[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 1047 Introduced in Senate (IS)]







107th CONGRESS
  1st Session
                                S. 1047

       To amend the Internal Revenue Code of 1986 to provide for 
   nonrecognition of gain on dispositions of dairy property which is 
certified by the Secretary of Agriculture as having been the subject of 
an agreement under the bovine tuberculosis eradication program, and for 
                            other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 14, 2001

  Mr. Gramm (for himself and Mrs. Hutchison) 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 for 
   nonrecognition of gain on dispositions of dairy property which is 
certified by the Secretary of Agriculture as having been the subject of 
an agreement under the bovine tuberculosis eradication program, 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. QUALIFIED DISPOSITION OF DAIRY PROPERTY TREATED AS 
              INVOLUNTARY CONVERSION.

    (a) In General.--Section 1033 of the Internal Revenue Code of 1986 
(relating to involuntary conversions) is amended by designating 
subsection (k) as subsection (l) and inserting after subsection (j) the 
following new subsection:
    ``(k) Qualified Disposition To Implement Bovine Tuberculosis 
Eradication Program.--
            ``(1) In general.--For purposes of this subtitle, if a 
        taxpayer elects the application of this subsection to a 
        qualified disposition:
                    ``(A) Treatment as involuntary conversion.--Such 
                disposition shall be treated as an involuntary 
                conversion to which this section applies.
                    ``(B) Modification of similar property 
                requirement.--Property to be held by the taxpayer 
                either for productive use in a trade or business or for 
                investment shall be treated as property similar or 
                related in service or use to the property disposed of.
                    ``(C) Extension of period for replacing property.--
                Subsection (a)(2)(B)(i) shall be applied by 
                substituting `4 years' for `2 years'.
                    ``(D) Waiver of unrelated person requirement.--
                Subsection (i) (relating to replacement property must 
                be acquired from unrelated person in certain cases) 
                shall not apply.
                    ``(E) Expanded capital gain for cattle and 
                horses.--Section 1231(b)(3)(A) shall be applied by 
                substituting `1 month' for `24 months'.
            ``(2) Qualified disposition.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `qualified disposition' means the disposition 
                of dairy property which is certified by the Secretary 
                of Agriculture as having been the subject of an 
                agreement under the bovine tuberculosis eradication 
                program, as implemented pursuant to the Declaration of 
                Emergency Because of Bovine Tuberculosis (65 Federal 
                Register 63,227 (2000)).
                    ``(B) Payments received in connection with the 
                bovine tuberculosis eradication program.--For purposes 
                of this subsection, any amount received by a taxpayer 
                in connection with an agreement under such bovine 
                tuberculosis eradication program shall be treated as 
                received in a qualified disposition.
                    ``(C) Transmittal of certifications.--The Secretary 
                of Agriculture shall transmit copies of certifications 
                under this paragraph to the Secretary.
            ``(3) Allowance of the adjusted basis of certified dairy 
        property as a depreciation deduction.--The adjusted basis of 
        any property certified under paragraph (2)(A) shall be allowed 
        as a depreciation deduction under section 167 for the taxable 
        year which includes the date of the certification described in 
        paragraph (2)(A).
            ``(4) Dairy property.--For purposes of this subsection, the 
        term `dairy property' means all tangible property used in 
        connection with a dairy business or a dairy processing plant.
            ``(5) Special rules for certain business organizations.--
                    ``(A) S corporations.--In the case of an S 
                corporation, gain on a qualified disposition shall not 
                be treated as recognized for the purposes of section 
                1374 (relating to tax imposed on certain built-in 
                gains).
                    ``(B) Partnerships.--In the case of a partnership 
                which dissolves in anticipation of a qualified 
                disposition (including in anticipation of receiving the 
                amount described in paragraph (2)(B)), the dairy 
                property owned by the partners of such partnership at 
                the time of such disposition shall be treated, for the 
                purposes of this section and notwithstanding any 
                regulation or rule of law, as owned by such partners at 
                the time of such disposition.
            ``(6) Termination.--This subsection shall not apply to 
        dispositions made after December 31, 2005.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to dispositions made and amounts received in taxable years ending after 
May 22, 2001.

SEC. 2. DEDUCTION OF QUALIFIED RECLAMATION EXPENDITURES.

    (a) In General.--Part VI of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to itemized deductions for 
individuals and corporations) is amended by adding at the end the 
following new section:

``SEC. 199. EXPENSING OF DAIRY PROPERTY RECLAMATION COSTS.

    ``(a) In General.--Notwithstanding section 280B (relating to 
demolition of structures), a taxpayer may elect to treat any qualified 
reclamation expenditure which is paid or incurred by the taxpayer as an 
expense which is not chargeable to capital account. Any expenditure 
which is so treated shall be allowed as a deduction for the taxable 
year in which it is paid or incurred.
    ``(b) Qualified Reclamation Expenditure.--
            ``(1) In general.--For purposes of this subparagraph, the 
        term `qualified reclamation expenditure' means amounts 
        otherwise chargeable to capital account and paid or incurred to 
        convert any real property certified under section 1033(k)(2) 
        (relating to qualified disposition) into unimproved land.
            ``(2) Special rule for expenditures for depreciable 
        property.--A rule similar to the rule of section 198(b)(2) 
        (relating to special rule for expenditures for depreciable 
        property) shall apply for purposes of paragraph (1).
    ``(c) Deduction Recaptured as Ordinary Income.--Rules similar to 
the rules of section 198(e) (relating to deduction recaptured as 
ordinary income on sale, etc.) shall apply with respect to any 
qualified reclamation expenditure.
    ``(d) Termination.--This section shall not apply to expenditures 
paid or incurred after December 31, 2005.''.
    (b) Clerical Amendment.--The table of sections for part VI of 
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new item:

                              ``Sec. 199. Expensing of dairy property 
                                        reclamation costs.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to expenditures paid or incurred in taxable years ending after 
May 22, 2001.
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