109th CONGRESS
2nd Session
S.2187
IN THE SENATE OF THE UNITED STATES
JANUARY 25, 2006
Mr. ISAKSON introduced the following bill; which was referred to the Committee on Finance
A BILL
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) SHORT TITLE- This Act may be cited as the Paul Coverdell Homestead Open Space Preservation and Conservation Act of 2006'.
(b) AMENDMENT OF 1986 CODE- Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.
SEC. 2. FINDINGS AND PURPOSE.
(a) FINDINGS- Congress finds the following:
(1) Tax and economic policies have for a sustained period of time inadvertently created financial difficulties for our Nation's farming and ranching families that, among other negative impacts, has forced a significant number of them to liquidate their land holdings.
(2) This has particularly been the case in areas surrounding growing urban centers and resort destinations.
(3) This has fragmented many of our Nation's large landscapes and disrupted many communities that historically derived their cultural and economic identities from the land.
(4) The impact of this has been to deprive many areas of open green space, which in turn has not only negatively affected our human settlements through the resulting sprawl, but has also dramatically reduced the amount of sustaining habitat for our natural communities of plants and animals.
(b) PURPOSE- The purpose of this Act is to provide an economic mechanism that will restore and conserve our Nation's natural estate in the form of forests, farms, ranches, and wetlands while protecting our waterways and our forests and open space in a manner that keeps them subject to private ownership and supportive of our surviving but threatened natural communities of plants and animals.
SEC. 3. QUALIFIED CONSERVATION CREDIT.
(a) IN GENERAL- Subpart B of part IV of subchapter A of chapter 1 (relating to other credits) is amended by adding at the end the following new section:
SEC. 30B. QUALIFIED CONSERVATION CREDIT.
(a) GENERAL RULE- There shall be allowed as a credit against the tax imposed by this chapter, in the case of a qualified conservation organization, the amount of the taxpayer's qualified conservation expenditures for the taxable year.
(b) QUALIFIED CONSERVATION EXPENDITURES- For purposes of this section--
(1) IN GENERAL- The term qualified conservation expenditures' means the sum of the qualified conservation organization's--
(A) acquisition costs, plus
(B) reserve funds.
(2) ACQUISITION COSTS- The term acquisition costs' means the sum of--
(A) the lesser of--
(i) the total of the amounts that a qualified conservation organization paid during the taxable year to acquire qualified real property interests exclusively for conservation purposes, or
(ii) the aggregate appraised value of the qualified real property interests referred to in clause (i), plus
(B) so much of the transaction costs reasonably incurred during the taxable year in connection with the acquisition of qualified real property interests as do not exceed 2 percent of the amount determined in subparagraph (A).
(3) RESERVE FUNDS-
(A) IN GENERAL- The term reserve funds' means amounts permanently set aside by a qualified conservation organization as an endowment to fund the future costs of enforcing and maintaining qualified real property interests acquired by the qualified conservation organization exclusively for conservation purposes.
(B) ENDOWMENT- The term endowment' means a restricted fund held in a segregated account, the income and realized appreciation of which may be expended solely for the purposes designated under this section, and which may be invested solely in qualified investments (as defined in section 501(c)(21)(D)(ii)).
(C) LIMITATION- The amount of reserve funds which may be taken into account under paragraph (1)(B) for the taxable year shall not exceed 8 percent of the acquisition costs for that taxable year.
(c) QUALIFIED CONSERVATION ORGANIZATION- For purposes of this section, the term qualified conservation organization' means, with respect to any taxable year--
(1) an organization which--
(A) is described in section 170(h)(3),
(B) has been in existence for at least 2 calendar years immediately before the taxable year, and
(C) was organized to serve primarily conservation purposes (as defined in section 170(h)(4)),
(2) a limited partnership, all the general partners of which are organizations described in paragraph (1), or
(3) a limited liability company, all the managers of which are organizations described in paragraph (1),
with respect to which neither the seller of the qualified real property interest nor any party related or subordinate to the seller (within the meaning of section 672(c)) would be a disqualified person (as defined in section 4946) if the organization were a private foundation.
(d) QUALIFIED REAL PROPERTY INTEREST- For purposes of this section, the term qualified real property interest' has the meaning given such term by section 170(h)(2)(C).
(e) EXCLUSIVELY FOR CONSERVATION PURPOSES- For purposes of this section, the term exclusively for conservation purposes' has the meaning given such term by section 170(h)(5), except that an acquisition shall not be treated as exclusively for conservation purposes unless the instrument conveying the qualified real property interest expressly provides that the conservation purposes may be enforced by both the attorney general of the State in which the real property is located and the qualified conservation organization.
(f) APPRAISED VALUE- For purposes of this section, the term appraised value' means the fair market value as determined by a qualified appraisal (as defined in section 155(a)(4) of the Deficit Reduction Act of 1984).
(g) LIMITATION BASED ON AMOUNT OF TAX- The credit allowed under subsection (a) shall not exceed the taxpayer's liability for income tax (including unrelated business income tax) for the taxable year.
(h) LIMITATION ON AGGREGATE CREDIT ALLOWABLE WITH RESPECT TO ACQUISITIONS OF QUALIFIED REAL PROPERTY INTERESTS LOCATED IN A STATE-
(1) CREDIT MAY NOT EXCEED CREDIT AMOUNT ALLOCATED TO ACQUISITION OF QUALIFIED REAL PROPERTY INTEREST-
(A) IN GENERAL- The amount of the credit determined under subsection (a) for any taxable year with respect to the acquisition of any qualified real property interest shall not exceed the conservation credit dollar amount allocated to such acquisition under this subsection.
(B) TIME FOR MAKING ALLOCATION- An allocation shall be taken into account under subparagraph (A) only if it is made not later than the close of the calendar year in which the qualified real property interest is acquired.
(C) ALLOCATION REDUCES AGGREGATE AMOUNT AVAILABLE TO AGENCY- Any conservation credit dollar amount allocated to the acquisition of any qualified real property interest for any calendar year shall reduce the aggregate conservation credit dollar amount of the allocating conservation credit agency for such calendar year.
(2) CONSERVATION CREDIT DOLLAR AMOUNT FOR AGENCIES-
(A) IN GENERAL- The aggregate conservation credit dollar amount which a conservation credit agency may allocate for any calendar year is the portion of the State conservation credit ceiling allocated under this paragraph for such calendar year to such agency.
(B) STATE CEILING INITIALLY ALLOCATED TO STATE CONSERVATION CREDIT AGENCIES- Except as provided in subparagraphs (F) and (G), the State conservation credit ceiling for each calendar year shall be allocated to the conservation credit agency of such State. If there is more than 1 conservation credit agency of a State, all such agencies shall be treated as a single agency.
(C) STATE CONSERVATION CREDIT CEILING- The State conservation credit ceiling applicable to any State for any calendar year shall be an amount equal to the sum of--
(i) the lesser of--
(I) an amount equal to the aggregate annual credit multiplied by a fraction, the numerator of which is the amount of land located in such State that is either used for agricultural purposes or constitutes private forest land and the denominator of which is the amount of land in all States that is either used for agricultural purposes or constitutes private forest land, or
(II) an amount equal to 4 percent of the aggregate annual credit for that year,
(ii) the amount (if any) allocated under subparagraph (D) to such State by the Secretary,
(iii) the unused State conservation credit ceiling (if any) of such State for the preceding calendar year,
(iv) the amount of the State conservation credit ceiling returned in the calendar year, plus
(v) the amount (if any) allocated under subparagraph (e) to such state by the Secretary.
For purposes of clause (i), the aggregate annual credit is determined in accordance with the following table:
| For the calendar year ending: | The aggregate annual credit is: |
| December 31, 2006 | $4,000,000,000 |
| December 31, 2007 | $4,500,000,000 |
| December 31, 2008 | $5,000,000,000 |
| December 31, 2009 | $5,500,000,000 |
| December 31, 2010 | $6,000,000,000 |
For purposes of clause (iii), the unused State conservation credit ceiling for any calendar year is the excess (if any) of the sum of the amounts described in clauses (i), (ii), and (iv) over the aggregate conservation credit dollar amount allocated for such year. For purposes of clause (iv), the amount of State conservation credit ceiling returned in the calendar year equals the conservation credit dollar amount previously allocated within the State to any proposed acquisition of a qualified real property interest which is not acquired within the period required by the terms of the allocation or to any proposed acquisition of a qualified real property interest with respect to which an allocation is canceled by mutual consent of the conservation credit agency and the qualified conservation organization receiving the allocation.
(D) UNUSED AGGREGATE ANNUAL CREDIT- Any portion of the aggregate annual credit for a calendar year that is not allocated to a State's conservation credit ceiling because of the 4 percent limitation under subparagraph (C)(i)(II) shall be allocated by the Secretary among the remaining States, subject to such 4 percent limitation, in proportion to their respective land used for agricultural purposes and private forest land.
(E) UNUSED CONSERVATION CREDIT CARRYOVERS ALLOCATED AMONG CERTAIN STATES-
(i) IN GENERAL- The unused conservation credit carryover of a State for any calendar year shall be assigned to the Secretary for allocation among qualified States for the succeeding calendar year.
(ii) UNUSED CONSERVATION CREDIT CARRYOVER- For purposes of this paragraph, the unused conservation credit carryover of a State for any calendar year is the excess (if any) of the unused State conservation credit ceiling for such year (as defined in subparagraph (C)(iii)) over the excess (if any) of--
(I) the aggregate conservation credit dollar amount allocated for such year, over
(II) the sum of the amounts described in clauses (i), (ii), and (iv) of subparagraph (C).
(iii) FORMULA FOR ALLOCATION OF UNUSED CONSERVATION CREDIT CARRYOVERS AMONG QUALIFIED STATES- The amount allocated under this subparagraph to a qualified State for any calendar year shall be the amount determined by the Secretary to bear the same ratio to the aggregate unused conservation credit carryovers of all States for the preceding calendar year as such State's land used for agricultural purposes and private forest land for the calendar year bears to the land used for agricultural purposes of all qualified States for the calendar year.
(iv) QUALIFIED STATE- For purposes of this subparagraph, the term qualified State' means, with respect to a calendar year, any State--
(I) which has adopted a statewide conservation plan designed to preserve the natural estate in the form of forests, farms, ranches, and wetlands located within the boundaries of that State,
(II) which allocated its entire State conservation credit ceiling for the preceding calendar year, and
(III) for which a request is made (not later than May 1 of the calendar year) to receive an allocation under clause (iii).
(F) SPECIAL RULE FOR STATES WITH CONSTITUTIONAL HOME RULE CITIES- For purposes of this subsection--
(i) IN GENERAL- The aggregate conservation credit dollar amount for any constitutional home rule city for any calendar year shall be an amount which bears the same ratio to the State conservation credit ceiling for such calendar year as--
(I) the land used for agricultural purposes and private forest land within a 25-mile radius of such city, bears to
(II) the land used for agricultural purposes and private forest land in the entire State.
(ii) COORDINATION WITH OTHER ALLOCATIONS- In the case of any state which contains 1 or more constitutional home rule cities, for purposes of applying this paragraph with respect to conservation credit agencies in such State other than constitutional home rule cities, the State conservation credit ceiling for any calendar year shall be reduced by the aggregate conservation credit dollar amounts determined for such year for all constitutional home rule cities in such State.
(iii) CONSTITUTIONAL HOME RULE CITY- For purposes of this subparagraph, the term constitutional home rule city' has the meaning given such term by section 146(d)(3)(C).
(G) STATE MAY PROVIDE FOR DIFFERENT ALLOCATION- Rules similar to the rules of section 146(e) (other than paragraph (2)(B) thereof) shall apply for purposes of this paragraph.
(H) LAND USED FOR AGRICULTURAL PURPOSES AND PRIVATE FOREST LAND- For purposes of this paragraph--
(i) LAND USED FOR AGRICULTURAL PURPOSES- The term land used for agricultural purposes' means the number of acres classified as land in farms in the 1997 Census of Agriculture conducted by the United States Department of Agriculture.
(ii) PRIVATE FOREST LAND- The term private forest land' means the number of acres classified as private forest land in the 1997 Forest Inventory and Analysis conducted by the United States Forest Service, excluding any acres so classified therein that are also included as land in farms in the 1997 Census of Agriculture described in clause (i).
(I) SECRETARY- For purposes of this paragraph, the term Secretary' means the Secretary of Agriculture and the Secretary of the Interior, acting pursuant to jointly established rules and procedures.
(3) SPECIAL RULES-
(A) INTERESTS MUST BE LOCATED WITHIN JURISDICTION OF CREDIT AGENCY- A conservation credit agency may allocate its aggregate conservation credit dollar amount only with respect to acquisitions of qualified real property interests located in the jurisdiction of the governmental unit of which such agency is a part.
(B) AGENCY ALLOCATIONS IN EXCESS OF LIMIT- If the aggregate conservation credit dollar amounts allocated by a conservation credit agency for any calendar year exceed the portion of the State conservation credit ceiling allocated to such agency for such calendar year, the conservation credit dollar amounts so allocated shall be reduced (to the extent of such excess) for acquisitions of qualified real property interests in the reverse order in which the allocations of such amounts were made.
(4) CONSERVATION CREDIT AGENCY- For purposes of this subsection, the term conservation credit agency' means any agency authorized to carry out this subsection.
(i) REGULATIONS- Except as provided in subsection (h)(2)(I), the Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section.
(j) TERMINATION- Subparagraph (A) of subsection (h)(1) shall not apply to any amount allocated after December 31, 2010.'.
(b) RECOGNITION OF GAIN- Section 1001 (relating to determination of amount of and recognition of gain or loss) is amended by adding at the end the following new subsection:
(f) QUALIFIED REAL PROPERTY INTERESTS- Gain shall be recognized on the sale of a qualified real property interest (as defined in section 30B(d)) to a qualified conservation organization (as defined in section 30B(c)) exclusively for conservation purposes (as defined in section 30B(e)) only to the extent that the amount realized on the sale exceeds the taxpayer's adjusted basis in the entire property to which the qualified real property interest relates.'.
(c) BASIS ADJUSTMENT- Section 1016 (relating to adjustments to basis) is amended by redesignating subsection (e) as subsection (f) and by inserting after subsection (d) the following new subsection:
(e) ADJUSTMENTS TO BASIS OF CERTAIN REAL PROPERTY- If the taxpayer has sold a qualified real property interest in a transaction to which section 1001(f) applies, then the taxpayer's basis in the remaining property shall be reduced (but not below zero) by the amount realized on the sale.'.
(d) CONFORMING AMENDMENTS-
(1) PASSIVE LOSS RULES INAPPLICABLE- Section 469(d)(2)(A)(i) is amended to read as follows:
(i) subpart D (other than section 30B) of part IV of subchapter A, or'.
(2) UNRELATED BUSINESS INCOME TAX- Section 511(a)(1) is amended by striking section 11.' and inserting section 11, less any credits to which the organization is entitled under section 30B.'.
(3) DENIAL OF CHARITABLE CONTRIBUTION DEDUCTION- Section 170(e) is amended by adding at the end the following new paragraph:
(7) SPECIAL RULE FOR CONTRIBUTIONS OF INTERESTS IN QUALIFIED CONSERVATION ORGANIZATIONS- No deduction shall be allowed for the contribution of an interest in a qualified conservation organization (as defined in section 30B(c)) that has acquired 1 or more qualified real property interests in transactions to which section 30B applies.'.
(4) CLASSIFICATION AS PARTNERSHIP- Section 761(a) is amended by adding at the end the following new sentence: Such term also includes an organization described in either section 30B(c)(2) or section 30B(c)(3).'.
(5) CLERICAL AMENDMENT- The table of sections for subpart B of part IV of subchapter A of chapter 1 is amended by adding at the end the following new item:Sec. 30B. Qualified conservation credit.'.
(e) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2005.
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