[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3559 Introduced in House (IH)]







104th CONGRESS
  2d Session
                                H. R. 3559

To amend the Internal Revenue Code of 1986 to provide a deduction for a 
    portion of the fiscal year 1996 transitional payment under the 
 Agricultural Market Transition Act which is deposited into a reserve 
                      against future farm losses.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 30, 1996

Mr. Nethercutt (for himself and Mr. Hastings of Washington) introduced 
  the following bill; which was referred to the Committee on Ways and 
                                 Means

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to provide a deduction for a 
    portion of the fiscal year 1996 transitional payment under the 
 Agricultural Market Transition Act which is deposited into a reserve 
                      against future farm losses.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. DEDUCTION FOR TRANSITION PAYMENT DEPOSITED INTO AGRICULTURAL 
              MARKET TRANSITION RESERVE.

    (a) In General.--Subpart C of part II of subchapter E of chapter 1 
of the Internal Revenue Code of 1986 (relating to taxable year in which 
deductions taken) is amended by inserting after section 468B the 
following new section:

``SEC. 468C. AGRICULTURAL MARKET TRANSITION RESERVE.

    ``(a) In General.--At the election of the taxpayer, there shall be 
allowed as a deduction for the taxable year in which the taxpayer 
receives the first-year agricultural market transition payment an 
amount equal to the amount paid by the taxpayer during such taxable 
year to the Agricultural Market Transition Reserve (hereinafter 
referred to as the `Reserve') of the taxpayer.
    ``(b) Limitation on Amount Paid Into Reserve.--
            ``(1) In general.--The amount which a taxpayer may pay into 
        the Reserve shall not exceed the lesser of--
                    ``(A) $40,000, or
                    ``(B) the amount of the first-year agricultural 
                market transition payment.
            ``(2) First-year agricultural market transition payment.--
        For purposes of this section, the first-year agricultural 
        market transition payment is the amount received by the 
        taxpayer under section 1103 of the Agricultural Market 
        Transition Act for the first fiscal year the taxpayer 
        participates in the program under such section.
            ``(3) Special rule for partnerships, etc.--In the case of a 
        partnership, the limitation under this subsection shall be 
        applied at the partner level and not at the partnership level. 
        A similar rule shall apply to S corporations.
    ``(c) Inclusion of Amounts Distributed.--There shall be includible 
in the gross income of the taxpayer for any taxable year--
            ``(1) any amount distributed from the Reserve during such 
        taxable year, and
            ``(2) any deemed distribution under subsection (e).
    ``(d) Agricultural Market Transition Reserve.--
            ``(1) In general.--For purposes of this section, the term 
        `Agricultural Market Transition Reserve' means a reserve 
        established by the taxpayer for purposes of this section.
            ``(2) Reserve exempt from taxation.--Any Agricultural 
        Market Transition Reserve is exempt from taxation under this 
        subtitle unless such Reserve has ceased to be an Agricultural 
        Market Transition Reserve by reason of subsection (e). 
        Notwithstanding the preceding sentence, any such Reserve shall 
        be subject to the taxes imposed by section 511 (relating to 
        imposition of tax on unrelated business income of charitable, 
        etc. organizations).
            ``(3) Contributions to reserve.--The Reserve shall not 
        accept any payments (or other amounts) other than payments with 
        respect to which a deduction is allowable under subsection (a).
            ``(4) Prohibitions against self-dealing.--Under regulations 
        prescribed by the Secretary, for purposes of section 4951 (and 
        so much of this title as relates to such section), the Reserve 
        shall be treated in the same manner as a trust described in 
        section 501(c)(21).
    ``(e) Deemed Distributions.--
            ``(1) Disqualification of reserve for self-dealing.--In any 
        case in which a Reserve violates any provision of this section 
        or section 4951, the Secretary may disqualify such Reserve from 
        the application of this section. In any case to which this 
        paragraph applies, the Reserve shall be treated as having 
        distributed all of its funds on the date such determination 
        takes effect.
            ``(2) Termination.--A Reserve shall be treated as having 
        distributed all of its funds on the date which is 10 years 
        after the date such Reserve was established.
    ``(f) Time When Payments Deemed Made.--For purposes of this 
section, a taxpayer shall be deemed to have made a payment to the 
Reserve on the last day of a taxable year if such payment is made on 
account of such taxable year and is made within 2\1/2\ months after the 
close of such taxable year.''
    (b) Clerical Amendment.--The table of sections for subpart C of 
part II of subchapter E of chapter 1 of such Code is amended by 
inserting after the item relating to section 468B the following new 
item:

                              ``Sec. 468C. Agricultural Market 
                                        Transition Reserve.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.
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