[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 313 Introduced in Senate (IS)]







107th CONGRESS
  1st Session
                                 S. 313

    To amend the Internal Revenue Code of 1986 to provide for Farm, 
  Fishing, and Ranch Risk Management Accounts, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           February 13, 2001

Mr. Grassley (for himself, Mr. Baucus, Mr. Roberts, Mrs. Hutchison, Mr. 
  Burns, Mr. Breaux, Mr. Hatch, Mr. Craig, Mr. Allard, Mr. Lugar, Mr. 
 Gramm, Mr. Hagel, Mr. Bunning, Mr. DeWine, Mr. Bond, Mr. Fitzgerald, 
Mr. Conrad, Mr. Murkowski, Mr. Stevens, Mr. Kyl, Mr. Brownback, and Mr. 
   Sessions) 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 Farm, 
  Fishing, and Ranch Risk Management Accounts, 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; AMENDMENT OF 1986 CODE.

    (a) Short Title.--This Act may be cited as the ``Farm, Fishing, and 
Ranch Risk Management Act''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.

SEC. 2. FARM, FISHING, 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 new section:

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

    ``(a) Deduction Allowed.--In the case of an individual engaged in 
an eligible farming business or commercial fishing, 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, Fishing, and Ranch Risk 
Management Account (hereinafter referred to as the `FFARRM Account').
    ``(b) Limitation.--
            ``(1) Contributions.--The amount which a taxpayer may pay 
        into the FFARRM 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 or commercial fishing.
            ``(2) Distributions.--Distributions from a FFARRM Account 
        may not be used to purchase, lease, or finance any new fishing 
        vessel, add capacity to any fishery, or otherwise contribute to 
        the overcapitalization of any fishery. The Secretary of 
        Commerce shall implement regulations to enforce this paragraph.
    ``(c) Eligible Businesses.--For purposes of this section--
            ``(1) Eligible farming business.--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.
            ``(2) Commercial fishing.--The term `commercial fishing' 
        has the meaning given such term by section (3) of the Magnuson-
        Stevens Fishery Conservation and Management Act (16 U.S.C. 
        1802) but only if such fishing is not a passive activity 
        (within the meaning of section 469(c)) of the taxpayer.
    ``(d) FFARRM Account.--For purposes of this section--
            ``(1) In general.--The term `FFARRM 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 
        FFARRM 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 FFARRM 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 (B) or (C) 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 FFARRM 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.
    ``(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 FFARRM 
                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 FFARRM Account (other 
                than distributions of current income) shall be treated 
                as made from deposits in the order in which such 
                deposits were made, beginning with the earliest 
                deposits.
            ``(2) Cessation in eligible business.--At the close of the 
        first disqualification period after a period for which the 
        taxpayer was engaged in an eligible farming business or 
        commercial fishing, there shall be deemed distributed from the 
        FFARRM 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 or commercial fishing.
            ``(3) Certain rules to apply.--Rules similar to the 
        following rules shall apply for purposes of this section:
                    ``(A) Section 220(f)(8) (relating to treatment on 
                death).
                    ``(B) Section 408(e)(2) (relating to loss of 
                exemption of account where individual engages in 
                prohibited transaction).
                    ``(C) Section 408(e)(4) (relating to effect of 
                pledging account as security).
                    ``(D) Section 408(g) (relating to community 
                property laws).
                    ``(E) 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 
        FFARRM Account on the last day of a taxable year if such 
        payment is made on account of such taxable year and is made on 
        or before the due date (without regard to extensions) for 
        filing the return of tax for such taxable year.
            ``(5) Individual.--For purposes of this section, the term 
        `individual' shall not include an estate or trust.
            ``(6) Deduction not allowed for self-employment tax.--The 
        deduction allowable by reason of subsection (a) shall not be 
        taken into account in determining an individual's net earnings 
        from self-employment (within the meaning of section 1402(a)) 
        for purposes of chapter 2.
    ``(g) Reports.--The trustee of a FFARRM 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) 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 new 
        paragraph:
            ``(4) a FFARRM Account (within the meaning of section 
        468C(d)), or''.
            (2) Section 4973 is amended by adding at the end the 
        following new subsection:
    ``(g) Excess Contributions to FFARRM Accounts.--For purposes of 
this section, in the case of a FFARRM 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 FFARRM 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 new item:

                              ``Sec. 4973. Excess contributions to 
                                        certain accounts, annuities, 
                                        etc.''
    (c) 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 new paragraph:
            ``(6) Special rule for ffarrm accounts.--A person for whose 
        benefit a FFARRM 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 FFARRM 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 new subparagraph:
                    ``(E) a FFARRM Account described in section 
                468C(d),''.
    (d) Failure To Provide Reports on FFARRM 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 new subparagraph:
                    ``(C) section 468C(g) (relating to FFARRM 
                Accounts),''.
    (e) 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 new item:

                              ``Sec. 468C. Farm, Fishing and Ranch Risk 
                                        Management Accounts.''
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2001.
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