[Code of Federal Regulations]
[Title 7, Volume 11]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1703.20]

[Page 31-32]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 1703--RURAL DEVELOPMENT--Table of Contents
 
      Subpart B--Rural Economic Development Loan and Grant Program
 
Sec. 1703.20  Ineligible uses of zero-interest loans and grants.

    (a) Zero-interest loans and grants must not be used:
    (1) To fund or assist projects of which any director, officer, 
general manager or significant stockholder of the Borrower, or close 
relative thereof, is an owner, stockholder, partner or director, or 
which would, in the judgment of the Administrator, create a conflict of 
interest or the appearance of a conflict of interest. The Borrower must 
disclose to the Administrator information regarding any conflict of 
interest, potential conflict of interest or any appearance of a conflict 
of interest. The Administrator will determine whether there is a 
conflict of interest or whether any potential conflict of interest or 
appearance of a conflict of interest may adversely affect RUS's 
interests. A Borrower organized as, or consisting of a cooperative, 
widely held mutual corporation, tribal government, municipal power 
corporation, public power district, or a similar widely held 
organization would ordinarily be able to have an ownership interest in 
or manage a project operated on either a for-profit or non-profit basis. 
A Borrower organized as a closely held, for-profit corporation with more 
than 5 percent of its stock held by one legal person, its subsidiary or 
an affiliate, would ordinarily be able to own or manage a project 
operated on a non-profit basis only;
    (2) For any costs incurred on the project:
    (i) Prior to receipt of the Borrower's completed application by RUS 
during an application period unless the Administrator has specifically 
approved such usage in writing; or
    (ii) For site development, the destruction or alteration of 
buildings, or other activities that would adversely affect the 
environment or limit the choice of reasonable alternatives prior to 
satisfying the requirements of Sec. 1703.32;
    (3) By the Borrower to purchase or lease any real property, 
materials, equipment, or services from its subsidiary, an affiliate, or 
significant stockholders, officers, managers or directors of the 
Borrower, or close relatives thereof, where the purchase or lease has 
not been fully disclosed to the Administrator and received the 
Administrator's prior written approval;
    (4) By the recipient of a pass-through-loan or pass-through-grant to 
purchase or lease any real property, materials, equipment, or services 
from the Borrower, its subsidiary, an affiliate of the Borrower, or 
significant stockholders, officers, managers or directors of the 
Borrower, or close relatives thereof, where the purchase or lease has 
not been fully disclosed to the Administrator and received the 
Administrator's prior written approval;
    (5) To pay off or refinance existing indebtedness incurred prior to 
receipt of the Borrower's completed application by RUS or for 
refinancing or repaying a loan made under the Act or a program 
administered by the Administrator;
    (6) For any electric or telephone purpose, as determined by the 
Administrator;
    (7) For the Borrower's electric or telephone operations or for any 
operations affiliated with the Borrower unless the Administrator has 
specifically informed the Borrower in writing that the operations are 
part of the approved purposes;

[[Page 32]]

    (8) To pay the salaries of any employee or owner of the Borrower, 
its subsidiaries, or affiliates. This restriction does not prohibit the 
use of loan or grant funds for printing and similar costs for project 
feasibility studies it has prepared, commissioned or purchased if 
specifically approved by the Administrator. This restriction is subject 
to the operating expense allowance for revolving loan funds set forth in 
Sec. 1703.22 (a)(6);
    (9) To fund feasibility studies and technical assistance as set 
forth in Sec. 1703.18 independently of projects which are funded under 
the zero-interest loan and grant program;
    (10) For community antenna television systems or facilities except 
as provided in Sec. 1703.17(d) of this subpart;
    (11) For proposed projects located in areas covered by the Coastal 
Barrier Resources Act (16 U.S.C. 3501 et seq.); or
    (12) For anything other than an approved purpose.
    (b) [Reserved]

[59 FR 11707, Mar. 14, 1994, as amended at 59 FR 53930, Oct. 27, 1994]