§940c–1 — Title 7 Agriculture | U.S. Code

Summary

The Secretary must guarantee payment on bonds or notes sold by nonprofit cooperatives or similar lenders when the money is used to make or refinance utility infrastructure loans to a borrower who has had, or could get, a loan under this chapter. Guaranteed bonds usually run 30 years (or another term the Secretary finds right). Borrowers can repay with regular principal and interest payments, with interest-only payments and a final principal payment, or with a mix of those methods. A lender cannot get guarantees that would make its guaranteed bonds larger than its outstanding loans for those eligible purposes. The Secretary can deny a guarantee if the lender is not qualified, the bond would not be investment grade without a guarantee, or the lender has not given a certified list of approved loan amounts. Guarantees are capped at $1,000,000,000 per year. Lenders must pay an annual fee equal to 30 basis points (0.30%) of the unpaid principal, paid twice a year. The Secretary may set the payment schedule to cover subsidy costs. Fees go into the rural economic development account and are used as that account requires. Guarantees cover the full amount owed (including interest and call premiums), can be transferred, and are backed by the United States government. The Secretary may limit guarantees to 5 per year. The department’s general counsel can give a legal opinion on a guarantee if asked. Money as needed is authorized. If appropriations are too small, the Secretary may use up to one-third of collected fees to cover costs before putting the rest into the rural account. The authority for these guarantees ends on September 30, 2023.

Title 7, §940c–1

Agriculture — Source: USLM XML via OLRC

(a)(1)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)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)(1)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)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)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)(1)A lender that receives a guarantee issued under this section on a bond or note shall pay a fee to the Secretary.

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

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

(B)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)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 section 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)(1)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)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)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)(1)There are authorized to be appropriated such sums as are necessary to carry out this section.

(2)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 ⅓ 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 section 940c(b)(2) and 940c–2(f) of this title.

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

Notes & Related Subsidiaries

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 section 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 section 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 AmendmentAmendment 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–1 Guarantees for bonds and notes issued for electrification or telephone purposes

Summary

Title 7, §940c–1

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