[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 1861 Introduced in Senate (IS)]







106th CONGRESS
  1st Session
                                S. 1861

To amend the Internal Revenue Code of 1986 to provide comprehensive tax 
        relief for small family farmers, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            November 4, 1999

   Mr. Grams introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to provide comprehensive tax 
        relief for small family farmers, and for other purposes.

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

SECTION 1. SHORT TITLE; ETC.

    (a) Short Title.--This Act may be cited as the ``Farmer Tax Relief 
Act of 1999''.
    (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.
    (c) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; etc.
Sec. 2. Farm and ranch risk management accounts.
Sec. 3. Increase in deduction for health insurance costs of self-
                            employed individuals.
Sec. 4. Increase in unified estate and gift tax credits.
Sec. 5. Inclusion of farmland as part of principal residence.
Sec. 6. Averaging of farm income.
Sec. 7. Exemption for farm income from unincorporated farm businesses 
                            from alternative minimum tax.
Sec. 8. Capital gain realized from transfer of farm property in 
                            complete or partial satisfaction of 
                            qualified farm indebtedness excluded from 
                            gross income.
Sec. 9. Exclusion of farm rental income in connection with certain 
                            lease agreements from net earnings from 
                            self-employment.
Sec. 10. Agricultural program improvements.
Sec. 11. Cooperative marketing includes value-added processing through 
                            animals.
Sec. 12. Declaratory judgment relief for section 521 cooperatives.
Sec. 13. Increase in threshold amount for cash remuneration for 
                            purposes of payroll tax.

SEC. 2. FARM AND RANCH RISK MANAGEMENT ACCOUNTS.

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

``SEC. 468C. FARM AND RANCH RISK MANAGEMENT ACCOUNTS.

    ``(a) Deduction Allowed.--In the case of an individual engaged in 
an eligible farming business, there shall be allowed as a deduction for 
any taxable year the amount paid in cash by the taxpayer during the 
taxable year to a Farm and Ranch Risk Management Account (hereinafter 
referred to as the `FARRM Account').
    ``(b) Limitation.--The amount which a taxpayer may pay into the 
FARRM Account for any taxable year shall not exceed 20 percent of so 
much of the taxable income of the taxpayer (determined without regard 
to this section) which is attributable (determined in the manner 
applicable under section 1301) to any eligible farming business.
    ``(c) Eligible Farming Business.--For purposes of this section, the 
term `eligible farming business' means any farming business (as defined 
in section 263A(e)(4)) which is not a passive activity (within the 
meaning of section 469(c)) of the taxpayer.
    ``(d) FARRM Account.--For purposes of this section--
            ``(1) In general.--The term `FARRM Account' means a trust 
        created or organized in the United States for the exclusive 
        benefit of the taxpayer, but only if the written governing 
        instrument creating the trust meets the following requirements:
                    ``(A) No contribution will be accepted for any 
                taxable year in excess of the amount allowed as a 
                deduction under subsection (a) for such year.
                    ``(B) The trustee is a bank (as defined in section 
                408(n)) or another person who demonstrates to the 
                satisfaction of the Secretary that the manner in which 
                such person will administer the trust will be 
                consistent with the requirements of this section.
                    ``(C) The assets of the trust consist entirely of 
                cash or of obligations which have adequate stated 
                interest (as defined in section 1274(c)(2)) and which 
                pay such interest not less often than annually.
                    ``(D) All income of the trust is distributed 
                currently to the grantor.
                    ``(E) The assets of the trust will not be 
                commingled with other property except in a common trust 
                fund or common investment fund.
            ``(2) Account taxed as grantor trust.--The grantor of a 
        FARRM Account shall be treated for purposes of this title as 
        the owner of such Account and shall be subject to tax thereon 
        in accordance with subpart E of part I of subchapter J of this 
        chapter (relating to grantors and others treated as substantial 
        owners).
    ``(e) Inclusion of Amounts Distributed.--
            ``(1) In general.--Except as provided in paragraph (2), 
        there shall be includible in the gross income of the taxpayer 
        for any taxable year--
                    ``(A) any amount distributed from a FARRM Account 
                of the taxpayer during such taxable year, and
                    ``(B) any deemed distribution under--
                            ``(i) subsection (f)(1) (relating to 
                        deposits not distributed within 5 years),
                            ``(ii) subsection (f)(2) (relating to 
                        cessation in eligible farming business), and
                            ``(iii) subparagraph (A) or (B) of 
                        subsection (f)(3) (relating to prohibited 
                        transactions and pledging account as security).
            ``(2) Exceptions.--Paragraph (1)(A) shall not apply to--
                    ``(A) any distribution to the extent attributable 
                to income of the Account, and
                    ``(B) the distribution of any contribution paid 
                during a taxable year to a FARRM Account to the extent 
                that such contribution exceeds the limitation 
                applicable under subsection (b) if requirements similar 
                to the requirements of section 408(d)(4) are met.
        For purposes of subparagraph (A), distributions shall be 
        treated as first attributable to income and then to other 
        amounts.
            ``(3) Exclusion from self-employment tax.--Amounts included 
        in gross income under this subsection shall not be included in 
        determining net earnings from self-employment under section 
        1402.
    ``(f) Special Rules.--
            ``(1) Tax on deposits in account which are not distributed 
        within 5 years.--
                    ``(A) In general.--If, at the close of any taxable 
                year, there is a nonqualified balance in any FARRM 
                Account--
                            ``(i) there shall be deemed distributed 
                        from such Account during such taxable year an 
                        amount equal to such balance, and
                            ``(ii) the taxpayer's tax imposed by this 
                        chapter for such taxable year shall be 
                        increased by 10 percent of such deemed 
                        distribution.
                The preceding sentence shall not apply if an amount 
                equal to such nonqualified balance is distributed from 
                such Account to the taxpayer before the due date 
                (including extensions) for filing the return of tax 
                imposed by this chapter for such year (or, if earlier, 
                the date the taxpayer files such return for such year).
                    ``(B) Nonqualified balance.--For purposes of 
                subparagraph (A), the term `nonqualified balance' means 
                any balance in the Account on the last day of the 
                taxable year which is attributable to amounts deposited 
                in such Account before the 4th preceding taxable year.
                    ``(C) Ordering rule.--For purposes of this 
                paragraph, distributions from a FARRM Account shall be 
                treated as made from deposits in the order in which 
                such deposits were made, beginning with the earliest 
                deposits. For purposes of the preceding sentence, 
                income of such an Account shall be treated as a deposit 
                made on the date such income is received by the 
                Account.
            ``(2) Cessation in eligible farming business.--At the close 
        of the first disqualification period after a period for which 
        the taxpayer was engaged in an eligible farming business, there 
        shall be deemed distributed from the FARRM Account of the 
        taxpayer an amount equal to the balance in such Account (if 
        any) at the close of such disqualification period. For purposes 
        of the preceding sentence, the term `disqualification period' 
        means any period of 2 consecutive taxable years for which the 
        taxpayer is not engaged in an eligible farming business.
            ``(3) Certain rules to apply.--Rules similar to the 
        following rules shall apply for purposes of this section:
                    ``(A) Section 408(e)(2) (relating to loss of 
                exemption of account where individual engages in 
                prohibited transaction).
                    ``(B) Section 408(e)(4) (relating to effect of 
                pledging account as security).
                    ``(C) Section 408(g) (relating to community 
                property laws).
                    ``(D) Section 408(h) (relating to custodial 
                accounts).
            ``(4) Time when payments deemed made.--For purposes of this 
        section, a taxpayer shall be deemed to have made a payment to a 
        FARRM Account on the last day of a taxable year if such payment 
        is made on account of such taxable year and is made within 3\1/
        2\ months after the close of such taxable year.
            ``(5) Individual.--For purposes of this section, the term 
        `individual' shall not include an estate or trust.
    ``(g) Reports.--The trustee of a FARRM Account shall make such 
reports regarding such Account to the Secretary and to the person for 
whose benefit the Account is maintained with respect to contributions, 
distributions, and such other matters as the Secretary may require 
under regulations. The reports required by this subsection shall be 
filed at such time and in such manner and furnished to such persons at 
such time and in such manner as may be required by such regulations.''
    (b) Deduction Allowed in Computing Adjusted Gross Income.--
Subsection (a) of section 62 (defining adjusted gross income) is 
amended by inserting after paragraph (17) the following:
            ``(18) Contributions to farm and ranch risk management 
        accounts.--The deduction allowed by section 468C(a).''
    (c) Tax on Excess Contributions.--
            (1) Subsection (a) of section 4973 (relating to tax on 
        excess contributions to certain tax-favored accounts and 
        annuities) is amended by striking ``or'' at the end of 
        paragraph (3), by redesignating paragraph (4) as paragraph (5), 
        and by inserting after paragraph (3) the following:
            ``(4) a FARRM Account (within the meaning of section 
        468C(d)), or''.
            (2) Section 4973 is amended by adding at the end the 
        following:
    ``(g) Excess Contributions to FARRM Accounts.--For purposes of this 
section, in the case of a FARRM Account (within the meaning of section 
468C(d)), the term `excess contributions' means the amount by which the 
amount contributed for the taxable year to the Account exceeds the 
amount which may be contributed to the Account under section 468C(b) 
for such taxable year. For purposes of this subsection, any 
contribution which is distributed out of the FARRM Account in a 
distribution to which section 468C(e)(2)(B) applies shall be treated as 
an amount not contributed.''
            (3) The section heading for section 4973 is amended to read 
        as follows:

``SEC. 4973. EXCESS CONTRIBUTIONS TO CERTAIN ACCOUNTS, ANNUITIES, 
              ETC.''

            (4) The table of sections for chapter 43 is amended by 
        striking the item relating to section 4973 and inserting the 
        following:

                              ``Sec. 4973. Excess contributions to 
                                        certain accounts, annuities, 
                                        etc.''
    (d) Tax on Prohibited Transactions.--
            (1) Subsection (c) of section 4975 (relating to tax on 
        prohibited transactions) is amended by adding at the end the 
        following:
            ``(6) Special rule for farrm accounts.--A person for whose 
        benefit a FARRM Account (within the meaning of section 468C(d)) 
        is established shall be exempt from the tax imposed by this 
        section with respect to any transaction concerning such account 
        (which would otherwise be taxable under this section) if, with 
        respect to such transaction, the account ceases to be a FARRM 
        Account by reason of the application of section 468C(f)(3)(A) 
        to such account.''
            (2) Paragraph (1) of section 4975(e) is amended by 
        redesignating subparagraphs (E) and (F) as subparagraphs (F) 
        and (G), respectively, and by inserting after subparagraph (D) 
        the following:
                    ``(E) a FARRM Account described in section 
                468C(d),''.
    (e) Failure To Provide Reports on FARRM Accounts.--Paragraph (2) of 
section 6693(a) (relating to failure to provide reports on certain tax-
favored accounts or annuities) is amended by redesignating 
subparagraphs (C) and (D) as subparagraphs (D) and (E), respectively, 
and by inserting after subparagraph (B) the following:
                    ``(C) section 468C(g) (relating to FARRM 
                Accounts),''.
    (f) Clerical Amendment.--The table of sections for subpart C of 
part II of subchapter E of chapter 1 is amended by inserting after the 
item relating to section 468B the following:

                              ``Sec. 468C. Farm and Ranch Risk 
                                        Management Accounts.''
    (g) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 3. INCREASE IN DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-
              EMPLOYED INDIVIDUALS.

    (a) In General.--Section 162(l)(1) (relating to special rules for 
health insurance costs of self-employed individuals) is amended to read 
as follows:
            ``(1) Allowance of deduction.--In the case of an individual 
        who is an employee within the meaning of section 401(c)(1), 
        there shall be allowed as a deduction under this section an 
        amount equal to the amount paid during the taxable year for 
        insurance which constitutes medical care for the taxpayer, the 
        taxpayer's spouse, and dependents.''
    (b) Clarification of Limitations on Other Coverage.--The first 
sentence of section 162(l)(2)(B) of the Internal Revenue Code of 1986 
is amended to read as follows: ``Paragraph (1) shall not apply to any 
taxpayer for any calendar month for which the taxpayer participates in 
any subsidized health plan maintained by any employer (other than an 
employer described in section 401(c)(4)) of the taxpayer or the spouse 
of the taxpayer.''
    (c) Effective Date.--The amendments made by this section apply to 
taxable years beginning after December 31, 1999.

SEC. 4. INCREASE IN UNIFIED ESTATE AND GIFT TAX
              CREDITS.

    (a) In General.--Section 2010(c) (relating to applicable credit 
amount) is amended to read as follows:
    ``(c) Applicable Credit Amount.--For purposes of this section, the 
applicable credit amount is the amount of the tentative tax which would 
be determined under the rate schedule set forth in section 2001(c) if 
the amount with respect to which such tentative tax is to be computed 
were the applicable exclusion amount determined in accordance with the 
following table:

        ``In the case of estates of decedents
                                                         The applicable
          dying, and gifts made, during:
                                                   exclusion amount is:
                  2000 or thereafter.................     $5,000,000.''
    (b) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying, and gifts made, after December 31, 
1999.

SEC. 5. INCLUSION OF FARMLAND AS PART OF PRINCIPAL RESIDENCE.

    (a) In General.--Subsection (d) of section 121 (relating to special 
rules concerning the exclusion of gain from sale of principal 
residence) is amended by adding at the end the following:
            ``(9) Farmland.--If, for each of the 5 taxable years 
        preceding the taxable year in which the sale or exchange of a 
        principal residence occurs, amounts were includible in gross 
        income of the taxpayer from a farming business conducted by the 
        taxpayer on real property contiguous to the principal 
        residence, then such real property shall, at the election of 
        the taxpayer, be treated as part of the principal residence for 
        purposes of this section. For purposes of the preceding 
        sentence, the term `contiguous' means adjacent or adjoining (at 
        1 or more corners), not taking into account any road right-of-
        way.''
    (b) Effective Date.--The amendment made by this section shall apply 
to sales and exchanges occurring after the date of the enactment of 
this Act.

SEC. 6. AVERAGING OF FARM INCOME.

    (a) In General.--Section 1301 (relating to averaging of farm 
income) is amended by redesignating subsections (b) and (c) as 
subsections (c) and (d), respectively, and by inserting after 
subsection (a) the following new subsection:
    ``(b) Election to Transfer Farm Income Among Taxable Years.--
            ``(1) In general.--In lieu of the election under subsection 
        (a) for a taxable year, a taxpayer may elect to increase or 
        decrease taxable income for the taxable year and the 3 previous 
        taxable years by transfering elected farm income from any of 
        such taxable years to any other of such taxable years.
            ``(2) Application to subsequent years.--Any adjustment 
        under this subsection for any taxable year shall be taken into 
        account in applying this section for any subsequent taxable 
        year.
            ``(3) Interest.--For purposes of applying sections 6601 and 
        6611 to returns modified under paragraph (1), the filing date 
        (as defined in section 6611(f)(4)(A)) for a returned modified 
        by reason of paragraph (1) shall be the same as the filing date 
        of the return for the current taxable year.''.
    (b) Conforming Amendments.--
            (1) The last sentence of subsection (a) of section 1301 is 
        amended by striking ``section'' the first place it appears and 
        inserting ``subsection''.
            (2) Clause (ii) of section 1301(b)(1)(A) is amended by 
        inserting ``or (b)'' after ``subsection (a)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

SEC. 7. EXEMPTION FOR FARM INCOME FROM UNINCORPORATED FARM BUSINESSES 
              FROM ALTERNATIVE MINIMUM TAX.

    (a) In General.--Section 55 (relating to alternative minimum tax 
imposed) is amended by adding at the end the following:
    ``(f) Exemption for Unincorporated Farming Business Income.--
            ``(1) In general.--In the case of a taxpayer (other than a 
        corporation) described in paragraph (2), income from a farming 
        business engaged in by the taxpayer, and deductions relating to 
        the production of such income, shall not be taken into account 
        in determining alternative minimum taxable income for the 
        taxable year.
            ``(2) Gross receipts test.--A taxpayer is described in this 
        paragraph if the gross receipts of the taxpayer attributable to 
        such farming business--
                    ``(A) meet the $5,000,000 gross receipts test of 
                section 448(c) for the first taxable year of the 
                taxpayer beginning after December 31, 1999, and
                    ``(B) would meet such test for the taxable year and 
                each of the prior taxable years beginning after such 
                first taxable year if such test were applied by 
                substituting `$7,500,000' for `$5,000,000'.
            ``(3) Prospective application of minimum tax if income from 
        a farming business ceases to be small.--In the case of a 
        taxpayer whose income from a farming business is not taken into 
        account for any prior taxable year by reason of paragraph (1), 
        the application of this part for taxable years beginning with 
        the first taxable year for which farming income of the taxpayer 
        is so taken into account shall be determined in accordance with 
        rules similar to the rules of subparagraphs (A) through (G) of 
        subsection (e)(2).
            ``(4) Farming business.--For purposes of this subsection, 
        the term `farming business' has the meaning given such term by 
        section 263A(e)(4).
            ``(5) Aggregation rules.--For purposes of determining gross 
        receipts under paragraph (2)--
                    ``(A) all related persons engaged in a farming 
                business shall be treated as 1 person, and
                    ``(B) a person is related to another person if the 
                related person bears a relationship to such person 
                specified in section 147(a)(2) or the related person 
                and such person are engaged in trades or businesses 
                under common control (within the meaning of subsections 
                (a) and (b) of section 52).
        For purposes of the preceding sentence, in applying section 
        267(b) or 707(b)(1) by reason of section 147(a)(2)(A), `10 
        percent' shall be substituted for `50 percent'.''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1999.

SEC. 8. CAPITAL GAIN REALIZED FROM TRANSFER OF FARM PROPERTY IN 
              COMPLETE OR PARTIAL SATISFACTION OF QUALIFIED FARM 
              INDEBTEDNESS EXCLUDED FROM GROSS INCOME.

    (a) In General.--Part III of subchapter B of chapter 1 (relating to 
items specifically excluded from gross income) is amended by 
redesignating section 139 as section 140 and by inserting after section 
138 the following new section:

``SEC. 139. CAPITAL GAIN REALIZED FROM TRANSFER OF FARM PROPERTY IN 
              COMPLETE OR PARTIAL SATISFACTION OF QUALIFIED FARM 
              INDEBTEDNESS.

    ``(a) In General.--Gross income of any taxpayer described in 
subsection (d) does not include so much of the gain from the transfer 
of farm property in complete or partial satisfaction of qualified farm 
indebtedness as does not exceed $350,000.
    ``(b) Prior Gains and Discharges of Indebtedness Taken Into 
Account.--
            ``(1) In general.--If, for any prior year--
                    ``(A) gain from the transfer of farm property in 
                complete or partial satisfaction of qualified farm 
                indebtedness, or
                    ``(B) a discharge of such indebtedness,
        is excluded from the taxpayer's gross income under subsection 
        (a) of this section or section 108(g), respectively, subsection 
        (a) of this section shall be applied for the taxable year with 
        respect to such gain by reducing the dollar amount contained in 
        such subsection by such excluded prior year gains and 
        discharges.
            ``(2) Current year coordination with section 108.--
        Subsection (a) of this section shall be applied for the taxable 
        year with respect to any gain by reducing the dollar amount 
        contained in such subsection (after any reduction under 
        paragraph (1)) by any amount excluded from gross income under 
        section 108 for such year.
    ``(c) Reduction of Tax Attributes.--
            ``(1) In general.--The amount excluded from gross income 
        under subsection (a) shall be applied to reduce the tax 
        attributes described under section 108(b)(2).
            ``(2) Coordination with section 108.--For purposes of this 
        subsection, the amount of tax attributes shall be determined 
        after any reduction under section 108(b) by reason of amounts 
        excluded from gross income under section 108(a)(1).
    ``(d) Taxpayer Described in This Subsection.--
            ``(1) In general.--A taxpayer is described in this 
        subsection if--
                    ``(A) such taxpayer's modified adjusted gross 
                income for the taxable year in which the transfer of 
                farm property in complete or partial satisfaction of 
                qualified farm indebtedness occurs is less than 100 
                percent of the national median adjusted gross income 
                for such year,
                    ``(B) more than 50 percent of the gross receipts of 
                the taxpayer for 6 of the 10 taxable years preceding 
such taxable year are attributable to--
                            ``(i)(I) the trade or business of farming 
                        (within the meaning of section 2032A(e)(5)), or
                            ``(II) the sale or lease of assets used in 
                        such trade or business, or
                            ``(ii) the activities described in both 
                        subclauses (I) and (II) of clause (i),
                    ``(C) such taxpayer materially participates (within 
                the meaning of section 2032A(e)(6)) in the trade or 
                business described in subparagraph (B)(i)(I), and
                    ``(D) equity in all property held by the taxpayer 
                after such transfer is less than the greater of --
                            ``(i) $25,000, or
                            ``(ii) 150 percent of the excess (if any) 
                        of--
                                    ``(I) the tax imposed by this 
                                chapter determined as if this section 
                                and section 108 did not apply to the 
                                transfer, over
                                    ``(II) the tax imposed by this 
                                chapter determined with regard to this 
                                section and section 108 (if 
                                applicable).
            ``(2) Modified adjusted gross income.--For purposes of this 
        subsection, the term `modified adjusted gross income' means 
        adjusted gross income--
                    ``(A) determined with regard to this section and 
                section 108, and
                    ``(B) increased by the amount of interest received 
                or accrued by the taxpayer during the taxable year 
                which is exempt from tax.
            ``(3) Equity.--For purposes of this subsection, the term 
        `equity' means, with respect to any property, an amount equal 
        to--
                    ``(A) the fair market value of such property, minus
                    ``(B) any indebtedness relating to such property.
    ``(e) Farm Property.--For purposes of this section, the term `farm 
property' means real and personal property used by the taxpayer in the 
trade or business of farming (within the meaning of section 
2032A(e)(5)).
    ``(f) Qualified Farm Indebtedness.--For purposes of this section, 
indebtedness of a taxpayer shall be treated as qualified farm 
indebtedness if such indebtedness was incurred directly in connection 
with the operation by the taxpayer of the trade or business of farming 
(within the meaning of section 2032A(e)(5)).''
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 is amended by striking the item relating to 
section 139 and inserting the following:

                              ``Sec. 139. Capital gain realized from 
                                        transfer of farm property in 
                                        complete or partial 
                                        satisfaction of qualified farm 
                                        indebtedness.
                              ``Sec. 140. Cross references to other 
                                        Acts.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to transfers occurring after December 31, 1999, in taxable years 
ending after such date.

SEC. 9. EXCLUSION OF FARM RENTAL INCOME IN CONNECTION WITH CERTAIN 
              LEASE AGREEMENTS FROM NET EARNINGS FROM SELF-EMPLOYMENT.

    (a) In General.--Section 1402(a)(1)(A) (relating to net earnings 
from self-employment) is amended by striking ``an arrangement'' and 
inserting ``a lease agreement''.
    (b) Amendment to Social Security Act.--Section 211(a)(1)(A) of the 
Social Security Act (42 U.S.C. 411(a)(1)(A)) is amended by striking 
``an arrangement'' and inserting ``a lease agreement''.
    (c) Effective Date.--The amendments made by this section shall 
apply to income received in taxable years beginning after December 31, 
1999.

SEC. 10. AGRICULTURAL PROGRAM IMPROVEMENTS.

    (a) Value-Added Agricultural Products.--Section 310B of the 
Consolidated Farm and Rural Development Act (7 U.S.C. 1932) is amended 
by adding at the end the following:
    ``(h) Value-Added Agricultural Products.--In approving applications 
for loans and grants authorized under this section, section 306(a)(11), 
and other applicable provisions of this title (as determined by the 
Secretary), the Secretary shall provide a high priority to projects 
that encourage the creation of farmer-owned facilities that process 
value-added agricultural products.''.
    (b) Technical Assistance.--Section 793(c)(1) of the Federal 
Agriculture Improvement and Reform Act of 1996 (7 U.S.C. 2204f(c)(1)) 
is amended by adding at the end the following:
                    ``(E) Technical assistance.--The Secretary may use 
                funds in the Account to provide technical assistance to 
                carry out any rural development activity for which 
                funds may be used under this paragraph.''.
    (c) Extension Programs for Small- and Medium-Sized Farming 
Operations.--Section 502(d) of the Rural Development Act of 1972 (7 
U.S.C. 2662(d)) is amended--
            (1) by inserting before ``Small farm'' the following:
            ``(1) In general.--''; and
            (2) by adding at the end the following:
            ``(2) Market development education and technical 
        assistance.--To ensure the continued viability of small- and 
        medium-sized farming operations, extension programs shall, to 
        the maximum extent practicable, provide education and technical 
        assistance to owners and operators of small- and medium-sized 
        farming operations that is directed toward--
                    ``(A) expanding marketing opportunities for the 
                farming operations through activities such as direct 
                farm-to-consumer markets, local value-added processing, 
                and farmer-owned cooperatives; and
                    ``(B) providing entrepreneurial training and 
                development assistance relating to natural resource-
                based activities.''.

SEC. 11. COOPERATIVE MARKETING INCLUDES VALUE-ADDED PROCESSING THROUGH 
              ANIMALS.

    (a) In General.--Section 1388 (relating to definitions and special 
rules) is amended by adding at the end the following:
    ``(k) Cooperative Marketing Includes Value-Added Processing Through 
Animals.--For purposes of section 521 and this subchapter, the term 
`marketing the products of members or other producers' includes feeding 
the products of members or other producers to cattle, hogs, fish, 
chickens, or other animals and selling the resulting animals or animal 
products.''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.

SEC. 12. DECLARATORY JUDGMENT RELIEF FOR SECTION 521 COOPERATIVES.

    (a) In General.--Subsection (a)(1) of section 7428 (relating to 
declaratory judgments relating to status and classification of 
organizations under section 501(c)(3), etc.) is amended by striking 
``or'' at the end of subparagraph (B) and by adding at the end the 
following:
                    ``(D) with respect to the initial qualification or 
                continuing qualification of a cooperative (described in 
                section 521(b)) which is exempt from tax under section 
                521(a), or''.
    (b) Effective Date.--The amendments made by this section shall 
apply with respect to pleadings filed after the date of the enactment 
of this Act but only with respect to determinations (or requests for 
determinations) made after January 1, 1999.

SEC. 13. INCREASE IN THRESHOLD AMOUNT FOR CASH REMUNERATION FOR 
              PURPOSES OF PAYROLL TAX.

    (a) In General.--Paragraph (8)(B) of section 3121(a) (relating to 
definition of wages) is amended--
            (1) in clause (i), by striking ``$150'' and inserting 
        ``$3,000'', and
            (2) in clause (ii), by striking ``$2,500'' and inserting 
        ``$15,000''.
    (b) Conforming Amendment.--The second sentence of section 3102(a) 
is amended by striking ``$150'' and inserting ``$3,000''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid in taxable years beginning after December 31, 
1999.
                                 <all>