[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 2584 Introduced in Senate (IS)]

  2d Session
                                S. 2584

To amend the Internal Revenue Code of 1986 to provide a tax credit for 
            farmers' investments in value-added agriculture.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 24, 2004

 Mrs. Clinton 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 a tax credit for 
            farmers' investments in value-added agriculture.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Agricultural Producers Value-Added 
Investment Tax Credit Act of 2004''.

SEC. 2. CREDIT FOR FARMER INVESTMENT IN VALUE-ADDED AGRICULTURAL 
              PROPERTY.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business related 
credits) is amended by adding at the end the following new section:

``SEC. 45G. VALUE-ADDED AGRICULTURAL PROPERTY INVESTMENT CREDIT.

    ``(a) General Rule.--For purposes of section 38, in the case of a 
taxpayer who is--
            ``(1) an eligible person, or
            ``(2) a farmer-owned entity,
the value-added agricultural property investment credit determined 
under this section for any taxable year is 50 percent of the basis of 
any qualified value-added agricultural property placed in service 
during the taxable year. In the case of a farmer-owned entity, such 
credit shall be allocated on a pro rata basis among eligible persons 
holding qualified interests in such entity as of the last day of such 
taxable year.
    ``(b) Maximum Credit.--For purposes of subsection (a)--
            ``(1) Property placed in service by eligible person.--In 
        the case of property placed in service during a taxable year by 
        an eligible person, the credit determined under this section 
        for such year shall not exceed $30,000, reduced by the amount 
        of the creditable investments allowed for the taxable year 
        under paragraph (2).
            ``(2) Property placed in service by farmer-owned entity.--
                    ``(A) In general.--In the case of property placed 
                in service by a farmer-owned entity, the credit 
                determined under this section shall not exceed the sum 
                of the eligible person's creditable investments in such 
                entity as of the date such property is placed in 
                service.
                    ``(B) Creditable investments.--For purposes of 
                subparagraph (A), the term `creditable investments' 
                means, with respect to any property placed in service 
                by a farmer-owned entity, the aggregate qualified 
                investments made by the eligible person in such entity, 
                reduced (but not below zero) by the sum of--
                            ``(i) the amount of the aggregate qualified 
                        investments made by such person in such entity 
                        which were taken into account under this 
                        section with respect to property previously 
                        placed in service by such entity, and
                            ``(ii) the amount of the aggregate 
                        qualified investments made by such person in 
                        all other farmer-owned entities which were 
                        taken into account under this section with 
                        respect to property previously placed in 
                        service by such other entities.
                    ``(C) Limitation.--For purposes of this paragraph, 
                the aggregate qualified investments made by the 
                eligible person which may be taken into account for any 
                taxable year shall not exceed $30,000.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Qualified value-added agricultural property.--The 
        term `qualified value-added agricultural property' means 
        property--
                    ``(A) which is used to add value to a good or 
                product, suitable for food or nonfood use, derived in 
                whole or in part from organic matter which is available 
                on a renewable basis, including agricultural crops and 
                agricultural wastes and residues, wood wastes and 
                residues, and domesticated animal wastes,
                    ``(B)(i) to which section 168 applies without 
                regard to any useful life, or
                    ``(ii) with respect to which depreciation (or 
                amortization in lieu of depreciation) is allowable and 
                having a useful life (determined as of the time such 
                property is placed in service) of 3 years or more, and
                    ``(C) which is owned and operated by an eligible 
                person or a farmer-owned entity.
            ``(2) Eligible person.--
                    ``(A) In general.--The term `eligible person' means 
                a person who materially participates during the taxable 
                year in an eligible farming business.
                    ``(B) Material participation.--For purposes of 
                subparagraph (A), the determination of whether a person 
                materially participates in the trade or business of 
                farming shall be made in a manner similar to the manner 
                in which such determination is made under section 
                2032A(e)(6). In the case that the person is a 
                corporation, cooperative, partnership, estate, or 
                trust, such determination shall be made at the 
                shareholder, partner, or beneficial interests level (as 
                the case may be).
                    ``(C) Eligible farming business.--For purposes of 
                subparagraph (A), the term `eligible farming business' 
                means a farming business (as defined in section 
                263A(e)(4)) which is not a passive activity (within the 
                meaning of section 469(c)).
            ``(3) Farmer-owned entity.--
                    ``(A) In general.--The term `farmer-owned entity' 
                means--
                            ``(i) a corporation (including an S 
                        corporation) in which eligible persons own 50 
                        percent or more of the total voting power of 
                        the stock and 50 percent or more (in value) of 
                        the stock,
                            ``(ii) a partnership in which eligible 
                        persons own 50 percent or more of the total 
                        voting power of the profits interest and 50 
                        percent or more (in value) of the profits 
                        interest, and
                            ``(iii) a cooperative in which eligible 
                        persons own 50 percent or more of the total 
                        voting power of the member patronage interests 
                        and 50 percent or more (in value) of the member 
                        patronage interests.
                    ``(B) Constructive ownership rules.--For purposes 
                of subparagraph (A), rules similar to the rules of 
                section 263A(e)(2)(B) shall apply; except that, in 
                applying such rules, the members of an individual's 
                family shall be the individuals described in 
                subparagraph (C).
                    ``(C) Members of family.--The family of any 
                individual shall include only his spouse and children, 
                grandchildren, and great grandchildren (whether by the 
                whole or half blood), and the spouses of his children, 
                grandchildren, and great grandchildren, who reside in 
                the same household or jointly operate farming 
                businesses (as defined in section 263A(e)(4)). For 
                purposes of the preceding sentence, a child who is 
                legally adopted, or who is placed with the taxpayer by 
                an authorized placement agency for adoption by the 
                taxpayer, shall be treated as a child by blood.
            ``(4) Qualified investments.--
                    ``(A) In general.--The term `qualified investments' 
                means a payment of cash for the purchase of a qualified 
                equity interest in a farmer-owned entity.
                    ``(B) Qualified equity interest.--The term 
                `qualified equity interest' means--
                            ``(i) any stock in a domestic corporation 
                        if such stock is acquired by the taxpayer after 
                        December 31, 2004, and before January 1, 2011, 
                        at its original issue (directly or through an 
                        underwriter) from the corporation solely in 
                        exchange for cash,
                            ``(ii) any capital or profits interest in a 
                        domestic partnership if such interest is 
                        acquired by the taxpayer after December 31, 
                        2004, and before January 1, 2011, and
                            ``(iii) any patronage interest in a 
                        cooperative if such interest is acquired by the 
                        taxpayer after December 31, 2004, and before 
                        January 1, 2011.
                Rules similar to the rules of section 1202(c)(3) shall 
                apply for purposes of this paragraph.
    ``(d) Special Rules.--For purposes of this section--
            ``(1) Treatment of married individuals.--In the case of a 
        separate return by a married individual (as defined in section 
        7703), subsection (b)(3)(A) shall be applied by substituting 
        `$15,000' for `$30,000'.
            ``(2) Applicable rules.--Under regulations prescribed by 
        the Secretary--
                    ``(A) Allocation of credit in the case of estates 
                and trusts.--Rules similar to the rules of subsection 
                (d) of section 52 shall apply.
                    ``(B) Certain property not eligible.--Rules similar 
                to the rules of section 50(b) shall apply.
            ``(3) Basis adjustment.--For purposes of this subtitle, if 
        a credit is allowed under this section to any eligible person 
        with respect to qualified value-added agricultural property, 
        the basis of such property shall be reduced by the amount of 
        the credit so allowed and increased by the amount of recapture 
        under subsection (e).
    ``(e) Recapture in the Case of Certain Dispositions.--
            ``(1) In general.--Under regulations prescribed by the 
        Secretary, rules similar to the rules of section 50(a) shall 
        apply with respect to an eligible person if, within the 5-year 
        period beginning on the date qualified value-added agricultural 
        property with respect to which such person was allowed a credit 
        under subsection (a) is originally placed in service--
                    ``(A) such property ceases to be qualified for 
                purposes of this section,
                    ``(B) the eligible person or the farmer-owned 
                entity (as the case may be) disposes of all or part of 
                such property, or
                    ``(C) the eligible person or the farmer-owned 
                entity (as the case may be) ceases to be an eligible 
                person or farmer-owned entity for purposes of this 
                section.
            ``(2) Special rules in event of death.--
                    ``(A) In general.--The period in paragraph (1) 
                shall be suspended with respect to an eligible person 
                for the 2-year period beginning on the date of death of 
                such person.
                    ``(B) Heirs who are eligible persons.--In the case 
                that an heir of an eligible person is also an eligible 
                person, neither paragraph (1) nor subparagraph (A) of 
                this paragraph (unless elected by such heir) shall 
                apply with respect to the transfer of property to such 
                heir.
    ``(f) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the purposes of this section.
    ``(g) Termination.--This section shall not apply to property placed 
in service after December 31, 2010.''.
    (b) Credit Allowed as Part of General Business Credit.--Section 
38(b) of such Code (defining current year business credit) is amended 
by striking ``plus'' at the end of paragraph (14), by striking the 
period at the end of paragraph (15) and inserting ``, plus'', and by 
adding at the end the following new paragraph:
            ``(16) in the case of an eligible person (as defined in 
        section 45G(c)), the value-added agricultural property 
        investment credit determined under section 45G(a).''.
    (c) Credit Allowable Against Minimum Tax.--
            (1) In general.--Paragraph (3) of section 38 of such Code 
        is amended--
                    (A) by inserting ``and value-added agricultural 
                property credit'' after ``employee credit'' in the 
                heading,
                    (B) by inserting ``and the value-added agricultural 
                property credit'' after ``employee credit'' each place 
                it appears in subparagraph (A), and
                    (C) by adding at the end the following new 
                subparagraph:
                    ``(C) Value-added agricultural property credit.--
                For purposes of this subsection, the term `value-added 
                agricultural property credit' means the credit 
                determined under section 45G.''
            (2) Conforming amendment.--Subclause (II) of section 
        38(c)(2)(A)(ii) of such Code is amended by inserting ``or the 
        value-added agricultural property credit'' after ``employment 
        credit''.
    (d) Limitation on Carryback.--Subsection (d) of section 39 of such 
Code is amended by adding at the end thereof the following new 
paragraph:
            ``(10) No carryback of value-added agricultural property 
        investment credit before effective date.--No portion of the 
        unused business credit for any taxable year which is 
        attributable to the credit determined under section 45G may be 
        carried back to any taxable year ending before the date of the 
        enactment of section 45G.''.
    (e) Deduction for Certain Unused Business Credits.--Subsection (c) 
of section 196 of such Code is amended by striking ``and'' at the end 
of paragraph (9), by striking the period at the end of paragraph (10) 
and inserting ``, and'', and by adding after paragraph (10) the 
following new paragraph:
            ``(11) the value-added agricultural property investment 
        credit determined under section 45G.''.
    (f) Basis Adjustment.--Subsection (a) of section 1016 of such Code 
is amended by striking ``and'' at the end of paragraph (27), by 
striking the period at the end of paragraph (28) and inserting ``; 
and'', and by adding at the end the following new paragraph:
            ``(29) to the extent provided in section 45G(d)(3), in the 
        case of payments with respect to which a credit has been 
        allowed under section 38.''.
    (g) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end thereof the following new section:

                              ``Sec. 45G. Value-added agricultural 
                                        property investment credit.''.
    (h) Effective Date.--The amendments made by this section shall 
apply to qualified investments (as defined in section 45G(c)(5) of the 
Internal Revenue Code of 1986 (as added by this section) made, and 
property placed in service, after December 31, 2004.
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