[Code of Federal Regulations]
[Title 7, Volume 11]
[Revised as of January 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1703.21]

[Page 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. 1703.21  Limitations on the use of zero-interest loan and grant funds.

    (a) A borrower may not charge interest for the use of the proceeds 
of the zero-interest loan provided under this program; however, it may 
charge reasonable loan servicing charges, reasonable legal fees involved 
in providing the RUS funds to the recipient, and the amount paid for an 
irrevocable letter of credit made payable to RUS and issued on behalf of 
the borrower that guarantees repayment of an RUS zero-interest loan, all 
as determined by the Administrator. A borrower may require the recipient 
of a pass-through-loan to provide and/or obtain adequate security for 
the zero-interest loan funds.
    (b) A borrower must calculate any costs to charge in connection with 
the use of grant funds under this program for the project and must 
temporarily deposit the grant funds in accordance with 7 CFR parts 3015, 
Uniform Federal Assistance Regulations, and 3016, Uniform Administrative 
Requirements for Grants and Cooperative Agreements to State and Local 
Governments, as appropriate. Grant funds will be disbursed to the 
Borrower in accordance with Sec. 1703.61(b).
    (c) A borrower may not make a profit from any zero-interest loan or 
grant provided from the subaccount, with the exception of the $500 
interest income exclusion in paragraph (d) of this section.
    (d) The Borrower may not requisition zero-interest loan funds unless 
those funds are deposited into the Borrower's RUS construction fund 
trustee account. The Borrower will be required to set up a separate 
Federally insured account called the Rural Economic Development Account, 
if loan funds are not expected to be disbursed within two months after 
receipt from RUS. All interest earned on temporarily deposited zero-
interest loan funds in excess of $500 per 12-month period must be used 
for approved purposes or returned to RUS. Interest earned in excess of 
$500 per 12 month period and returned to RUS will not be used to reduce 
the Borrower's principal indebtedness. Grant funds will be disbursed by 
RUS in accordance with 7 CFR parts 3015 and 3016, and Sec. 1703.61(b).
    (e) The borrower may not condition the receipt of the proceeds of a 
zero-interest loan or grant under this subpart with the requirement that 
the recipient take electric or telephone service from the borrower.

[57 FR 44317, Sept. 25, 1992, as amended at 59 FR 11708, Mar. 14, 1994]