[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1299 Introduced in House (IH)]







105th CONGRESS
  1st Session
                                H. R. 1299

   To amend the Internal Revenue Code of 1986 to provide relief from 
                         estate and gift taxes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 10, 1997

 Mr. McCrery (for himself, Ms. Dunn, Mr. Herger, Mr. Christensen, and 
 Mr. Condit) 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 relief from 
                         estate and gift taxes.

    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 ``Family Business 
Protection Act of 1997''.
    (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.

                  TITLE I--RELIEF FOR ALL INDIVIDUALS

SEC. 101. UNIFIED CREDIT AGAINST ESTATE AND GIFT TAXES REPLACED WITH 
              UNIFIED EXEMPTION AMOUNT.

    (a) In General.--
            (1) Estate tax.--Part IV of subchapter A of chapter 11 is 
        amended by inserting after section 2051 the following new 
        section:

``SEC. 2052. EXEMPTION.

    ``(a) In General.--For purposes of the tax imposed by section 2001, 
the value of the taxable estate shall be determined by deducting from 
the value of the gross estate an amount equal to the excess (if any) 
of--
            ``(1) the exemption amount for the calendar year in which 
        the decedent died, over
            ``(2) the sum of--
                    ``(A) the aggregate amount allowed as an exemption 
                under section 2521 (or the corresponding provisions of 
                prior law) with respect to gifts made by the decedent 
                after December 31, 1976, and
                    ``(B) the aggregate amount of gifts made by the 
                decedent for which credit was allowed by section 2505 
                (as in effect on the day before the date of the 
                enactment of the Family Business Protection Act of 
                1997).
Gifts which are includible in the gross estate of the decedent shall 
not be taken into account in determining the amounts under paragraph 
(2).
    ``(b) Exemption Amount.--For purposes of subsection (a), the term 
`exemption amount' means the amount determined in accordance with the 
following table:

        ``In the case of
                                                          The exemption
          calendar year:
                                                             amount is:
                  1998...............................         $680,000 
                  1999...............................         $760,000 
                  2000...............................         $840,000 
                  2001...............................         $920,000 
                  2002 or thereafter.................       $1,000,000.
    ``(c) Cost-of-Living Adjustments.--In the case of any decedent 
dying in a calendar year after 2002, the $1,000,000 amount set forth in 
subsection (b) shall be increased by an amount equal to--
            ``(1) $1,000,000, multiplied by
            ``(2) the cost-of-living adjustment determined under 
        section 1(f)(3) for such calendar year by substituting 
        `calendar year 2001' for `calendar year 1992' in subparagraph 
        (B) thereof.
If any amount as adjusted under the preceding sentence is not a 
multiple of $10,000, such amount shall be rounded to the nearest 
multiple of $10,000.''
            (2) Gift tax.--Subchapter C of chapter 12 (relating to 
        deductions) is amended by inserting before section 2522 the 
        following new section:

``SEC. 2521. EXEMPTION.

    ``(a) In General.--In computing taxable gifts for any calendar 
year, there shall be allowed as a deduction in the case of a citizen or 
resident of the United States an amount equal to the excess of--
            ``(1) the exemption amount determined under section 2052 
        for such calendar year, over
            ``(2) the sum of--
                    ``(A) the aggregate amount allowed as an exemption 
                under this section (or the corresponding provisions of 
                prior law) for all preceding calendar periods, and
                    ``(B) the aggregate amount of gifts for which 
                credit was allowed by section 2505 (as in effect on the 
                day before the date of the enactment of the Family 
                Business Protection Act of 1997).''
    (b) Repeal of Unified Credits.--
            (1) Section 2010 (relating to unified credit against estate 
        tax) is hereby repealed.
            (2) Section 2505 (relating to unified credit against gift 
        tax) is hereby repealed.
    (c) Conforming Amendments.--
            (1) Subsection (b) of section 2001 is amended by adding at 
        the end the following new sentence: ``For purposes of paragraph 
        (2), the amount of the tax payable under chapter 12 shall be 
        determined without regard to the credit provided by section 
        2505 (as in effect on the day before the date of the enactment 
        of the Family Business Protection Act of 1997).''
            (2) Paragraph (2) of section 2001(c) is amended to read as 
        follows:
            ``(2) Phaseout of graduated rates.--The amount of the tax 
        determined under paragraph (1) shall be increased by 5 percent 
        of so much of the taxable estate as exceeds $10,000,000 but 
        does not exceed the amount at which the average tax rate under 
        this section is 55 percent.''
            (3) Subsection (f) of section 2011 is amended by striking 
        ``, reduced by the amount of the unified credit provided by 
        section 2010''.
            (4) Subsection (a) of section 2012 is amended by striking 
        ``and the unified credit provided by section 2010''.
            (5) Subsection (b) of section 2013 is amended by inserting 
        before the period at the end of the first sentence ``and 
        increased by the exemption allowed under section 2052 or 
        2106(a)(4) (or the corresponding provisions of prior law) in 
        determining the taxable estate of the transferor for purposes 
        of the estate tax''.
            (6) Subparagraph (A) of section 2013(c)(1) is amended by 
        striking ``2010,''.
            (7) Paragraph (2) of section 2014(b) is amended by striking 
        ``2010,''.
            (8) Clause (ii) of section 2056A(b)(12)(C) is amended to 
        read as follows:
                            ``(ii) to treat any reduction in the tax 
                        imposed by paragraph (1)(A) by reason of the 
                        credit allowable under section 2010 (as in 
                        effect on the day before the date of the 
                        enactment of the Family Business Protection Act 
                        of 1997) or the exemption allowable under 
                        section 2052 with respect to the decedent as 
                        such a credit or exemption (as the case may be) 
                        allowable to such surviving spouse for purposes 
                        of determining the amount of the exemption 
                        allowable under section 2521 with respect to 
                        taxable gifts made by the surviving spouse 
                        during the year in which the spouse becomes a 
                        citizen or any subsequent year,''.
            (9) Section 2102 is amended by striking subsection (c).
            (10) Subsection (a) of section 2106 is amended by adding at 
        the end the following new paragraph:
            ``(4) Exemption.--
                    ``(A) In general.--An exemption of $60,000.
                    ``(B) Residents of possessions of the united 
                states.--In the case of a decedent who is considered to 
                be a nonresident not a citizen of the United States 
                under section 2209, the exemption under this paragraph 
                shall be the greater of--
                            ``(i) $60,000, or
                            ``(ii) that proportion of $175,000 which 
                        the value of that part of the decedent's gross 
                        estate which at the time of his death is 
                        situated in the United States bears to the 
value of his entire gross estate wherever situated.
                    ``(C) Special rules.--
                            ``(i) Coordination with treaties.--To the 
                        extent required under any treaty obligation of 
                        the United States, the exemption allowed under 
                        this paragraph shall be equal to the amount 
                        which bears the same ratio to the exemption 
                        amount under section 2052 (for the calendar 
                        year in which the decedent died) as the value 
                        of the part of the decedent's gross estate 
                        which at the time of his death is situated in 
                        the United States bears to the value of his 
                        entire gross estate wherever situated. For 
                        purposes of the preceding sentence, property 
                        shall not be treated as situated in the United 
                        States if such property is exempt from the tax 
                        imposed by this subchapter under any treaty 
                        obligation of the United States.
                            ``(ii) Coordination with gift tax exemption 
                        and unified credit.--If an exemption has been 
                        allowed under section 2521 (or a credit has 
                        been allowed under section 2505 as in effect on 
                        the day before the date of the enactment of the 
                        Family Business Protection Act of 1997) with 
                        respect to any gift made by the decedent, each 
                        dollar amount contained in subparagraph (A) or 
                        (B) or the exemption amount applicable under 
                        clause (i) of this subparagraph (whichever 
                        applies) shall be reduced by the exemption so 
                        allowed under 2521 (or, in the case of such a 
                        credit, by the amount of the gift for which the 
                        credit was so allowed).''
            (11) Subsection (c) of section 2107 is amended--
                    (A) by striking paragraph (1) and by redesignating 
                paragraphs (2) and (3) as paragraphs (1) and (2), 
                respectively, and
                    (B) by striking the second sentence of paragraph 
                (2) (as so redesignated).
            (12) Section 2206 is amended by striking ``the taxable 
        estate'' in the first sentence and inserting ``the sum of the 
        taxable estate and the amount of the exemption allowed under 
        section 2052 or 2106(a)(4) in computing the taxable estate''.
            (13) Section 2207 is amended by striking ``the taxable 
        estate'' in the first sentence and inserting ``the sum of the 
        taxable estate and the amount of the exemption allowed under 
        section 2052 or 2106(a)(4) in computing the taxable estate''.
            (14) Subparagraph (B) of section 2207B(a)(1) is amended to 
        read as follows:
                    ``(B) the sum of the taxable estate and the amount 
                of the exemption allowed under section 2052 or 
                2106(a)(4) in computing the taxable estate.''
            (15) Paragraph (3) of section 2504(a) is amended to read as 
        follows:
            ``(3) the exemption (if any) allowable under section 2521 
        (or the corresponding provisions of prior law) shall be applied 
        in all computations in respect of preceding calendar periods 
        ending before January 1, 1977, or after December 31, 1997, for 
        purposes of computing the tax for any calendar year.''
            (16) Paragraph (1) of section 6018(a) is amended by 
        striking ``$600,000'' and inserting ``the exemption amount 
        under section 2052 for the calendar year which includes the 
        date of death''.
            (17) Subparagraph (A) of section 6601(j)(2) is amended to 
        read as follows:
                    ``(A) the amount of the tax which would be imposed 
                by chapter 11 on an amount of taxable estate equal to 
                the excess of $1,000,000 over the exemption amount 
                allowable under section 2052, or''.
            (18) The table of sections for part II of subchapter A of 
        chapter 11 is amended by striking the item relating to section 
        2010.
            (19) The table of sections for subchapter A of chapter 12 
        is amended by striking the item relating to section 2505.
    (d) Effective Date.--The amendments made by this section--
            (1) insofar as they relate to the tax imposed by chapter 11 
        of the Internal Revenue Code of 1986, shall apply to estates of 
        decedents dying after December 31, 1997, and
            (2) insofar as they relate to the tax imposed by chapter 12 
        of such Code, shall apply to gifts made after December 31, 
        1997.

   TITLE II--ADDITIONAL RELIEF FOR FAMILY-OWNED BUSINESSES AND FARMS

SEC. 201. FAMILY-OWNED BUSINESS EXCLUSION.

    (a) In General.--Part III of subchapter A of chapter 11 (relating 
to gross estate) is amended by inserting after section 2033 the 
following new section:

``SEC. 2033A. FAMILY-OWNED BUSINESS EXCLUSION.

    ``(a) In General.--In the case of an estate of a decedent to which 
this section applies, the value of the gross estate shall not include 
the lesser of--
            ``(1) the adjusted value of the qualified family-owned 
        business interests of the decedent otherwise includible in the 
        estate, or
            ``(2) the sum of--
                    ``(A) $1,500,000, plus
                    ``(B) 50 percent of the excess (if any) of the 
                adjusted value of such interests over $1,500,000.
    ``(b) Estates to Which Section Applies.--This section shall apply 
to an estate if--
            ``(1) the decedent was (at the date of the decedent's 
        death) a citizen or resident of the United States,
            ``(2) the sum of--
                    ``(A) the adjusted value of the qualified family-
                owned business interests which--
                            ``(i) are included in determining the value 
                        of the gross estate (without regard to this 
                        section), and
                            ``(ii) are acquired by a qualified heir 
                        from, or passed to a qualified heir from, the 
                        decedent (within the meaning of section 
                        2032A(e)(9)), plus
                    ``(B) the amount of the adjusted taxable gifts of 
                such interests from the decedent to members of the 
                decedent's family taken into account under subsection 
                2001(b)(1)(B),
        exceeds 50 percent of the adjusted gross estate, and
            ``(3) during the 8-year period ending on the date of the 
        decedent's death there have been periods aggregating 5 years or 
        more during which--
                    ``(A) such interests were owned by the decedent or 
                a member of the decedent's family, and
                    ``(B) there was active management (within the 
                meaning of section 2032A(e)(12)) by the decedent or a 
                member of the decedent's family in the operation of the 
                business to which such interests relate.
    ``(c) Adjusted Gross Estate.--For purposes of this section, the 
term `adjusted gross estate' means the value of the gross estate 
(determined without regard to this section)--
            ``(1) reduced by any amount deductible under section 
        2053(a)(4), and
            ``(2) increased by the sum of--
                    ``(A) the amount taken into account under 
                subsection (b)(2)(B), plus
                    ``(B) the amount of other gifts from the decedent 
                to the decedent's spouse (at the time of the gift) 
                within 10 years of the date of the decedent's death, 
                plus
                    ``(C) the amount of other gifts (not included under 
                subparagraph (A) or (B)) from the decedent within 3 
                years of such date.
    ``(d) Adjusted Value of the Qualified Family-Owned Business 
Interests.--For purposes of this section, the adjusted value of any 
qualified family-owned business interest is the value of such interest 
for purposes of this chapter (determined without regard to this 
section), reduced by the excess of--
            ``(1) any amount deductible under section 2053(a)(4), over
            ``(2) the sum of--
                    ``(A) any indebtedness on any qualified residence 
                of the decedent the interest on which is deductible 
                under section 163(h)(3), plus
                    ``(B) any indebtedness to the extent the taxpayer 
                establishes that the proceeds of such indebtedness were 
                used for the payment of educational and medical 
                expenses of the decedent, the decedent's spouse, or the 
                decedent's dependents (within the meaning of section 
                152), plus
                    ``(C) any indebtedness not described in 
                subparagraph (A) or (B), to the extent such 
                indebtedness does not exceed $10,000.
    ``(e) Qualified Family-Owned Business Interest.--
            ``(1) In general.--For purposes of this section, the term 
        `qualified family-owned business interest' means--
                    ``(A) an interest as a proprietor in a trade or 
                business carried on as a proprietorship, or
                    ``(B) an interest as a partner in a partnership, or 
                stock in a corporation, carrying on a trade or 
                business, if--
                            ``(i) at least--
                                    ``(I) 50 percent of such 
                                partnership or corporation is owned 
                                (directly or indirectly) by the 
                                decedent or members of the decedent's 
                                family,
                                    ``(II) 70 percent of such 
                                partnership or corporation is so owned 
                                by 2 families (including the decedent's 
                                family), or
                                    ``(III) 90 percent of such 
                                partnership or corporation is so owned 
                                by 3 families (including the decedent's 
                                family), and
                            ``(ii) at least 30 percent of such 
                        partnership or corporation is so owned by each 
                        family described in subclause (II) or (III) of 
                        clause (i).
            ``(2) Limitation.--Such term shall not include--
                    ``(A) any interest in a trade or business the 
                principal place of business of which is not located in 
                the United States,
                    ``(B) any interest in--
                            ``(i) an entity which had, or
                            ``(ii) an entity which is a member of a 
                        controlled group (as defined in section 
                        267(f)(1)) which had,
                readily tradable stock or debt on an established 
                securities market or secondary market (as defined by 
                the Secretary) within 3 years of the date of the 
                decedent's death,
                    ``(C) any interest in a trade or business not 
                described in section 542(c)(2), if more than 35 percent 
                of the adjusted ordinary gross income of such trade or 
                business for the taxable year which includes the date 
                of the decedent's death would qualify as personal 
                holding company income (as defined in section 543(a)), 
                and
                    ``(D) that portion of an interest in a trade or 
                business that is attributable to cash or marketable 
                securities, or both, in excess of the reasonably 
                expected day-to-day working capital needs of such trade 
                or business.
            ``(3) Ownership rules.--
                    ``(A) Indirect ownership.--For purposes of 
                determining indirect ownership under paragraph (1), 
                rules similar to the rules of paragraphs (2) and (3) of 
                section 447(e) shall apply.
                    ``(B) Tiered entities.--For purposes of this 
                section, if--
                            ``(i) a qualified family-owned business 
                        holds an interest in another trade or business, 
                        and
                            ``(ii) such interest would be a qualified 
                        family-owned business interest if held directly 
                        by the family (or families) holding interests 
                        in the qualified family-owned business meeting 
                        the requirements of paragraph (1)(B),
                then the value of the qualified family-owned business 
                shall include the portion attributable to the interest 
                in the other trade or business.
    ``(f) Tax Treatment of Failure To Actively Manage Business or 
Dispositions of Interests.--
            ``(1) In general.--There is imposed an additional estate 
        tax if, within 10 years after the date of the decedent's death 
        and before the date of the qualified heir's death--
                    ``(A) the qualified heir ceases to use for the 
                qualified use (within the meaning of section 
                2032A(c)(6)(B), determined by substituting `active 
                management' for `material participation' each place it 
                appears) the qualified family-owned business interest 
                which was acquired (or passed) from the decedent, or
                    ``(B) the qualified heir disposes of any portion of 
                a qualified family-owned business interest (other than 
                by a disposition to a member of the qualified heir's 
                family or through a qualified conservation contribution 
                under section 170(h)).
            ``(2) Additional estate tax.--The amount of the additional 
        estate tax imposed by paragraph (1) shall be equal to--
                    ``(A) the applicable percentage of adjusted tax 
                difference attributable to the qualified family-owned 
                business interest (as determined under rules similar to 
                the rules of section 2032A(c)(2)(B)), plus
                    ``(B) interest on the amount determined under 
                subparagraph (A) at the annual rate of 4 percent for 
                the period beginning on the date the estate tax 
                liability was due under this chapter and ending on the 
                date such additional estate tax is due.
            ``(3) Applicable percentage.--For purposes of paragraph 
        (2), the term `applicable percentage' means the percentage 
        determined in accordance with the following table for the year 
        (in the 10-year period referred to in paragraph (1)) in which 
        the recapture event occurs:

        In the case of the:
                                          The applicable percentage is:
            First 5 such years.......................   100 percent    
            6th such year............................    50 percent    
            7th such year............................    40 percent    
            8th such year............................    30 percent    
            9th such year............................    20 percent    
            10th such year...........................   10 percent.    
    ``(g) Other Definitions and Applicable Rules.--For purposes of this 
section--
            ``(1) Qualified heir.--The term `qualified heir'--
                    ``(A) has the meaning given to such term by section 
                2032A(e)(1), and
                    ``(B) includes any active employee of the trade or 
                business to which the qualified family-owned business 
                interest relates if such employee has been employed by 
                such trade or business for a period of at least 10 
                years before the date of the decedent's death.
            ``(2) Member of the family.--The term `member of the 
        family' has the meaning given to such term by section 
        447(e)(1).
            ``(3) Inflation adjustment.--In the case of estates of 
        decedents dying in a calendar year after 1997, the $1,500,000 
        amount contained in subsection (a) shall be increased each 
        place it appears by an amount equal to--
                    ``(A) $1,500,000, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for such calendar year by 
                substituting `calendar year 1996' for `calendar year 
                1992' in subparagraph (B) thereof.
        If any amount as adjusted under the preceding sentence is not a 
        multiple of $10,000, such amount shall be rounded to the 
        nearest multiple of $10,000.
            ``(4) Applicable rules.--Rules similar to the following 
        rules shall apply:
                    ``(A) Section 2032A(b)(4) (relating to decedents 
                who are retired or disabled).
                    ``(B) Section 2032A(b)(5) (relating to special 
                rules for surviving spouses).
                    ``(C) Section 2032A(c)(2)(D) (relating to partial 
                dispositions).
                    ``(D) Section 2032A(c)(3) (relating to only 1 
                additional tax imposed with respect to any 1 portion).
                    ``(E) Section 2032A(c)(4) (relating to due date).
                    ``(F) Section 2032A(c)(5) (relating to liability 
                for tax; furnishing of bond).
                    ``(G) Section 2032A(c)(7) (relating to no tax if 
                use begins within 2 years; active management by 
                eligible qualified heir treatment as material 
                participation).
                    ``(H) Section 2032A(e)(10) (relating to community 
                property).
                    ``(I) Section 2032A(e)(14) (relating to treatment 
                of replacement property acquired in section 1031 or 
                1033 transactions).
                    ``(J) Section 2032A(f) (relating to statute of 
                limitations).
                    ``(K) Section 6166(b)(3) (relating to farmhouses 
                and certain other structures taken into account).
                    ``(L) Subparagraphs (B), (C), and (D) of section 
                6166(g)(1) (relating to acceleration of payment).''
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter A of chapter 11 is amended by inserting after the item 
relating to section 2033 the following new item:

                              ``Sec. 2033A. Family-owned business 
                                        exclusion.''
    (c) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying after December 31, 1996.

SEC. 202. INFLATION ADJUSTMENT OF MAXIMUM BENEFIT UNDER SPECIAL ESTATE 
              TAX VALUATION RULES FOR CERTAIN FARM, ETC., REAL 
              PROPERTY.

    (a) In General.--Paragraph (2) of section 2032A(a) (relating to 
limitation on aggregate reduction in fair market value) is amended to 
read as follows:
            ``(2) Limitation on aggregate reduction in fair market 
        value.--
                    ``(A) In general.--The aggregate decrease in the 
                value of qualified real property taken into account for 
                purposes of this chapter which results from the 
                application of paragraph (1) with respect to any 
                decedent shall not exceed $750,000.
                    ``(B) Inflation adjustment.--In the case of estates 
                of decedents dying in a calendar year after 1996, the 
                $750,000 amount set forth in subparagraph (A) shall be 
                increased by an amount equal to--
                            ``(i) $750,000, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for such 
                        calendar year by substituting `calendar year 
                        1995' for `calendar year 1992' in subparagraph 
                        (B) thereof.
                Any increase determined under the preceding sentence 
                shall be rounded to the nearest multiple of $1,000.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to estates of decedents dying after December 31, 1996.

             TITLE III--BENEFITS FOR CONSERVATION EASEMENTS

SEC. 301. TREATMENT OF LAND SUBJECT TO A QUALIFIED CONSERVATION 
              EASEMENT.

    (a) Estate Tax With Respect to Land Subject to a Qualified 
Conservation Easement.--Section 2031 (relating to the definition of 
gross estate) is amended by redesignating subsection (c) as subsection 
(d) and by inserting after subsection (b) the following new subsection:
    ``(c) Estate Tax With Respect to Land Subject to a Qualified 
Conservation Easement.--
            ``(1) In general.--If the executor makes the election 
        described in paragraph (4), then, except as otherwise provided 
        in this subsection, there shall be excluded from the gross 
        estate the value of land subject to a qualified conservation 
        easement.
            ``(2) Treatment of certain indebtedness.--
                    ``(A) In general.--The exclusion provided in 
                paragraph (1) shall not apply to the extent that the 
                land is debt-financed property.
                    ``(B) Definitions.--For purposes of this 
                paragraph--
                            ``(i) Debt-financed property.--The term 
                        `debt-financed property' means any property 
                        with respect to which there is an acquisition 
                        indebtedness (as defined in clause (ii)) on the 
                        date of the decedent's death.
                            ``(ii) Acquisition indebtedness.--The term 
                        `acquisition indebtedness' means, with respect 
                        to debt-financed property, the unpaid amount 
                        of--
                                    ``(I) the indebtedness incurred by 
                                the donor in acquiring such property,
                                    ``(II) the indebtedness incurred 
                                before the acquisition of such property 
                                if such indebtedness would not have 
                                been incurred but for such acquisition.
                                    ``(III) the indebtedness incurred 
                                after the acquisition of such property 
                                if such indebtedness would not have 
                                been incurred but for such acquisition 
                                and the incurrence of such indebtedness 
                                was reasonably foreseeable at the time 
                                of such acquisition, except that 
                                indebtedness incurred after the 
                                acquisition of such property is not 
                                acquisition indebtedness if incurred to 
                                carry on activities directly related to 
                                farming, ranching, forestry, 
                                horticulture, or viticulture, and
                                    ``(IV) the extension, renewal, or 
                                refinancing of an acquisition 
                                indebtedness.
            ``(3) Treatment of retained development right.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                the value of any development right retained by the 
                donor in the conveyance of a qualified conservation 
                easement.
                    ``(B) Termination of retained development right.--
                If every person in being who has an interest (whether 
                or not in possession) in such land shall execute an 
                agreement to extinguish permanently some or all of any 
                development rights (as defined in subparagraph (D)) 
                retained by the donor on or before the date for filing 
                the return of the tax imposed by section 2001, then any 
                tax imposed by section 2001 shall be reduced 
                accordingly. Such agreement shall be filed with the 
                return of the tax imposed by section 2001. The 
                agreement shall be in such form as the Secretary shall 
                prescribe.
                    ``(C) Additional tax.--Failure to implement the 
                agreement described in subparagraph (B) within 2 years 
                of the decedent's death shall result in the imposition 
                of an additional tax in the amount of tax which would 
                have been due on the retained development rights 
                subject to such agreement. Such additional tax shall be 
                due and payable on the last day of the 6th month 
                following the end of the 2-year period.
                    ``(D) Development right defined.--For purposes of 
                this paragraph, the term `development right' means the 
                right to establish or use any structure and the land 
                immediately surrounding it for sale (other than the 
                sale of the structure as part of a sale of the entire 
                tract of land subject to the qualified conservation 
                easement), or other commercial purpose which is not 
                subordinate to and directly supportive of the activity 
                of farming, forestry, ranching, horticulture, or 
                viticulture conducted on land subject to the qualified 
                conservation easement in which such right is retained.
            ``(4) Election.--The election under this subsection shall 
        be made on the return of the tax imposed by section 2001. Such 
        an election, once made, shall be irrevocable.
            ``(5) Calculation of estate tax due.--An executor making 
        the election described in paragraph (4) shall, for purposes of 
        calculating the amount of tax imposed by section 2001, include 
        the value of any development right (as defined in paragraph 
        (3)) retained by the donor in the conveyance of such qualified 
        conservation easement. The computation of tax on any retained 
        development right prescribed in this paragraph shall be done in 
        such manner and on such forms as the Secretary shall prescribe.
            ``(6) Definitions.--For purposes of this subsection--
                    ``(A) Land subject to a qualified conservation 
                easement.--The term `land subject to a qualified 
                conservation easement' means land--
                            ``(i) which is located in or within 50 
                        miles of an area which, on the date of the 
                        decedent's death, is--
                                    ``(I) a metropolitan area (as 
                                defined by the Office of Management and 
                                Budget), or
                                    ``(II) a National Park or 
                                wilderness area designated as part of 
                                the National Wilderness Preservation 
                                System (unless it is determined by the 
                                Secretary that land in or within 50 
                                miles of such a park or wilderness area 
                                is not under significant development 
                                pressure),
                            ``(ii) which was owned by the decedent or a 
                        member of the decedent's family at all times 
                        during the 3-year period ending on the date of 
                        the decedent's death, and
                            ``(iii) with respect to which a qualified 
                        conservation easement is or has been made by 
                        the decedent or a member of the decedent's 
                        family.
                    ``(B) Qualified conservation easement.--The term 
                `qualified conservation easement' means a qualified 
                conservation contribution (as defined in section 
                170(h)(1)) of a qualified real property interest (as 
                defined in section 170(h)(2)(C)), except that for this 
                purpose the term `qualified real property interest' 
                shall not include any structure or building 
                constituting `a certified historic structure' as 
                defined in section 170(h)(4)(B), and the restriction on 
                the use of such interest described in section 
                170(h)(2)(C) shall include a prohibition on commercial 
                recreational activity, except that the leasing of 
                fishing and hunting rights shall not be considered 
                commercial recreational activity when such leasing is 
                subordinate to the activities of farming, ranching, 
                forestry, horticulture or viticulture.
                    ``(C) Member of family.--The term `member of the 
                decedent's family' means any member of the family (as 
                defined in section 2032A(e)(2)) of the decedent.
            ``(7) Application of this section to interests in 
        partnerships, corporations, and trusts.--The Secretary shall 
        prescribe regulations applying this section to an interest in a 
        partnership, corporation, or trust which, with respect to the 
        decedent, is an interest in a closely held business (within the 
        meaning of paragraph (1) of section 6166(b)).''
    (b) Carryover Basis.--Section 1014(a) (relating to basis of 
property acquired from a decedent) is amended by striking the period at 
the end of paragraph (3) and inserting ``, or'' and by adding after 
paragraph (3) the following new paragraph:
            ``(4) to the extent of the applicability of the exclusion 
        described in section 2031(c), the basis in the hands of the 
        decedent.''
    (c) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying after December 31, 1996.

SEC. 302. GIFT TAX ON LAND SUBJECT TO A QUALIFIED CONSERVATION 
              EASEMENT.

    (a) Gift Tax With Respect to Land Subject to a Qualified 
Conservation Easement.--Section 2503 (relating to taxable gifts) is 
amended by adding at the end the following new subsection:
    ``(h) Gift Tax With Respect to Land Subject to a Qualified 
Conservation Easement.--The transfer by gift of land subject to a 
qualified conservation easement shall not be treated as a transfer of 
property by gift for purposes of this chapter. For purposes of this 
subsection, the term `land subject to a qualified conservation 
easement' has the meaning given to such term by section 2031(c); except 
that references to the decedent shall be treated as references to the 
donor and references to the date of the decedent's death shall be 
treated as references to the date of the transfer by the donor.''
    (b) Effective Date.--The amendment made by this section shall apply 
to gifts made after December 31, 1996.

SEC. 303. QUALIFIED CONSERVATION CONTRIBUTION IS NOT A DISPOSITION.

    (a) Qualified Conservation Contribution Is Not a Disposition.--
Subsection (c) of section 2032A (relating to alternative valuation 
method) is amended by adding at the end the following new paragraphs:
            ``(8) Qualified conservation contribution is not a 
        disposition.--A qualified conservation contribution (as defined 
        in section 170(h)) by gift or otherwise shall not be deemed a 
        disposition under subsection (c)(1)(A).
            ``(9) Exception for real property is land subject to a 
        qualified conservation easement.--If qualified real property is 
        land subject to a qualified conservation easement (as defined 
        in section 2031(c)), the preceding paragraphs of this 
        subsection shall not apply.''
    (b) Land Subject to a Qualified Conservation Easement Is Not 
Disqualified.--Subsection (b) of section 2032A (relating to alternative 
valuation method) is amended by adding at the end the following 
paragraph:
                    ``(E) If property is otherwise qualified real 
                property, the fact that it is land subject to a 
                qualified conservation easement (as defined in section 
                2031(c)) shall not disqualify it under this section.''
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to contributions made, and easements granted, after 
December 31, 1996.

SEC. 304. QUALIFIED CONSERVATION CONTRIBUTION WHERE SURFACE AND MINERAL 
              RIGHTS ARE SEPARATED.

    (a) In General.--Section 170(h)(5)(B)(ii) (relating to special 
rule) is amended to read as follows:
            ``(ii) Special rule.--With respect to any contribution of 
        property in which the ownership of the surface estate and 
        mineral interests has been and remains separated, subparagraph 
        (A) shall be treated as met if the probability of surface 
        mining occurring on such property is so remote as to be 
        negligible.''
    (b) Effective Date.--The amendment made by this section shall apply 
with respect to contributions made after December 31, 1992, in taxable 
years ending after such date.

              TITLE IV--BENEFITS FOR HISTORIC PRESERVATION

SEC. 401. EXCLUSION FROM ESTATE TAX FOR HISTORIC PROPERTY SUBJECT TO 
              PRESERVATION EASEMENT.

    (a) In General.--Part IV of subchapter A of chapter 11 (relating to 
taxable estate) is amended by adding at the end the following new 
section:

``SEC. 2057. QUALIFIED HISTORIC PROPERTY.

    ``(a) General Rule.--For purposes of the tax imposed by section 
2001, the value of the taxable estate shall be determined by deducting 
from the value of the gross estate an amount equal to the value of any 
qualified historic property included in the gross estate.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Qualified historic property.--
                    ``(A) In general.--The term `qualified historic 
                property' means any historic property if--
                            ``(i) on or before the date on which the 
                        return of the tax imposed by section 2001 is 
                        filed, a qualified real property interest 
                        described in section 170(h)(2)(C) in such 
                        property is held by a qualified organization 
                        for the purpose described in section 
                        170(h)(4)(A)(iv), and
                            ``(ii) such property is covered by an 
                        agreement meeting the requirements of 
                        subsection (c) which is entered into on or 
                        before such date.
                Clause (i) shall not be construed to require that the 
                property be held for the purpose described therein for 
                longer than the 20-year period referred to in 
                subsection (c)(1)(D).
                    ``(B) Treatment of personal property.--Such term 
                includes personal property included within, or 
                associated with, qualified historic property (as 
                defined in paragraph (1)) if such personal property--
                            ``(i) is held by the decedent holding such 
                        qualified historic property,
                            ``(ii) has been so included within, or 
                        associated with, such qualified historic 
                        property throughout the 10-year period ending 
                        on the date of the decedent's death, and
                            ``(iii) is covered by the agreement 
                        referred to in subparagraph (A)(ii) which 
                        covers such qualified historic property.
            ``(2) Historic property.--The term `historic property' 
        means--
                    ``(A) any building (and its structural 
                components)--
                            ``(i) which is designated as a National 
                        Historic Landmark under section 101 of the 
                        National Historic Preservation Act throughout 
                        the 10-year period ending on the date of the 
                        decedent's death,
                            ``(ii) which was owned by the decedent or a 
                        member of the decedent's family (as defined in 
                        section 2032A(e)(2)) throughout such 10-year 
                        period, and
                            ``(iii) which was originally used for 
                        residential purposes, and
                    ``(B) any other real property to the extent 
                reasonably necessary for public view and visitation of 
                the property described in subparagraph (A).
            ``(3) Qualified organization.--The term `qualified 
        organization' has the meaning given to such term by section 
        170(h)(3).
            ``(4) Treatment of qualified historic property held by a 
        corporation.--In the case of a corporation all of the stock in 
        which was held on the date of the decedent's death by the 
        decedent or members of the decedent's family (as defined in 
        section 2032A(e)(2))--
                    ``(A) stock in such corporation shall be treated 
                for purposes of this section as qualified historic 
                property to the extent that the value of such stock is 
                attributable to qualified historic property held by 
                such corporation, but
                    ``(B) the requirements of subsection (c) shall be 
                met only if each member of the decedent's family 
                holding such stock on such date sign the agreement 
                referred to in subsection (c).
    ``(c) Requirements for Agreement.--
            ``(1) In general.--For purposes of subsection 
        (b)(1)(A)(ii), an agreement meets the requirements of this 
        subsection if--
                    ``(A) such agreement is a written agreement signed 
                by each person in being who has an interest (whether or 
                not in possession) in the historic property (other than 
                the qualified organization),
                    ``(B) such agreement is entered into with a State 
                historic preservation agency (or similar State agency) 
                and filed with the Secretary with the return of the tax 
                imposed by section 2001,
                    ``(C) such agreement provides that the only 
                activities carried on at the historic property are 
                activities which are substantially related (aside from 
                the need for income or funds or the use made of the 
                profits derived) to--
                            ``(i) the public view and visitation of 
                        such property and the property described in the 
                        last sentence of subsection (b)(1) with respect 
                        to such property), and
                            ``(ii) the maintenance and preservation of 
                        such property and surrounding areas for such 
                        public view and visitation,
                    ``(D) such agreement provides that the historic 
                property will be open to the public on a substantial 
                and regular basis for a period of at least 20 years 
                beginning on the date on which the return of the tax 
                imposed by section 2001 is filed, and
                    ``(E) such agreement provides that any admission 
                fees (if any) shall bear a reasonable relationship to 
                admission fees for other comparable tourist sites and 
                shall be approved by such State historic preservation 
                agency (or similar State agency).
            ``(2) Treatment of food, lodging, and meeting facilities 
        provided to general public.--The regular carrying on--
                    ``(A) a trade or business of providing lodging 
                shall be treated as not substantially related for 
                purposes of paragraph (1)(C),
                    ``(B) a trade or business of providing food shall 
                be treated as not substantially related for purposes of 
                paragraph (1)(C) unless--
                            ``(i) such food is only provided to 
                        individuals who pay the generally applicable 
                        admission fees (if any) for admission to the 
                        property by individuals to whom no food is 
                        provided, and
                            ``(ii) only an insubstantial portion of the 
                        structures on the historic property is devoted 
                        to the provision of such food, and
                    ``(C) a trade or business of providing facilities 
                for meetings or events shall be treated as not 
                substantially related for purposes of paragraph (1)(C) 
                unless all of the net proceeds from such trade or 
                business are used for maintenance or preservation of 
                the historic property.
    ``(d) Tax Treatment of Dispositions and Failure to Comply With 
Agreement.--
            ``(1) Imposition of additional estate tax.--If, during the 
        20-year period referred to in subsection (c)(1)(D)--
                    ``(A) any person signing the written agreement 
                referred to in subsection (c) disposes of any interest 
                in the qualified historic property, or
                    ``(B) there is a violation of any provision of such 
                agreement (as determined under regulations prescribed 
                by the Secretary),
        then there is hereby imposed an additional estate tax.
            ``(2) Exception for certain transferees who agree to be 
        bound by agreement.--No tax shall be imposed under paragraph 
        (1) by reason of any disposition if the person acquiring the 
        property--
                    ``(A) is a qualified organization or is a member of 
                the family (as defined in section 2032A(e)(2)) of the 
                person disposing of such property, and
                    ``(B) agrees to be bound by the agreement referred 
                to in subsection (b)(4) and to be liable for any tax 
                under this subsection in the same manner as the person 
                disposing of such property.
            ``(3) Amount of additional tax.--
                    ``(A) In general.--The amount of the additional tax 
                imposed by paragraph (1) with respect to any property 
                shall be an amount equal to the applicable percentage 
                of the excess of--
                            ``(i) what would (but for subsection (a)) 
                        have been the tax imposed by section 2001 
                        (reduced by the credits allowable), over
                            ``(ii) the tax imposed by section 2001 (as 
                        so reduced).
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage is the 
                percentage determined in accordance with the following 
                table for the year (of 20-year period referred to in 
                subsection (c)(1)(D)) in which the event described in 
                paragraph (1) occurs:

                ``If the event
                                                         The applicable
                occurs during:
                                                         percentage is:
                The 1st 12 years of such 20-year       100 percent     
                    period.
                The 13th or 14th year of such period.   80 percent     
                The 15th or 16th year of such period.   60 percent     
                The 17th or 18th year of such period.   40 percent     
                The 19th or 20th year of such period.   20 percent.    
            ``(4) Due date.--The additional tax imposed by this 
        subsection shall be due and payable on the day which is 6 
        months after the date of the disposition or violation referred 
        to in paragraph (1).
            ``(5) Liability for tax.--Any person signing the agreement 
        referred to in subsection (c) (other than the executor) shall 
        be personally liable for the additional tax imposed by this 
        subsection. If more than 1 person is liable under this 
        subsection, all such persons shall be jointly and severally 
        liable.
            ``(6) Certain other rules to apply.--Rules similar to the 
        rules of sections 1016(c), 2013(f), and 2032A(f) shall apply 
        for purposes of this subsection.
    ``(e) Other Special Rules.--
            ``(1) Coordination with deduction for transfer of 
        easement.--Section 2055(f) shall not apply to any interest 
        referred to therein with respect to property for which a 
        deduction is allowed under subsection (a).
            ``(2) Denial of deduction of indebtedness on excluded 
        property.--No deduction shall be allowed under section 2053 for 
        indebtedness in respect of property the value of which is 
        deducted under subsection (a).
            ``(3) Submission of annual inventories of personal 
        property.--The Secretary shall require the submission to the 
        Secretary of such inventories of personal property which is 
        qualified historic property as the Secretary determines are 
        necessary for purposes of this section.''
    (b) Technical Amendments.--
            (1) Subsection (a) of section 1014 of such Code is amended 
        by striking the period at the end of paragraph (3) and 
        inserting ``, or'' and by adding after paragraph (3) the 
        following new paragraph:
            ``(4) in the case of property the value of which was 
        deducted under section 2057(a), the adjusted basis of such 
        property in the hands of the decedent immediately before the 
        death of the decedent.''
            (2) Subparagraph (A) of section 2056A(b)(10) of such Code 
        is amended by inserting ``2057,'' after ``2056,''.
            (3) The table of sections for part IV of subchapter A of 
        chapter 11 of such Code is amended by adding at the end the 
        following new item:

                              ``Sec. 2057. Qualified historic 
                                        property.''
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to the estates of decedents dying after the date of 
the enactment of this Act.
                                 <all>