(a) To be eligible for funding, an Applicant may be either a nonprofit or for-profit organization, and must take one of the following forms:

(1) Corporation;

(2) Limited Liability Company and Limited Liability Partnership;

(3) Cooperative or mutual organization;

(4) States or local governments, including any agency, subdivision, instrumentality, or political subdivision thereof;

(5) A territory or possession of the United States; or

(6) An Indian tribe, as defined in section 4 of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450b).

(b) Individuals and legal general partnerships that are formed with individuals are not eligible entities.

(c) Co-Applicants are not eligible entities. If two entities would like to partner with each other in delivering broadband to areas without sufficient access, then one entity must take the lead on submitting an application. Inter-company agreements can be used to account for revenues and expenses on the applicant's financial projections. However, based on the existing financial and security arrangements, the Agency may require that both, or other entities, be parties to the award documents, or guarantee the award.

To be eligible for funding assistance under the part, the Applicant must:

(a) Submit a complete application and provide all supporting documentation including unqualified, audited financial statements from the date the application is submitted as detailed in § 1740.63.

(b) Demonstrate that the project can be completely built out within five years from the date funds are first made available.

(c) Demonstrate that the project is technically feasible as detailed in § 1740.64.

(d) Demonstrate that all project costs can be fully funded or accounted for as detailed in § 1740.63.

(e) Submit documentation which enables RUS to determine that the project is financially feasible and sustainable as detailed in § 1740.61.

(f) Demonstrate that the following service requirements will be met:

(1) Facilities funded with grant funds will provide broadband service proposed in the application for the composite economic life of the facilities, as approved by RUS, or as provided in the Award Documents.

(2) Facilities funded with loan funds must provide broadband service through the amortization period of the loan.

(a) Eligible service areas. (1) Applicants must propose to provide broadband service directly to all premises in the PFSA.

(2) If any part of the applicant's PFSA is ineligible, RUS, in its sole discretion, may request that an applicant modify its application, if RUS believes the modification is feasible. Otherwise, RUS will reject the application.

(b) Ineligible service areas—(1) Overlapping service areas. RUS will not fund more than one project that serves any one given geographic area. Invariably, however, applicants will propose service areas that overlap, varying from small de minimis areas of the territory, but which may be significant with respect to households involved, to larger areas of the service territory, but which may contain few households or businesses, if any. As a result, devising a procedure that will cover every overlap circumstance is not practicable. Nevertheless, it is the agency's intent to make as many eligible applications viable for consideration as possible. That may mean the agency may:

(i) Determine the overlap to be so insignificant that no agency action is necessary;

(ii) Request one or more applications to be revised to eliminate the overlapping territory;

(iii) Choose one application over another given the amount of assistance requested, the number of awards already chosen in the area or State, or the need for the project in the specific area due to other factors; or

(iv) Simply choose the project that scores higher or in the judgement of the agency is more financially feasible.

(2) Prior funded service areas to include: (i) RUS Broadband loans. Service areas of borrowers that have RUS Broadband loans, as defined in this part, are ineligible for all other applicants, and can be found on the Agency web page for the program. However, RUS Broadband Borrowers that have built out their service areas consistent with their application and award documents, but were not required to provide, and are currently not providing, sufficient access to broadband pursuant to this regulation are eligible to apply for funding for these service areas; provided that they have not defaulted on, and have materially complied with, in the sole discretion of RUS, their prior Broadband loan award requirements. Current RUS Broadband Borrowers that have received funding to provide sufficient access to broadband but have not yet built out their system are ineligible to apply for funding for these service areas.

(ii) RUS Community Connect Grants. Service areas that received grants under the RUS Community Connect Grant Program are eligible if they do not have sufficient access to broadband, except for those grants still under construction. Service areas still under construction can be found on the Agency's web page.

(iii) RUS BIP Grants. Service areas that received a 100 percent grant under the RUS Broadband Initiatives Program are eligible if they do not have sufficient access to broadband.

(c) Service areas with other funding. (1) Applicants are encouraged to work with the Governor's office for the states, and tribal governments for the tribal areas where they are proposing to provide broadband service and submit information detailing where state funding has been provided.

(2) Service areas that have received federal grant funds, or funds from the Federal Communications Commission, to provide broadband service will be restricted from funding, if such funding is principally to construct facilities throughout the service area that provide broadband service at the threshold level of service. If additional service areas are restricted from funding, these areas will be identified in the funding opportunity announcement that opens an application window.

Award and any matching funds must be used to pay only eligible costs incurred post award, except for approved pre-application expenses. Eligible costs must be consistent with the cost principles identified in 2 CFR 200, Subpart E, Cost Principles. In addition, costs must be reasonable, allocable, and necessary to the project. Any application that proposes to use any portion of the award or matching funds for any ineligible costs may be rejected.

(a) Eligible award costs. Award funds under this part may be used to pay for the following costs:

(1) To fund the construction or improvement of facilities, including buildings and land, required to provide fixed terrestrial broadband service, including fixed wireless service, and any other facilities required for providing other services over the same facilities, such as equipment required to comply with CALEA;

(2) To fund reasonable preapplication expenses in an amount not to exceed five percent of the award. Preapplication expenses must be included in the first request for advance of award funds and will be funded with either grant or loan funds. If the funding category applied for has a grant component, then grant funds will be used for this purpose. If preapplication expenses are not included in the first request for advance of award funds, they will become an ineligible purpose; and

(3) To fund the acquisition of an existing system that does not currently provide sufficient access to broadband for upgrading that system to meet the requirements of this regulation. The cost of the acquisition is limited to 40 percent of the award amount requested. Acquisitions can be considered for 100 percent loans.

(b) Ineligible award costs. Award funds under this part may not be used for any of the following purposes:

(1) To fund operating expenses of the Awardee;

(2) To fund costs incurred prior to the date on which the application was submitted other than eligible preapplication expenses;

(3) To fund an acquisition of an affiliate, or the purchase or acquisition of any facilities or equipment of an affiliate. Note that if affiliated transactions are contemplated in the application, approval of the application does not constitute approval to enter into affiliated transactions, nor acceptance of the affiliated arrangements that conflict with the obligations under the award documents;

(4) To fund the acquisition of a system previously funded by RUS without prior written approval of RUS before an application is submitted;

(5) To fund the purchase or lease of any vehicle other than those used primarily in construction or system improvements;

(6) To fund broadband facilities leased under the terms of an operating lease or an indefeasible right of use (IRU) agreement;

(7) To fund the merger or consolidation of entities;

(8) To fund costs incurred in acquiring spectrum as part of a Federal Communication Commission (FCC) auction or in a secondary market acquisition. Spectrum that is part of a system acquisition may be considered;

(9) To fund facilities that provide mobile services;

(10) To fund facilities that provide satellite service including satellite backbone services;

(11) To fund the acquisition of a system that is providing sufficient access to broadband; or

(12) To refinance outstanding debt.