11, 1973, see section 12 of Pub. L. 93–32, set out as a note under section 930 of this title.

¹ So in original. Probably should be paragraph "(2)(A)(ii)".

§936. Guaranteed loans; accommodations and subordination of liens; interest rates; assignability of guaranteed loans and related guarantees

The Secretary may provide financial assistance to borrowers for purposes provided in this chapter by guaranteeing loans, in the full amount thereof, made by the National Rural Utilities Cooperative Finance Corporation and any other legally organized lending agency, or by accommodating or subordinating liens or mortgages in the fund held by the Secretary as owner or as trustee or custodian for purchases of notes from the fund, or by any combination of such guarantee, accommodation, or subordination. The Secretary shall not provide such assistance to any borrower of a telephone loan under this chapter unless the borrower specifically applies for such assistance. No fees or charges shall be assessed for any such accommodation or subordination. Guaranteed loans shall bear interest at the rate agreed upon by the borrower and the lender. Guaranteed loans, and accommodation and subordination of liens or mortgages, may be made concurrently with an insured loan. The amount of guaranteed loans shall be subject only to such limitations as to amounts as may be authorized from time to time by the Congress of the United States: Provided, That any amounts guaranteed hereunder shall not be included in the totals of the budget of the United States Government and shall be exempt from any general limitation imposed by statute on expenditures and net lending (budget outlays) of the United States. As used in this subchapter a guaranteed loan is one which is initially made, held, and serviced by a legally organized lending agency and which is guaranteed by the Secretary hereunder. A guaranteed loan, including the related guarantee, may be assigned to the extent provided in the contract of guarantee executed by the Secretary under this subchapter; the assignability of such loan and guarantee shall be governed exclusively by said contract of guarantee.

(May 20, 1936, ch. 432, title III, §306, as added Pub. L. 93–32, §2, May 11, 1973, 87 Stat. 69; amended Pub. L. 94–124, §1, Nov. 4, 1975, 89 Stat. 677; Pub. L. 97–35, title I, §165(b), Aug. 13, 1981, 95 Stat. 379; Pub. L. 101–624, title XXIII, §2362, Nov. 28, 1990, 104 Stat. 4042; Pub. L. 103–354, title II, §235(a)(13), Oct. 13, 1994, 108 Stat. 3221; Pub. L. 110–234, title VI, §6102(b), May 22, 2008, 122 Stat. 1195; Pub. L. 110–246, §4(a), title VI, §6102(b), June 18, 2008, 122 Stat. 1664, 1956; Pub. L. 115–334, title VI, §6602(b)(10), Dec. 20, 2018, 132 Stat. 4777.)

Editorial Notes

Codification

Pub. L. 110–234 and Pub. L. 110–246 made identical amendments to this section. The amendments by Pub. L. 110–234 were repealed by section 4(a) of Pub. L. 110–246.

Amendments

2018—Pub. L. 115–334 substituted "the National Rural Utilities Cooperative Finance Corporation" for "the Rural Telephone Bank, National Rural Utilities Cooperative Finance Corporation,".

2008—Pub. L. 110–246, §6102(b), substituted "No fees or charges shall be assessed for any such accommodation or subordination." for "No fees or charges shall be assessed for any such guarantee, accommodation, or subordination. With respect to guarantees issued by the Secretary under this section, on the request of the borrower of any such loan so guaranteed, the loan shall be made by the Federal Financing Bank and at a rate of interest that is not more than the rate of interest applicable to other similar loans then being made or purchased by the Bank."

1994—Pub. L. 103–354 substituted "Secretary" for "Administrator" wherever appearing.

1990—Pub. L. 101–624 inserted provisions prohibiting Administrator from providing assistance to telephone borrower unless borrower specifically applies therefor.

1981—Pub. L. 97–35 inserted provisions relating to loans made by Federal Financing Bank with respect to guarantees issued under this section, and substituted "an insured loan" for "a loan insured at the standard rate".

1975—Pub. L. 94–124 authorized assignment of guaranteed loans and their related guarantees and inserted "initially" before "made, held, and serviced" in provision defining guaranteed loans as that term is used in this subchapter.

Statutory Notes and Related Subsidiaries

Effective Date of 2008 Amendment

Amendment of this section and repeal of Pub. L. 110–234 by Pub. L. 110–246 effective May 22, 2008, the date of enactment of Pub. L. 110–234, see section 4 of Pub. L. 110–246, set out as an Effective Date note under section 8701 of this title.

Effective Date

Section effective May 11, 1973, see section 12 of Pub. L. 93–32, set out as a note under section 930 of this title.

Prepayment of Loans

Pub. L. 99–349, title I, July 2, 1986, 100 Stat. 713, related to the prepayment of loans made by the Federal Financing Bank, and guaranteed by the Administrator of the Rural Electrification Administration, prior to repeal by Pub. L. 99–509, title I, §1011(b), Oct. 21, 1986, 100 Stat. 1876.

§936a. Prepayment of loans

(a) Conditions for prepayment

Except as provided in subsection (c), a borrower of a loan made by the Federal Financing Bank and guaranteed under section 936 of this title may prepay such loan (or any loan advance thereunder) by paying the outstanding principal balance due on the loan (or advance), if—

(1) the loan is outstanding on July 2, 1986;

(2) private capital, with the existing loan guarantee, is used to replace the loan; and

(3) the borrower certifies that any savings from such prepayment will be passed on to its customers or used to improve the financial strength of the borrower in cases of financial hardship.

(b) Charges on prepayment prohibited

No sums in addition to the payment of the outstanding principal balance due on the loan may be charged as the result of such prepayment against the borrower, the fund, or the Secretary.

(c) Disqualification for prepayment on finding of adverse affect on Federal Financing Bank

(1) A borrower will not qualify for prepayment under this section if, in the opinion of the Secretary of the Treasury, to prepay in such borrower's case would adversely affect the operation of the Federal Financing Bank.

(2) Paragraph (1) shall be effective in fiscal year 1987 only for any loan the prepayment of the principal amount of which will cause the cumulative amount of net proceeds from all such prepayments made during such year to exceed $2,017,500,000.

(d) Amount of permissible prepayments; establishment of eligibility criteria

(1) The Secretary shall permit, subject to subsection (a), prepayments of principal on loans in fiscal year 1987 under this section or Public Law 99–349 in such amounts as to realize net proceeds from all such prepayments in fiscal year 1987 in an amount not less than $2,017,500,000.

(2) The Secretary shall establish—

(A) eligibility criteria to ensure that any loan prepayment activity required to be carried out under this subsection will be directed to those cooperative borrowers in greatest need of the benefits associated with prepayment, as determined by the Secretary; and

(B) such other eligibility criteria as the Secretary determines are necessary to carry out this subsection.

(e) Assignability and transferability of guarantees of loans

Any guarantee of a loan prepaid under this section shall be fully assignable under the provisions of section 936 of this title and transferable. However, the Secretary may require that any such guarantee, if transfered ¹ or assigned, be transferred or assigned to a loan or security that, if sold, will be grouped with nonguaranteed loans or securities and sold in a manner to ensure that such sale will not unreasonably compete with the marketing of obligations of the United States.

(May 20, 1936, ch. 432, title III, §306A, as added Pub. L. 99–509, title I, §1011(a), Oct. 21, 1986, 100 Stat. 1875; amended Pub. L. 103–354, title II, §235(a)(7), (13), Oct. 13, 1994, 108 Stat. 3221.)

Editorial Notes

References in Text

Public Law 99–349, referred to in subsec. (d)(1), is Pub. L. 99–349, July 2, 1986, 100 Stat. 710, known as the Urgent Supplemental Appropriations Act, 1986. Provisions of title I of Pub. L. 99–349 relating to prepayment of loans were set out as a note under section 936 of this title and were repealed by Pub. L. 99–509, title I, §1011(b), Oct. 21, 1986, 100 Stat. 1876. For complete classification of this Act to the Code, see Tables.

Amendments

1994—Pub. L. 103–354 substituted "Secretary" for "Rural Electrification Administration" in subsec. (b) and "Secretary" for "Administrator" wherever appearing in subsecs. (d) and (e).

Statutory Notes and Related Subsidiaries

Prepayment of Rural Electrification Loans During Fiscal Year 1988

Pub. L. 100–203, title I, §1401, Dec. 22, 1987, 101 Stat. 1330–20, provided that:

"(a) Eligibility to Prepay.—Notwithstanding subsections (c), (d), and (e) of section 306A of the Rural Electrification Act of 1936 (7 U.S.C. 936a(c), (d), and (e)), during fiscal year 1988, a borrower of a loan made by the Federal Financing Bank and guaranteed under section 306 of such Act (7 U.S.C. 936) may, at the option of the borrower, prepay such loan (or any loan advance thereunder) in accordance with subsections (a) and (b) of section 306A of such Act, except that any prepayment that would cause the total amount of such prepayments during fiscal year 1988 to exceed $2,000,000,000 shall be subject solely to the approval of the Secretary of the Treasury.

"(b) Priority for Approval.—In determining which borrowers shall be permitted to prepay loans under subsection (a):

"(1) The Administrator of the Rural Electrification Administration shall give priority to those 8 borrowers that were determined by the Administrator, prior to the date of the enactment of this Act [Dec. 22, 1987], to be eligible to prepay, or that prepaid, an advance under section 306A of such Act [7 U.S.C. 936a] (as in effect prior to the date of the enactment of this Act), except that to retain such priority a borrower shall—

"(A) notify the Administrator in writing, within 30 days after the issuance of regulations to carry out this section, of the intent of the borrower to prepay; and

"(B) complete such prepayment by disbursing funds to the Federal Financing Bank to prepay loan advances within 120 days after the issuance of such regulations.

"(2) In considering requests for prepayment under subsection (a) by borrowers not described in paragraph (1), the Administrator shall permit prepayment based on the order in which borrowers are prepared to disburse funds to the Federal Financing Bank to complete such prepayments. If more than 1 borrower is so prepared at the same time, and if the combined amount of such prepayments would cause the total amount of prepayments during fiscal year 1988, under this section, to exceed $2,000,000,000, the Administrator shall—

"(A) base the determination on the date on which prepayment applications have been submitted; or

"(B) permit partial prepayment by two or more borrowers.

"(c) Regulations.—Not later than 30 days after the date of enactment of this Act [Dec. 22, 1987], the Administrator of the Rural Electrification Administration shall issue such regulations as are necessary to carry at this section.

"(d) Study.—Not later than January 1, 1989, the Comptroller General of the United States shall—

"(1) study—

"(A) all benefits provided by Federal Financing Bank lending and the procedures and conditions for the prepayment of current Federal Financing Bank loans;

"(B) the benefits and costs to Federal Financing Bank borrowers of making prepayments; and

"(C) alternative conditions and procedures for prepayment of all Federal Financing Bank loans to balance Federal benefits with Federal costs; and

"(2) submit to Congress a report describing the results of such study, together with any appropriate recommendations."

Prepayment of Guaranteed Loans; Restrictions

Pub. L. 100–202, §101(k) [title VI, §633], Dec. 22, 1987, 101 Stat. 1329–322, 1329-356, provided that: "Hereafter, notwithstanding section 306A(c), (d), and (e) of the Rural Electrification Act of 1936, as amended [7 U.S.C. 936a(c), (d), (e)], a borrower of a loan made by the Federal Financing Bank and guaranteed under section 306 of such Act (7 U.S.C. 936) may, at the option of the borrower, prepay such loan (or any loan advance thereunder) in accordance with section 306A(a) and (b) of such Act: Provided, That any prepayment in excess of $2,500,000,000 shall be subject to the approval of the Secretary of the Treasury."

Pub. L. 100–71, title I, July 11, 1987, 101 Stat. 429, provided in part that: "Hereafter, notwithstanding section 306A(d) of the Rural Electrification Act of 1936 (7 U.S.C. 936a(d)), a borrower of a loan made by the Federal Financing Bank and guaranteed under section 306 of such Act (7 U.S.C. 936) may, at the option of the borrower, prepay such loan (or any loan advance thereunder) in accordance with section 306A of such Act."

Regulations

Pub. L. 99–509, title I, §1011(c), Oct. 21, 1986, 100 Stat. 1876, provided that: "The Secretary of Agriculture shall issue regulations to implement this section [enacting sections 936a and 936b of this title and repealing provisions set out as a note under section 936 of this title] within 60 days after the date of enactment of this Act [Oct. 21, 1986]. Such regulations—

"(1) shall facilitate prepayment of loans under section 306A of the Rural Electrification Act of 1936 [this section], as added by subsection (a); and

"(2) may not require any rural utility that is a borrower of loans subject to section 306A to make unreasonable reductions in rates to its customers as a condition of such prepayment."

¹ So in original. Probably should be "transferred".

§936b. Sale or prepayment of direct or insured loans

(a) Discounted prepayment by borrowers of electric loans

(1) In general

Except as provided in paragraph (2), a direct or insured loan made under this chapter shall not be sold or prepaid at a value that is less than the outstanding principal balance on the loan.

(2) Exception

On request of the borrower, an electric loan made under this chapter, or a portion of such a loan, that was advanced before May 1, 1992, or has been advanced for not less than 2 years, shall be sold to or prepaid by the borrower at the lesser of—

(A) the outstanding principal balance on the loan; or

(B) the present value of the loan discounted from the face value at maturity at the rate established by the Secretary.

(3) Discount rate

The discount rate applicable to the prepayment under this subsection of a loan or loan advance shall be the then current cost of funds to the Department of the Treasury for obligations of comparable maturity to the remaining term of the loan.

(4) Tax exempt financing

If a borrower prepays a loan under this subsection using tax exempt financing, the discount shall be adjusted to ensure that the borrower receives a benefit that is equal to the benefit the borrower would receive if the borrower used fully taxable financing. The borrower shall certify in writing whether the financing will be tax exempt and shall comply with such other terms and conditions as the Secretary may establish that are reasonable and necessary to carry out this subsection.

(5) Eligibility

(A) In general

A borrower that has prepaid an insured or direct loan shall remain eligible for assistance under this chapter in the same manner as other borrowers, except that—

(i) a borrower that has prepaid a loan, either before or after October 21, 1992, at a discount rate as provided by paragraph (3), shall not be eligible, except at the discretion of the Secretary, to apply for or receive direct or insured loans under this chapter during the 120-month period beginning on the date of the prepayment; and

(ii) a borrower that prepaid a loan before October 21, 1992, at a discount rate greater than that provided by paragraph (3), shall not be eligible—

(I) except at the discretion of the Secretary, to apply for or receive direct or insured loans described in clause (i) during the 180-month period beginning on the date of the prepayment; or

(II) to apply for or receive direct or insured loans described in clause (i) until the borrower has repaid to the Federal Government the sum of—

(aa) the amount (if any) by which the discount the borrower received by reason of the prepayment exceeds the discount the borrower would have received had the discount been based on the cost of funds to the Department of the Treasury at the time of the prepayment; and

(bb) interest on the amount described in item (aa), for the period beginning on the date of the prepayment and ending on the date of the repayment, at a rate equal to the average annual cost of borrowing by the Department of the Treasury.

(B) Effect on existing agreements

If a borrower and the Secretary have entered into an agreement with respect to a prepayment occurring before October 21, 1992, this paragraph shall supersede any provision in the agreement relating to the restoration of eligibility for loans under this chapter.

(C) Distribution borrowers

A distribution borrower not in default on the repayment of loans made or insured under this chapter shall be eligible for discounted prepayment as provided in this subsection. For the purpose of determining eligibility for discounted prepayment under this subsection or eligibility for assistance under this chapter, a default by a borrower from which a distribution borrower purchases wholesale power shall not be considered a default by the distribution borrower.

(6) Definitions

As used in this subsection:

(A) Direct loan

The term "direct loan" means a loan made under section 904 of this title.

(B) Insured loan

The term "insured loan" means a loan made under section 935 of this title.

(b) Mergers of electric borrowers

Notwithstanding subsection (a), a direct or insured loan may be prepaid by an electric borrower at the lesser of the outstanding principal balance due thereon or the present value thereof discounted from the face value at maturity at the rate set by the Secretary if the borrower is an electrical organization which resulted from a merger or consolidation between a borrower and an organization which, prior to October 1, 1987, prepaid its direct or insured loans pursuant to this section. Prepayments by a borrower hereunder shall be made not later than one year after the effective date of the merger, consolidation, or other transaction. The discount rate to be set by the Secretary for direct or insured loans prepayments hereunder shall be based on the current cost of funds to the Department of the Treasury for obligations of comparable maturity to those being prepaid. If a borrower prepays using tax exempt financing, the discount shall be adjusted to make the discount equivalent to fully taxable financing. The borrower shall certify in writing whether the financing will be tax exempt and shall comply with such other terms and conditions as the Secretary may establish which are reasonable and necessary to implement this provision. As used in this section, the term "direct loan" means a loan made under section 904 of this title.

(May 20, 1936, ch. 432, title III, §306B, as added Pub. L. 99–509, title I, §1011(a), Oct. 21, 1986, 100 Stat. 1876; amended Pub. L. 101–624, title XXIII, §2387, Nov. 28, 1990, 104 Stat. 4051; Pub. L. 102–428, §2, Oct. 21, 1992, 106 Stat. 2183; Pub. L. 103–354, title II, §235(a)(13), Oct. 13, 1994, 108 Stat. 3221.)

Editorial Notes

Codification

October 21, 1992, referred to in subsec. (a)(5)(A), (B), was in the original "the date of enactment of this subsection", which was translated as meaning the date of enactment of Pub. L. 102–428, which amended subsec. (a) generally, to reflect the probable intent of Congress.

Amendments

1994—Pub. L. 103–354 substituted "Secretary" for "Administrator" wherever appearing.

1992—Subsec. (a). Pub. L. 102–428, §2(a), amended subsec. (a) generally. Prior to amendment, subsec. (a) read as follows: "A direct or insured loan made under this chapter shall not be sold or prepaid at a value less than the face value of any outstanding principal balance on such loan, except when sold to or prepaid by the borrower at the lesser of the outstanding principal balance due on the loan or the loan's present value discounted from the face value at maturity at the rate set by the Administrator. The exception contained in the preceding sentence shall be effective for the period ending September 30, 1987."

Subsec. (b). Pub. L. 102–428, §2(b), inserted heading.

1990—Pub. L. 101–624 designated existing provisions as subsec. (a) and added subsec. (b).

§936c. Refinancing and prepayment of FFB loans

(a) In general

A borrower of a loan made by the Federal Financing Bank and guaranteed under section 936 of this title may, at the option of the borrower, refinance or prepay the loan or an advance on the loan, or any portion of the loan or advance.

(b) Penalty

(1) Determination of penalty

A penalty shall be assessed against a borrower that refinances or prepays a loan or loan advance, or any portion of a loan or advance, under this section. Except as provided in paragraph (2), the penalty shall be equal to the lesser of—

(A) the difference between the outstanding principal balance of the loan being refinanced and the present value of the loan discounted at a rate equal to the then current cost of funds to the Department of the Treasury for obligations of comparable maturity to the loan being refinanced or prepaid;

(B) 100 percent of the amount of interest for 1 year on the outstanding principal balance of the loan or loan advance, or any portion of the loan or advance, being refinanced, multiplied by the ratio that—

(i) the number of quarterly payment dates between the date of the refinancing or prepayment and the maturity date for the loan advance; bears to

(ii) the number of quarterly payment dates between the first quarterly payment date that occurs 12 years after the end of the year in which the amount being refinanced was advanced and the maturity date of the loan advance; and

(C)(i) the present value of 100 percent of the amount of interest for 1 year on the outstanding principal balance of the loan or loan advance, or any portion of the loan or advance, being refinanced or prepaid; plus

(ii) for the interval between the date of the refinancing or prepayment and the first quarterly payment date that occurs 12 years after the end of the year in which the amount being refinanced or prepaid was advanced, the present value of the difference between—

(I) each payment scheduled for the interval on the loan amount being refinanced or prepaid; and

(II) the payment amounts that would be required during the interval on the amounts being refinanced or prepaid if the interest rate on the loan were equal to the then current cost of funds to the Department of the Treasury for obligations of comparable maturity to the loan being refinanced or prepaid.

(2) Limitation

(A) In general

Except as provided in subparagraph (B), the penalty provided by paragraph (1)(A) shall be required for refinancing or prepayment under this section.

(B) Exception

In the case of a loan advanced under an agreement that permits the refinancing or prepayment of the loan advance based on the payment of 1 year of interest on the outstanding principal balance of the loan advance, a borrower may, in lieu of the penalty required by paragraph (1)(A), pay a penalty as provided by—

(i) paragraph (1)(B), if the loan advance has reached the 12-year maturity required under the loan agreement for the refinancing or prepayment; or

(ii) paragraph (1)(C), if the loan advance has not reached the 12-year maturity required under the loan agreement for the refinancing or prepayment.

(3) Financing of penalty

(A) In general

In the case of a refinancing under this section, a borrower may, at the option of the borrower, meet the penalty requirements of paragraph (1) by—

(i) making a payment in the amount of the required penalty at the time of the refinancing; or

(ii) increasing the outstanding principal balance of the loan advance guaranteed by the Secretary that is being refinanced under this section by the amount of the penalty.

(B) Increased principal

If a borrower meets the penalty requirements of paragraph (1) by increasing the outstanding principal balance of the loan advance that is being refinanced, the borrower shall make a payment at the time of the refinancing equal to 2.5 percent of the amount of the penalty that is added to the outstanding principal balance of the loan.

(c) Loan terms and conditions after refinancing

(1) In general

On the payment of a penalty as provided by subsection (b), the loan or loan advance, or any portion of the loan or advance, shall be refinanced at the interest rate described in paragraph (2) for a term selected by the borrower pursuant to paragraph (3), except that this paragraph shall not apply if the loan advance, or any portion of the advance, is prepaid by the borrower.

(2) Interest rate

The interest rate on a loan refinanced under this section shall be determined to be equal to the then current cost of funds to the Department of the Treasury for obligations of comparable maturity to a term selected by the borrower pursuant to paragraph (3), except that such rate shall not be greater than 7 percent per year, subject to subsection (d).

(3) Loan term

Subject to paragraph (4), the borrower of a loan that is refinanced under this section—

(A) shall select the term for which an interest rate shall be determined pursuant to paragraph (2); and

(B) at the end of the term (and any succeeding term selected by the borrower under this paragraph), may renew the loan for another term selected by the borrower.

(4) Maximum term

The borrower may not select a term pursuant to paragraph (3) that ends after the maturity date set for the loan before the refinancing of the loan under this section.

(5) Existing loans

In the case of the refinancing of a loan of a borrower pursuant to this section and the inclusion of a penalty in the outstanding principal balance of the refinanced loan pursuant to subsection (b)(3)—

(A) the refinancing and inclusion of the penalty shall not be subject to appropriations or limited by the amount provided during a fiscal year for new loans, loan guarantees, or other credit activity;

(B) the request of the borrower for the refinancing under this section may not be denied or delayed; and

(C) the borrower may not be limited in the selection of any refinancing or prepayment option provided by this section to the borrower.

(d) Maximum rate option

(1) In general

Except as provided in paragraphs (2), (3), and (4), a borrower of a loan or loan advance, or any portion of the loan or advance, that is refinanced under this section shall have the option of ensuring that the interest rate on such loan, loan advance, or portion thereof does not exceed 7 percent per year.

(2) Limitation

A borrower may not exercise the option under paragraph (1) in the case of a loan or loan advance, or portion thereof, if the total amount of such loans for which such option would be exercised exceeds 50 percent of the outstanding principal balance of the loans made to such borrower and guaranteed under section 936 of this title.

(3) Fee

A borrower that exercises the maximum rate option under paragraph (1) shall, at the time of exercising such option, pay a fee equal to 1 percent of the outstanding principal balance of such loan or loan advance, or portion thereof, for which such option is exercised. Such fee shall be in addition to the penalties and other payments required under subsection (b).

(4) Sunset

The option provided under paragraph (1) shall not be available in the case of any loan or loan advance, or portion thereof, unless a written request to exercise such option is sent to the Secretary not later than 1 year after the effective date of regulations issued to carry out the Rural Electrification Loan Restructuring Act of 1993.

(May 20, 1936, ch. 432, title III, §306C, as added Pub. L. 103–66, title I, §1201(a), Aug. 10, 1993, 107 Stat. 327; amended Pub. L. 103–129, §2(c)(10), Nov. 1, 1993, 107 Stat. 1365; Pub. L. 103–354, title II, §235(a)(13), Oct. 13, 1994, 108 Stat. 3221.)

Editorial Notes

References in Text

The Rural Electrification Loan Restructuring Act of 1993, referred to in subsec. (d)(4), is Pub. L. 103–129, Nov. 1, 1993, 107 Stat. 1356. Section 6 of Pub. L. 103–129 relates to the issuance of regulations to carry out amendments made by the Act and is set out as a note under section 901 of this title. For complete classification of this Act to the Code, see Short Title of 1993 Amendment note set out under section 901 of this title and Tables.

Amendments

1994—Subsecs. (b)(3)(A)(ii), (d)(4). Pub. L. 103–354 substituted "Secretary" for "Administrator".

1993—Subsec. (c)(2). Pub. L. 103–129, §2(c)(10)(A), inserted before period at end ", except that such rate shall not be greater than 7 percent per year, subject to subsection (d) of this section".

Subsec. (d). Pub. L. 103–129, §2(c)(10)(B), added subsec. (d).

Statutory Notes and Related Subsidiaries

Regulations

Pub. L. 103–66, title I, §1201(b), Aug. 10, 1993, 107 Stat. 330, provided that: "Not later than 45 days after the date of enactment of this section [Aug. 10, 1993], the Administrator of the Rural Electrification Administration shall issue interim final regulations to carry out the amendment made by subsection (a) [enacting this section]."

Pilot Program for Funds To Refinance Debt

Pub. L. 115–31, div. A, title VII, §749, May 5, 2017, 131 Stat. 177, authorized the Secretary of Agriculture to conduct a pilot program that authorized not more than $600,000,000 in funds from rural electrification loans made by the Federal Financing Bank that were guaranteed under section 306 of the Rural Electrification Act of 1936 (7 U.S.C. 936) to be used for refinancing debt pursuant to this section, with the authority for the pilot program to remain in effect through Sept. 30, 2019.

§936d. Eligibility of distribution borrowers for loans, loan guarantees, and lien accommodations

For the purpose of determining the eligibility of a distribution borrower not in default on the repayment of a loan made or guaranteed under this chapter for a loan, loan guarantee, or lien accommodation under this subchapter, a default by a borrower from which the distribution borrower purchases wholesale power shall not—

(1) be considered a default by the distribution borrower;

(2) reduce the eligibility of the distribution borrower for assistance under this chapter; or

(3) be the cause, directly or indirectly, of imposing any requirement or restriction on the borrower as a condition of the assistance, except such requirements or restrictions as are necessary to implement a debt restructuring agreed on by the power supply borrower and the Government.

(May 20, 1936, ch. 432, title III, §306D, as added Pub. L. 103–129, §2(c)(7), Nov. 1, 1993, 107 Stat. 1364.)

§936e. Administrative prohibitions applicable to certain electric borrowers

(a) In general

For the purpose of relieving borrowers of unnecessary and burdensome requirements, the Secretary, guided by the practices of private lenders with respect to similar credit risks, shall issue regulations, applicable to any electric borrower under this chapter whose net worth exceeds 110 percent of the outstanding principal balance on all loans made or guaranteed to the borrower by the Secretary, to minimize those approval rights, requirements, restrictions, and prohibitions that the Secretary otherwise may establish with respect to the operations of such a borrower.

(b) Subordination or sharing of liens

At the request of a private lender providing financing to such a borrower for a capital investment, the Secretary shall, expeditiously, either offer to share the government's lien on the borrower's system or offer to subordinate the government's lien on that property financed by the private lender.

(c) Issuance of regulations

In issuing regulations implementing this section, the Secretary may establish requirements, guided by the practices of private lenders, to ensure that the security for any loan made or guaranteed under this chapter is reasonably adequate.

(d) Authority of Secretary

Nothing in this section limits the authority of the Secretary to establish terms and conditions with respect to the use by borrowers of the proceeds of loans made or guaranteed under this chapter or to take any other action specifically authorized by law.

(May 20, 1936, ch. 432, title III, §306E, as added Pub. L. 103–129, §2(c)(7), Nov. 1, 1993, 107 Stat. 1365; amended Pub. L. 103–201, §1, Dec. 17, 1993, 107 Stat. 2342; Pub. L. 103–354, title II, §235(a)(8), (13), Oct. 13, 1994, 108 Stat. 3221.)

Editorial Notes

Amendments

1994—Pub. L. 103–354 substituted "Secretary" for "Administrator" in heading of subsec. (d) and wherever appearing in text.

1993—Pub. L. 103–201 inserted "certain" before "electric" in section catchline and amended text generally. Prior to amendment, text read as follows: "The Administrator may not require prior approval of, impose any requirement, restriction, or prohibition with respect to the operations of, or deny or delay the granting of a lien accommodation to, any electric borrower under this chapter whose net worth exceeds 110 percent of the outstanding principal balance on all loans made or guaranteed to the borrower by the Administrator."

Statutory Notes and Related Subsidiaries

Regulations

Pub. L. 103–201, §2, Dec. 17, 1993, 107 Stat. 2342, provided that: "The Administrator of the Rural Electrification Administration shall issue interim final regulations implementing this Act [amending this section] not later than 180 days after enactment [Dec. 17, 1993]. If the regulations are not issued within such period of time, the Administrator may not, until the Administrator issues such regulations, require prior approval of, establish any requirement, restriction, or prohibition, with respect to the operations of any electric borrower under the Rural Electrification Act of 1936 [7 U.S.C. 90 et seq.] whose net worth exceeds 110 percent of the outstanding principal balance on all loans made or guaranteed to the borrower by the Administrator."

§936f. Substantially underserved trust areas

(a) Definitions

In this section:

(1) Eligible program

The term "eligible program" means a program administered by the Rural Utilities Service and authorized in—

(A) this chapter; or

(B) paragraph (1), (2), (14), (22), or (24) of section 1926(a) of this title or section 1926a, 1926c, 1926d, or 1926e of this title.

(2) Substantially underserved trust area

The term "substantially underserved trust area" means a community in "trust land" (as defined in section 3765 of title 38) with respect to which the Secretary determines has a high need for the benefits of an eligible program.

(b) Initiative

The Secretary, in consultation with local governments and Federal agencies, may implement an initiative to identify and improve the availability of eligible programs in communities in substantially underserved trust areas.

(c) Authority of Secretary

In carrying out subsection (b), the Secretary—

(1) may make available from loan or loan guarantee programs administered by the Rural Utilities Service to qualified utilities or applicants financing with an interest rate as low as 2 percent, and with extended repayment terms;

(2) may waive nonduplication restrictions, matching fund requirements, or credit support requirements from any loan or grant program administered by the Rural Utilities Service to facilitate the construction, acquisition, or improvement of infrastructure;

(3) may give the highest funding priority to designated projects in substantially underserved trust areas; and

(4) shall only make loans or loan guarantees that are found to be financially feasible and that provide eligible program benefits to substantially underserved trust areas.

(d) Report

Not later than 1 year after the date of enactment of this section and annually thereafter, the Secretary shall submit to Congress a report that describes—

(1) the progress of the initiative implemented under subsection (b); and

(2) recommendations for any regulatory or legislative changes that would be appropriate to improve services to substantially underserved trust areas.

(May 20, 1936, ch. 432, title III, §306F, as added Pub. L. 110–234, title VI, §6105, May 22, 2008, 122 Stat. 1196, and Pub. L. 110–246, §4(a), title VI, §6105, June 18, 2008, 122 Stat. 1664, 1957.)

Editorial Notes

References in Text

The date of enactment of this section, referred to in subsec. (d), is the date of enactment of Pub. L. 110–246, which was approved June 18, 2008.

Codification

Pub. L. 110–234 and Pub. L. 110–246 enacted identical sections. Pub. L. 110–234 was repealed by section 4(a) of Pub. L. 110–246.

Statutory Notes and Related Subsidiaries

Effective Date

Enactment of this section and repeal of Pub. L. 110–234 by Pub. L. 110–246 effective May 22, 2008, the date of enactment of Pub. L. 110–234, see section 4 of Pub. L. 110–246, set out as a note under section 8701 of this title.

§937. Loans from other credit sources

When it appears to the Secretary that the loan applicant is able to obtain a loan for part of his credit needs from a responsible cooperative or other credit source at reasonable rates and terms consistent with the loan applicant's ability to pay and the achievement of this chapter's objectives, he may request the loan applicant to apply for and accept such a loan concurrently with an insured loan, subject, however, to full use being made by the Secretary of the funds made available hereunder for such insured loans under this subchapter. The Secretary may not request any applicant for an electric loan under this chapter to apply for and accept a loan in an amount exceeding 30 percent of the credit needs of the applicant.

(May 20, 1936, ch. 432, title III, §307, as added Pub. L. 93–32, §2, May 11, 1973, 87 Stat. 70; amended Pub. L. 97–35, title I, §165(c), Aug. 13, 1981, 95 Stat. 379; Pub. L. 103–129, §2(c)(8), Nov. 1, 1993, 107 Stat. 1365; Pub. L. 103–354, title II, §235(a)(13), Oct. 13, 1994, 108 Stat. 3221.)

Editorial Notes

Amendments

1994—Pub. L. 103–354 substituted "Secretary" for "Administrator" wherever appearing.

1993—Pub. L. 103–129 inserted at end "The Administrator may not request any applicant for an electric loan under this chapter to apply for and accept a loan in an amount exceeding 30 percent of the credit needs of the applicant."

1981—Pub. L. 97–35 substituted "an insured loan" for "a loan insured at the standard rate".

Statutory Notes and Related Subsidiaries

Effective Date

Section effective May 11, 1973, see section 12 of Pub. L. 93–32, set out as a note under section 930 of this title.

§938. Full faith and credit of the United States

Any contract of insurance or guarantee executed by the Secretary under this subchapter shall be an obligation supported by the full faith and credit of the United States and incontestable except for fraud or misrepresentation of which the holder had actual knowledge at the time it became a holder.

(May 20, 1936, ch. 432, title III, §308, as added Pub. L. 93–32, §2, May 11, 1973, 87 Stat. 70; amended Pub. L. 94–124, §2, Nov. 4, 1975, 89 Stat. 677; Pub. L. 103–354, title II, §235(a)(13), Oct. 13, 1994, 108 Stat. 3221.)

Editorial Notes

Amendments

1994—Pub. L. 103–354 substituted "Secretary" for "Administrator".

1975—Pub. L. 94–124 substituted "of which the holder had actual knowledge at the time it became a holder" for "of which the holder has actual knowledge".

Statutory Notes and Related Subsidiaries

Effective Date

Section effective May 11, 1973, see section 12 of Pub. L. 93–32, set out as a note under section 930 of this title.

§939. Loan terms and conditions

Loans made from or insured through the fund shall be for the same purposes and on the same terms and conditions as are provided for loans in subchapters I and II of this chapter except as otherwise provided in sections 933 to 938 inclusive.

(May 20, 1936, ch. 432, title III, §309, as added Pub. L. 93–32, §2, May 11, 1973, 87 Stat. 70; amended Pub. L. 101–624, title XXIII, §2360, Nov. 28, 1990, 104 Stat. 4042; Pub. L. 103–129, §2(b)(2), Nov. 1, 1993, 107 Stat. 1363; Pub. L. 104–127, title VII, §779, Apr. 4, 1996, 110 Stat. 1151; Pub. L. 115–334, title VI, §6602(b)(11), Dec. 20, 2018, 132 Stat. 4777.)

Editorial Notes

Amendments

2018—Pub. L. 115–334 struck out at end "The preceding sentence shall not be construed to make section 948(b)(2) or 950b of this title applicable to this subchapter."

1996—Pub. L. 104–127 struck out subsec. (a) designation and heading "In general" and heading and text of subsec. (b). Prior to amendment, text read as follows: "The term of any telephone loan made under this subchapter shall be determined by the borrower at the time the loan application is submitted."

1993—Subsec. (a). Pub. L. 103–129 inserted at end "The preceding sentence shall not be construed to make section 948(b)(2) or 950b of this title applicable to this subchapter."

1990—Pub. L. 101–624 designated existing provisions as subsec. (a) and added subsec. (b).

Statutory Notes and Related Subsidiaries

Effective Date

Section effective May 11, 1973, see section 12 of Pub. L. 93–32, set out as a note under section 930 of this title.

§940. Refinancing of rural development loans

At the request of the borrower, the Secretary is authorized and directed to refinance with loans which will be insured under this chapter at the interest rates provided in section 935 of this title any loans made for rural electric and telephone facilities under any provision of the Consolidated Farm and Rural Development Act [7 U.S.C. 1921 et seq.].

(May 20, 1936, ch. 432, title III, §310, as added Pub. L. 93–32, §2, May 11, 1973, 87 Stat. 70; amended Pub. L. 103–354, title II, §235(a)(13), Oct. 13, 1994, 108 Stat. 3221.)

Editorial Notes

References in Text

The Consolidated Farm and Rural Development Act, referred to in text, is title III of Pub. L. 87–128, Aug. 8, 1961, 75 Stat. 307, which is classified principally to chapter 50 (§1921 et seq.) of this title. For complete classification of the Act to the Code, see Short Title note set out under section 1921 of this title and Tables.

Amendments

1994—Pub. L. 103–354 substituted "Secretary" for "Administrator".

Statutory Notes and Related Subsidiaries

Effective Date

Section effective May 11, 1973, see section 12 of Pub. L. 93–32, set out as a note under section 930 of this title.

§940a. Repealed. Pub. L. 104–127, title VII, §780, Apr. 4, 1996, 110 Stat. 1151

Section, act May 20, 1936, ch. 432, title III, §311, as added Oct. 18, 1986, Pub. L. 99–500, §101(m) [title VI, §623], 100 Stat. 1783–308, 1783-333, and Oct. 30, 1986, Pub. L. 99–591, §101(m) [title VI, §623], 100 Stat. 3341–308, 3341-333; amended Oct. 13, 1994, Pub. L. 103–354, title II, §235(a)(7), (13), 108 Stat. 3221, related to privatization demonstration program.

§940b. Use of funds

A borrower of an insured or guaranteed electric loan under this chapter may, without restriction or prior approval of the Secretary, invest its own funds or make loans or guarantees, not in excess of 15 percent of its total utility plant.

(May 20, 1936, ch. 432, title III, §312, as added Pub. L. 100–203, title I, §1402, Dec. 22, 1987, 101 Stat. 1330–21; amended Pub. L. 103–354, title II, §235(a)(13), Oct. 13, 1994, 108 Stat. 3221.)

Editorial Notes

Amendments

1994—Pub. L. 103–354 substituted "Secretary" for "Administrator".

§940c. Cushion of credit payments program

(a) Establishment

(1) In general

(A) Development and promotion of program

The Secretary shall develop and promote a program to encourage borrowers to voluntarily make deposits into cushion of credit accounts established within the Rural Electrification and Telephone Revolving Fund.

(B) Termination

Effective on December 20, 2018, no deposits may be made under subparagraph (A).

(2) Interest

(A) In general

Amounts in each cushion of credit account shall accrue interest to the borrower at a rate of 5 percent per annum.

(B) Reduction

Notwithstanding subparagraph (A), amounts in each cushion of credit account shall accrue interest to the borrower at a rate equal to—

(i) 4 percent per annum in fiscal year 2021; and

(ii) the then applicable 1-year Treasury rate thereafter.

(3) Balance

(A) In general

A borrower may reduce the balance of its cushion of credit account only if the amount obtained from the reduction is used to make scheduled payments on loans made or guaranteed under this chapter.

(B) Prepayment

Notwithstanding subparagraph (A) and subject to subparagraph (C), beginning on December 20, 2018, and ending with September 30, 2020, a borrower may, at the sole discretion of the borrower, reduce the balance of its cushion of credit account if the amount obtained from the reduction is used to prepay loans made or guaranteed under this chapter.

(C) No prepayment premium

Notwithstanding any other provision of this chapter, no prepayment premium shall be imposed or collected with respect to that portion of a loan that is prepaid by a borrower in accordance with subparagraph (B).

(D) Mandatory funding

Notwithstanding section 661c of title 2, out of any funds in the Treasury not otherwise appropriated, the Secretary of the Treasury shall make available such sums as necessary to cover any loan modification costs as defined in section 661a of title 2.

(b) Uses of cushion of credit payments

(1) In general

(A) Cash balance

Cushion of credit payments shall be held in the Rural Electrification and Telephone Revolving Fund as a cash balance in the cushion of credit accounts of borrowers.

(B) Interest

All cash balance amounts (obtained from cushion of credit payments, loan payments, and other sources) held by the Fund shall bear interest to the Fund at a rate equal to the weighted average rate on outstanding certificates of beneficial ownership issued by the Fund.

(C) Credits

The amount of interest accrued on the cash balances shall be credited to the Fund as an offsetting reduction to the amount of interest paid by the Fund on its certificates of beneficial ownership.

(2) Rural economic development subaccount

The Secretary shall maintain a subaccount within the Rural Electrification and Telephone Revolving Fund to which shall be credited, on a monthly basis, a sum determined by multiplying the outstanding cushion of credit payments made after October 1, 1987, by the difference (converted to a monthly basis) between the average weighted interest rate paid on outstanding certificates of beneficial ownership issued by the Fund and 5 percent.

(May 20, 1936, ch. 432, title III, §313, as added Pub. L. 100–203, title I, §1403, Dec. 22, 1987, 101 Stat. 1330–21; amended Pub. L. 103–354, title II, §235(a)(13), Oct. 13, 1994, 108 Stat. 3221; Pub. L. 115–334, title VI, §§6503, 6504(b), Dec. 20, 2018, 132 Stat. 4772, 4773.)

Editorial Notes

Amendments

2018—Subsec. (a)(1). Pub. L. 115–334, §6503(1), designated existing provisions as subpar. (A), inserted heading, and added subpar. (B).

Subsec. (a)(2). Pub. L. 115–334, §6503(2), designated existing provisions as subpar. (A), inserted heading, and added subpar. (B).

Subsec. (a)(3). Pub. L. 115–334, §6503(3), designated existing provisions as subpar. (A), inserted heading, and added subpar. (B).

Subsec. (b)(2). Pub. L. 115–334, §6504(b), struck out subpar. (A) designation and heading before "The Secretary shall", substituted "5 percent." for "the 5 percent rate of interest provided to borrowers on cushion of credit payments.", and struck out subpars. (B) to (E) which related to grants, repayments, proceeds, and number of grants, respectively.

1994—Subsecs. (a)(1), (b)(2)(A) to (C). Pub. L. 103–354 substituted "Secretary" for "Administrator".

§940c–1. Guarantees for bonds and notes issued for electrification or telephone purposes

(a) In general

(1) Guarantees

Subject to subsection (b), the Secretary shall guarantee payments on bonds or notes issued by cooperative or other lenders organized on a not-for-profit basis, if the proceeds of the bonds or notes are used to make utility infrastructure loans, or refinance bonds or notes issued for those purposes, to a borrower that has at any time received, or is eligible to receive, a loan under this chapter.

(2) Terms

A bond or note guaranteed under this section shall, by agreement between the Secretary and the borrower—

(A) be for a term of 30 years (or another term of years that the Secretary determines is appropriate); and

(B) be repaid by the borrower—

(i) in periodic installments of principal and interest;

(ii) in periodic installments of interest and, at the end of the term of the bond or note, as applicable, by the repayment of the outstanding principal; or

(iii) through a combination of the methods described in clauses (i) and (ii).

(b) Limitations

(1) Outstanding loans

A lender shall not receive a guarantee under this section for a bond or note if, at the time of the guarantee, the total principal amount of such guaranteed bonds or notes outstanding of the lender would exceed the principal amount of outstanding loans of the lender for eligible purposes described in subsection (a)(1).

(2) Qualifications

The Secretary may deny the request of a lender for the guarantee of a bond or note under this section if the Secretary determines that—

(A) the lender does not have appropriate expertise or experience or is otherwise not qualified to make loans for eligible purposes described in subsection (a)(1);

(B) the bond or note issued by the lender would not be investment grade quality without a guarantee; or

(C) the lender has not provided to the Secretary a list of loan amounts approved by the lender that the lender certifies are for eligible purposes described in subsection (a)(1).

(3) Annual amount

The total amount of guarantees provided by the Secretary under this section during a fiscal year shall not exceed $1,000,000,000, subject to the availability of funds under subsection (e).

(c) Fees

(1) In general

A lender that receives a guarantee issued under this section on a bond or note shall pay a fee to the Secretary.

(2) Amount

(A) In general

The amount of the annual fee paid for the guarantee of a bond or note under this section shall be equal to 30 basis points of the amount of the unpaid principal of the bond or note guaranteed under this section.

(B) Prohibition

Except as otherwise provided in this subsection and subsection (e)(2), no other fees shall be assessed.

(3) Payment

(A) In general

A lender shall pay the fees required under this subsection on a semiannual basis.

(B) Structured schedule

The Secretary shall, with the consent of the lender, structure the schedule for payment of the fee to ensure that sufficient funds are available to pay the subsidy costs for note or bond guarantees as provided for in subsection (e)(2).

(4) Rural economic development subaccount

Subject to subsection (e)(2), fees collected under this subsection shall be—

(A) deposited into the rural economic development subaccount that shall be maintained as required by sections 940c(b)(2) and 940c–2(f) of this title, to remain available until expended; and

(B) used for the purposes described in section 940c(b)(2) of this title.

(d) Guarantees

(1) In general

A guarantee issued under this section shall—

(A) be for the full amount of a bond or note, including the amount of principal, interest, and call premiums;

(B) be fully assignable and transferable; and

(C) represent the full faith and credit of the United States.

(2) Limitation

To ensure that the Secretary has the resources necessary to properly examine the proposed guarantees, the Secretary may limit the number of guarantees issued under this section to 5 per year.

(3) Department opinion

On the timely request of a lender, the General Counsel of the Department of Agriculture shall provide the Secretary with an opinion regarding the validity and authority of a guarantee issued to the lender under this section.

(e) Authorization of appropriations

(1) In general

There are authorized to be appropriated such sums as are necessary to carry out this section.

(2) Fees

To the extent that the amount of funds appropriated for a fiscal year under paragraph (1) are not sufficient to carry out this section, the Secretary may use up to 1/3 of the fees collected under subsection (c) for the cost of providing guarantees of bonds and notes under this section before depositing the remainder of the fees into the rural economic development subaccount required to be maintained by sections 940c(b)(2) and 940c–2(f) of this title.

(f) Termination

The authority provided under this section shall terminate on September 30, 2023.

(May 20, 1936, ch. 432, title III, §313A, as added Pub. L. 107–171, title VI, §6101(a), May 13, 2002, 116 Stat. 413; amended Pub. L. 110–234, title VI, §6106(a), May 22, 2008, 122 Stat. 1197; Pub. L. 110–246, §4(a), title VI, §6106(a), June 18, 2008, 122 Stat. 1664, 1958; Pub. L. 113–79, title VI, §6102, Feb. 7, 2014, 128 Stat. 851; Pub. L. 115–334, title VI, §§6504(d), 6505(a), Dec. 20, 2018, 132 Stat. 4774.)

Editorial Notes

Codification

The authorities provided by each provision of, and each amendment made by, Pub. L. 115–334, as in effect on Sept. 30, 2023, to continue, and authorities to be carried out, until the later of Sept. 30, 2024, or the date specified in the provision of, or amendment made by, Pub. L. 115–334, see section 102(a) of Pub. L. 118–22, set out in an Extension of Agricultural Programs note under section 9001 of this title.

The authorities provided by each provision of, and each amendment made by, Pub. L. 110–246, as in effect on Sept. 30, 2012, to continue, and the Secretary of Agriculture to carry out the authorities, until the later of Sept. 30, 2013, or the date specified in the provision of, or amendment made by, Pub. L. 110–246, see section 701(a) of Pub. L. 112–240, set out in a 1-Year Extension of Agricultural Programs note under section 8701 of this title.

Pub. L. 110–234 and Pub. L. 110–246 made identical amendments to this section. The amendments by Pub. L. 110–234 were repealed by section 4(a) of Pub. L. 110–246.

Amendments

2018—Subsec. (a). Pub. L. 115–334, §6505(a)(1), designated existing provisions as par. (1), inserted heading, substituted "basis, if the proceeds of the bonds or notes are used to make utility infrastructure loans, or refinance bonds or notes issued for those purposes, to a borrower that has at any time received, or is eligible to receive, a loan under this chapter." for "basis if the proceeds of the bonds or notes are used to make loans for any electrification or telephone purpose eligible for assistance under this chapter, including section 904 or 922 of this title or to refinance bonds or notes issued for such purposes.", and added par. (2).

Subsec. (b)(1). Pub. L. 115–334, §6505(a)(2)(A), substituted "purposes described in subsection (a)(1)." for "electrification or telephone purposes consistent with this chapter."

Subsec. (b)(2). Pub. L. 115–334, §6505(a)(2)(B), (C), redesignated par. (3) as (2) and struck out former par. (2). Prior to amendment, text of par. (2) read as follows: "The Secretary shall not guarantee payment on a bond or note issued by a lender, the proceeds of which are used for the generation of electricity."

Subsec. (b)(2)(A). Pub. L. 115–334, §6505(a)(2)(D)(i), substituted "for eligible purposes described in subsection (a)(1)" for "for electrification or telephone purposes".

Subsec. (b)(2)(C). Pub. L. 115–334, §6505(a)(2)(D)(ii), substituted "subsection (a)(1)" for "subsection (a)".

Subsec. (b)(3), (4). Pub. L. 115–334, §6505(a)(2)(C), redesignated par. (4) as (3). Former par. (3) redesignated (2).

Subsec. (c)(4)(A). Pub. L. 115–334, §6504(d)(1)(A), substituted "that shall be maintained as required by sections 940c(b)(2) and 940c–2(f) of this title" for "maintained under section 940c(b)(2)(A) of this title".

Subsec. (c)(4)(B). Pub. L. 115–334, §6504(d)(1)(B), substituted "940c(b)(2) of this title" for "940c(b)(2)(B) of this title".

Subsec. (e)(2). Pub. L. 115–334, §6504(d)(2), substituted "required to be maintained by sections 940c(b)(2) and 940c–2(f) of this title" for "maintained under section 940c(b)(2)(A) of this title".

Subsec. (f). Pub. L. 115–334, §6505(a)(3), substituted "2023" for "2018".

2014—Subsec. (f). Pub. L. 113–79 substituted "2018" for "2012".

2008—Subsec. (b)(1). Pub. L. 110–246, §6106(a)(1)(A), substituted "for eligible electrification or telephone purposes consistent with this chapter" for "for electrification or telephone purposes that have been made concurrently with loans approved for such purposes under this chapter".

Subsec. (b)(4). Pub. L. 110–246, §6106(a)(1)(B), added par. (4) and struck out former par. (4) which related to prohibition on use of amounts from reduced funding costs for interest rate reduction except for certain concurrent loans.

Subsec. (c)(2), (3). Pub. L. 110–246, §6106(a)(2), added pars. (2) and (3) and struck out former pars. (2) and (3) which provided that the amount of an annual fee paid for the guarantee would be equal to 30 basis points of the amount of the unpaid principal and directed payment of fees required under subsec. (c) on a semiannual basis.

Subsec. (f). Pub. L. 110–246, §6106(a)(3), substituted "2012" for "2007".

Statutory Notes and Related Subsidiaries

Effective Date of 2008 Amendment

Amendment of this section and repeal of Pub. L. 110–234 by Pub. L. 110–246 effective May 22, 2008, the date of enactment of Pub. L. 110–234, see section 4 of Pub. L. 110–246, set out as an Effective Date note under section 8701 of this title.

Regulations and Implementation

Pub. L. 110–234, title VI, §6106(b), May 22, 2008, 122 Stat. 1197, and Pub. L. 110–246, §4(a), title VI, §6106(b), June 18, 2008, 122 Stat. 1664, 1959, provided that: "The Secretary [of Agriculture] shall continue to carry out section 313A of the Rural Electrification Act of 1936 (7 U.S.C. 940c–1) in the same manner as on the day before the date of enactment of this Act [June 18, 2008], except without regard to the limitations prescribed in subsection (b)(1) of that section, until such time as any regulations necessary to carry out the amendments made by this section [amending this section] are fully implemented."

[Pub. L. 110–234 and Pub. L. 110–246 enacted identical provisions. Pub. L. 110–234 was repealed by section 4(a) of Pub. L. 110–246, set out as a note under section 8701 of this title.]

Pub. L. 108–199, div. A, title VII, §750(b), Jan. 23, 2004, 118 Stat. 38, provided that: "The Secretary shall publish a proposed rule to carry out section 313A of the Rural Electrification Act of 1936 [7 U.S.C. 940c–1] within 60 days of enactment of this Act [Jan. 23, 2004]."

Pub. L. 107–171, title VI, §6101(b), May 13, 2002, 116 Stat. 415, provided that:

"(1) Regulations.—Not later than 180 days after the date of enactment of this Act [May 13, 2002], the Secretary of Agriculture shall promulgate regulations to carry out the amendments made by this section [enacting this section].

"(2) Implementation.—Not later than 240 days after the date of enactment of this Act [May 13, 2002], the Secretary shall implement the amendment made by this section [enacting this section]."

Administration of Guarantees Prior to Implementation of Regulations

Pub. L. 115–334, title VI, §6505(b), Dec. 20, 2018, 132 Stat. 4775, provided that: "Beginning on the date of enactment of the Agriculture Improvement Act of 2018 [Dec. 20, 2018], the Secretary [of Agriculture] shall continue to carry out section 313A of the Rural Electrification Act of 1936 (7 U.S.C. 940c–1) (as amended by subsection (a)) under a Notice of Solicitation of Applications until the date on which any regulations necessary to carry out the amendments made by subsection (a) [amending this section] are fully implemented."

§940c–2. Rural development loans and grants

(a) In general

The Secretary shall provide grants or zero interest loans to borrowers under this chapter for the purpose of promoting rural economic development and job creation projects, including funding for project feasibility studies, start-up costs, incubator projects, and other reasonable expenses for the purpose of fostering rural development.

(b) Repayments

In the case of zero interest loans, the Secretary shall establish such reasonable repayment terms as will encourage borrower participation.

(c) Proceeds

All proceeds from the repayment of such loans made under this section shall be returned to the subaccount that the Secretary shall maintain in accordance with sections 940c(b)(2) and 940c–2(f) of this title.

(d) Number of grants

Loans and grants required under this section shall be made to the full extent of the amounts made available under subsection (e).

(e) Funding

(1) Discretionary funding

In addition to other funds that are available to carry out this section, there is authorized to be appropriated not more than $10,000,000 for each of fiscal years 2019 through 2023 to carry out this section, to remain available until expended.

(2) Mandatory funding

Of the funds of the Commodity Credit Corporation, the Secretary shall credit to the subaccount to use for the cost of grants and loans under this section $5,000,000 for each of fiscal years 2022 through 2024, to remain available until expended.

(3) Other funds

In addition to the funds described in paragraphs (1) and (2), the Secretary shall use, without fiscal year limitation, to provide grants and loans under this section—

(A) the interest differential sums credited to the subaccount described in subsection (c); and

(B) subject to section 940c–1(e)(2) of this title, the fees described in subsection (c)(4) of such section.

(f) Maintenance of account

The Secretary shall maintain the subaccount described in section 940c(b)(2) of this title, as in effect in fiscal year 2017, for purposes of carrying out this section.

(May 20, 1936, ch. 432, title III, §313B, as added Pub. L. 115–334, title VI, §6504(c), Dec. 20, 2018, 132 Stat. 4773; amended Pub. L. 118–22, div. B, title I, §102(d)(4), Nov. 17, 2023, 137 Stat. 116.)

Editorial Notes

Amendments

2023—Subsec. (e)(2). Pub. L. 118–22 substituted "through 2024" for "and 2023".

Statutory Notes and Related Subsidiaries

Effective Date of 2023 Amendment

Amendment by Pub. L. 118–22 to be applied and administered as if enacted on Sept. 30, 2023, see section 102(g) of Pub. L. 118–22, set out in an Extension of Agricultural Programs note under section 9001 of this title.

Additional Funding for Fiscal Year 2024

Pub. L. 118–42, div. B, title VII, §780, Mar. 9, 2024, 138 Stat. 118, provided that: "Section 313B(a) of the Rural Electrification Act of 1936 (7 U.S.C. 940c–2(a)), shall be applied for fiscal year 2024 and each fiscal year thereafter until the specified funding has been expended as if the following were inserted after the final period: 'In addition, the Secretary shall use $9,465,000 of the funds available to carry out this section in fiscal year 2024 for an additional amount for the same purpose and under the same terms and conditions as the Rural Business Development Grants authorized by section 310B of the Consolidated Farm and Rural Development Act (7 U.S.C. 1932(c)).'."

Implementation of Loan and Grant Program

Pub. L. 115–334, title VI, §6504(e), Dec. 20, 2018, 132 Stat. 4774, provided that:

"(1) Subject to section 313B(e) of the Rural Electrification Act of 1936 (as added by this section) [7 U.S.C. 940c–2(e)], the Secretary of Agriculture shall carry out the loan and grant program required under such section in the same manner as the loan and grant program under section 313(b)(2) of such Act [7 U.S.C. 940c(b)(2)] is carried out on the day before the date of the enactment of this Act [Dec. 20, 2018], until such time as any regulations necessary to carry out the amendments made by this section [enacting this section and amending sections 912, 940c, and 940c–1 of this title] are fully implemented.

"(2) Paragraph (1) shall take effect on the date of the enactment of this Act."

§940d. Repealed. Pub. L. 115–334, title VI, §6601(b), Dec. 20, 2018, 132 Stat. 4776

Section, May 20, 1936, ch. 432, title III, §314, as added Pub. L. 101–508, title I, §1201, Nov. 5, 1990, 104 Stat. 1388–7; amended Pub. L. 103–129, §2(b)(1), Nov. 1, 1993, 107 Stat. 1362; Pub. L. 103–354, title II, §235(a)(13), Oct. 13, 1994, 108 Stat. 3221, related to limitations on authorization of appropriations.

§940e. Expansion of 911 access

(a) In general

Subject to subsection (c) and such terms and conditions as the Secretary may prescribe, the Secretary may make loans under this subchapter to entities eligible to borrow from the Rural Utilities Service, State or local governments, Indian tribes (as defined in section 5304 of title 25), or other public entities for facilities and equipment to expand or improve in rural areas—

(1) 911 access;

(2) integrated interoperable emergency communications, including multiuse networks that provide critical transportation-related information services in addition to emergency communications services;

(3) homeland security communications;

(4) transportation safety communications; or

(5) location technologies used outside an urbanized area.

(b) Loan security

Government-imposed fees related to emergency communications (including State or local 911 fees) may be considered to be security for a loan under this section.

(c) Emergency communications equipment providers

The Secretary may make a loan under this section to an emergency communication equipment provider to expand or improve 911 access or other communications or technologies described in subsection (a) if the local government that has jurisdiction over the project is not allowed to acquire the debt resulting from the loan.

(d) Authorization of appropriations

The Secretary shall use to make loans under this section any funds otherwise made available for telephone loans for each of fiscal years 2008 through 2023.

(May 20, 1936, ch. 432, title III, §315, as added Pub. L. 107–171, title VI, §6102, May 13, 2002, 116 Stat. 415; amended Pub. L. 110–234, title VI, §6107, May 22, 2008, 122 Stat. 1198; Pub. L. 110–246, §4(a), title VI, §6107, June 18, 2008, 122 Stat. 1664, 1959; Pub. L. 113–79, title VI, §6103, Feb. 7, 2014, 128 Stat. 851; Pub. L. 115–334, title VI, §6506, Dec. 20, 2018, 132 Stat. 4775.)

Editorial Notes

Codification

Pub. L. 110–234 and Pub. L. 110–246 made identical amendments to this section. The amendments by Pub. L. 110–234 were repealed by section 4(a) of Pub. L. 110–246.

Amendments

2018—Subsec. (a)(2). Pub. L. 115–334, §6506(1), substituted "critical transportation-related" for "commercial or transportation".

Subsec. (d). Pub. L. 115–334, §6506(2), substituted "2023" for "2018".

2014—Subsec. (d). Pub. L. 113–79 substituted "2018" for "2012".

2008—Pub. L. 110–246, §6107, amended section generally, substituting provisions relating to expansion of access, loan security, emergency communications equipment providers, and authorization of appropriations, consisting of subsecs. (a) to (d), for provisions relating to expansion of access and authorization of appropriations, consisting of subsecs. (a) and (b).

Statutory Notes and Related Subsidiaries

Effective Date of 2008 Amendment

Amendment of this section and repeal of Pub. L. 110–234 by Pub. L. 110–246 effective May 22, 2008, the date of enactment of Pub. L. 110–234, see section 4 of Pub. L. 110–246, set out as an Effective Date note under section 8701 of this title.

§940f. Extension of period of existing guarantee

(a) In general

Subject to the limitations in this section and the provisions of the Federal Credit Reform Act of 1990 [2 U.S.C. 661 et seq.], as amended, a borrower of a loan made by the Federal Financing Bank and guaranteed under this chapter may request an extension of the final maturity of the outstanding principal balance of such loan or any loan advance thereunder. If the Secretary and the Federal Financing Bank approve such an extension, then the period of the existing guarantee shall also be considered extended.

(b) Limitations

(1) Feasibility and security

Extensions under this section shall not be made unless the Secretary first finds and certifies that, after giving effect to the extension, in his judgment the security for all loans to the borrower made or guaranteed under this chapter is reasonably adequate and that all such loans will be repaid within the time agreed.

(2) Extension of useful life or collateral

Extensions under this section shall not be granted unless the borrower first submits with its request either—

(A) evidence satisfactory to the Secretary that a Federal or State agency with jurisdiction and expertise has made an official determination, such as through a licensing proceeding, extending the useful life of a generating plant or transmission line pledged as collateral to or beyond the new final maturity date being requested by the borrower, or

(B) a certificate from an independent licensed engineer concluding, on the basis of a thorough engineering analysis satisfactory to the Secretary, that the useful life of the generating plant or transmission line pledged as collateral extends to or beyond the new final maturity date being requested by the borrower.

(3) Amount eligible for extension

Extensions under this section shall not be granted if the principal balance extended exceeds the appraised value of the generating plant or transmission line referred to in subsection paragraph (2).

(4) Period of extension

Extensions under this section shall in no case result in a final maturity greater than 55 years from the time of original disbursement and shall in no case result in a final maturity greater than the useful life of the plant.

(5) Number of extensions

Extensions under this section shall not be granted more than once per loan advance.

(c) Fees

(1) In general

A borrower that receives an extension under this section shall pay a fee to the Secretary which shall be credited to the Rural Electrification and Telecommunications Loans Program account. Such fees shall remain available without fiscal year limitation to pay the modification costs for extensions.

(2) Amount

The amount of the fee paid shall be equal to the modification cost, calculated in accordance with section 502 of the Federal Credit Reform Act of 1990 [2 U.S.C. 661a], as amended, of such extension.

(3) Payment

The borrower shall pay the fee required under this section at the time the existing guarantee is extended by making a payment in the amount of the required fee.

(May 20, 1936, ch. 432, title III, §316, as added Pub. L. 109–97, title VII, §774, Nov. 10, 2005, 119 Stat. 2160.)

Editorial Notes

References in Text

The Federal Credit Reform Act of 1990, referred to in subsec. (a), is title V of Pub. L. 93–344, as added by Pub. L. 101–508, title XIII, §13201(a), Nov. 5, 1990, 104 Stat. 1388–609, which is classified generally to subchapter III (§661 et seq.) of chapter 17A of Title 2, The Congress. For complete classification of this Act to the Code, see Short Title note set out under section 621 of Title 2 and Tables.

§940g. Electric loans for renewable energy

(a) Definition of renewable energy source

In this section, the term "renewable energy source" means an energy conversion system fueled from a solar, wind, hydropower, biomass, or geothermal source of energy.

(b) Loans

In addition to any other funds or authorities otherwise made available under this chapter, the Secretary may make electric loans under this subchapter for electric generation from renewable energy resources for resale to rural and nonrural residents.

(c) Rate

The rate of a loan under this section shall be equal to the average tax-exempt municipal bond rate of similar maturities.

(May 20, 1936, ch. 432, title III, §317, as added Pub. L. 110–234, title VI, §6108, May 22, 2008, 122 Stat. 1198, and Pub. L. 110–246, §4(a), title VI, §6108, June 18, 2008, 122 Stat. 1664, 1959.)

Editorial Notes

Codification

Pub. L. 110–234 and Pub. L. 110–246 enacted identical sections. Pub. L. 110–234 was repealed by section 4(a) of Pub. L. 110–246.

Statutory Notes and Related Subsidiaries

Effective Date

Enactment of this section and repeal of Pub. L. 110–234 by Pub. L. 110–246 effective May 22, 2008, the date of enactment of Pub. L. 110–234, see section 4 of Pub. L. 110–246, set out as a note under section 8701 of this title.

§940h. Bonding requirements

The Secretary shall review the bonding requirements for all programs administered by the Rural Utilities Service under this chapter to ensure that bonds are not required if—

(1) the interests of the Secretary are adequately protected by product warranties; or

(2) the costs or conditions associated with a bond exceed the benefit of the bond.

(May 20, 1936, ch. 432, title III, §318, as added Pub. L. 110–234, title VI, §6109, May 22, 2008, 122 Stat. 1198, and Pub. L. 110–246, §4(a), title VI, §6109, June 18, 2008, 122 Stat. 1664, 1960.)

Editorial Notes

Codification

Pub. L. 110–234 and Pub. L. 110–246 enacted identical sections. Pub. L. 110–234 was repealed by section 4(a) of Pub. L. 110–246.

Statutory Notes and Related Subsidiaries

Effective Date

Enactment of this section and repeal of Pub. L. 110–234 by Pub. L. 110–246 effective May 22, 2008, the date of enactment of Pub. L. 110–234, see section 4 of Pub. L. 110–246, set out as a note under section 8701 of this title.

§940i. Cybersecurity and grid security improvements

(a) Definition of cybersecurity and grid security improvements

In this section, the term "cybersecurity and grid security improvements" means investment in the development, expansion, and modernization of rural utility infrastructure that addresses known cybersecurity and grid security risks.

(b) Loans and loan guarantees

The Secretary may make or guarantee loans under this subchapter and subchapter I for cybersecurity and grid security improvements.

(May 20, 1936, ch. 432, title III, §319, as added Pub. L. 115–334, title VI, §6507, Dec. 20, 2018, 132 Stat. 4775.)