1.Short title; amendment of
1986 Code
(a)This Act may be cited as the Paul Coverdell
Homestead Open Space Preservation and Conservation Act of 2006
.
(b)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.
2.
(a)Congress
finds the following:
(1)Tax and economic
policies have for a sustained period of time inadvertently created financial
difficulties for our Nation’s farming and ranching families that, among other
negative impacts, has forced a significant number of them to liquidate their
land holdings.
(2)This has
particularly been the case in areas surrounding growing urban centers and
resort destinations.
(3)This has
fragmented many of our Nation’s large landscapes and disrupted many communities
that historically derived their cultural and economic identities from the
land.
(4)The impact of
this has been to deprive many areas of open green space, which in turn has not
only negatively affected our human settlements through the resulting sprawl,
but has also dramatically reduced the amount of sustaining habitat for our
natural communities of plants and animals.
(b)The
purpose of this Act is to provide an economic mechanism that will restore and
conserve our Nation’s natural estate in the form of forests, farms, ranches,
and wetlands while protecting our waterways and our forests and open space in a
manner that keeps them subject to private ownership and supportive of our
surviving but threatened natural communities of plants and animals.
3.Qualified
conservation credit
(a)Subpart B of part IV of subchapter A of chapter 1
(relating to other credits) is amended by adding at the end the following new
section:
30D.Qualified
conservation credit
(a)There shall be allowed as a credit against the tax imposed
by this chapter, in the case of a qualified conservation organization, the
amount of the taxpayer’s qualified conservation expenditures for the taxable
year.
(b)Qualified
conservation expendituresFor purposes of this section—
(1)The term qualified conservation expenditures
means the sum of the qualified conservation organization’s—
(A)acquisition
costs, plus
(B)reserve
funds.
(2)The term acquisition costs means the sum
of—
(A)the lesser
of—
(i)the total of the
amounts that a qualified conservation organization paid during the taxable year
to acquire qualified real property interests exclusively for conservation
purposes, or
(ii)the aggregate
appraised value of the qualified real property interests referred to in clause
(i), plus
(B)so much of the
transaction costs reasonably incurred during the taxable year in connection
with the acquisition of qualified real property interests as do not exceed 2
percent of the amount determined in subparagraph (A).
(3)
(A)The term reserve funds means amounts
permanently set aside by a qualified conservation organization as an endowment
to fund the future costs of enforcing and maintaining qualified real property
interests acquired by the qualified conservation organization exclusively for
conservation purposes.
(B)The
term endowment means a restricted fund held in a segregated
account, the income and realized appreciation of which may be expended solely
for the purposes designated under this section, and which may be invested
solely in qualified investments (as defined in section
501(c)(21)(D)(ii)).
(C)The
amount of reserve funds which may be taken into account under paragraph (1)(B)
for the taxable year shall not exceed 8 percent of the acquisition costs for
that taxable year.
(c)Qualified
conservation organizationFor purposes of this section, the term
qualified conservation organization means, with respect to any
taxable year—
(1)an organization
which—
(A)is described in
section 170(h)(3),
(B)has been in
existence for at least 2 calendar years immediately before the taxable year,
and
(C)was organized to
serve primarily conservation purposes (as defined in section 170(h)(4)),
(2)a limited
partnership, all the general partners of which are organizations described in
paragraph (1), or
(3)a limited
liability company, all the managers of which are organizations described in
paragraph (1),
with
respect to which neither the seller of the qualified real property interest nor
any party related or subordinate to the seller (within the meaning of section
672(c)) would be a disqualified person (as defined in section 4946) if the
organization were a private foundation.(d)Qualified real
property interestFor purposes of this section, the term
qualified real property interest has the meaning given such term
by section 170(h)(2)(C).
(e)Exclusively for
conservation purposesFor purposes of this section, the term
exclusively for conservation purposes has the meaning given such
term by section 170(h)(5), except that an acquisition shall not be treated as
exclusively for conservation purposes unless the instrument conveying the
qualified real property interest expressly provides that the conservation
purposes may be enforced by both the attorney general of the State in which the
real property is located and the qualified conservation organization.
(f)For purposes of this section, the term appraised
value means the fair market value as determined by a qualified appraisal
(as defined in section 155(a)(4) of the Deficit Reduction Act of 1984).
(g)Limitation
based on amount of taxThe credit allowed under subsection (a)
shall not exceed the taxpayer’s liability for income tax (including unrelated
business income tax) for the taxable year.
(h)Limitation on
aggregate credit allowable with respect to acquisitions of qualified real
property interests located in a State
(1)Credit may not
exceed credit amount allocated to acquisition of qualified real property
interest
(A)The amount of the credit determined under subsection (a)
for any taxable year with respect to the acquisition of any qualified real
property interest shall not exceed the conservation credit dollar amount
allocated to such acquisition under this subsection.
(B)Time for making
allocationAn allocation shall be taken into account under
subparagraph (A) only if it is made not later than the close of the calendar
year in which the qualified real property interest is acquired.
(C)Allocation
reduces aggregate amount available to agencyAny conservation
credit dollar amount allocated to the acquisition of any qualified real
property interest for any calendar year shall reduce the aggregate conservation
credit dollar amount of the allocating conservation credit agency for such
calendar year.
(2)Conservation
credit dollar amount for agencies
(A)The aggregate conservation credit dollar amount which a
conservation credit agency may allocate for any calendar year is the portion of
the State conservation credit ceiling allocated under this paragraph for such
calendar year to such agency.
(B)State ceiling
initially allocated to state conservation credit agenciesExcept
as provided in subparagraphs (F) and (G), the State conservation credit ceiling
for each calendar year shall be allocated to the conservation credit agency of
such State. If there is more than 1 conservation credit agency of a State, all
such agencies shall be treated as a single agency.
(C)State
conservation credit ceilingThe State conservation credit ceiling
applicable to any State for any calendar year shall be an amount equal to the
sum of—
(i)the lesser
of—
(I)an amount equal
to the aggregate annual credit multiplied by a fraction, the numerator of which
is the amount of land located in such State that is either used for
agricultural purposes or constitutes private forest land and the denominator of
which is the amount of land in all States that is either used for agricultural
purposes or constitutes private forest land, or
(II)an amount equal
to 4 percent of the aggregate annual credit for that year,
(ii)the amount (if
any) allocated under subparagraph (F) to such State by the Secretary,
(iii)the amount of
the State conservation credit ceiling returned in the calendar year,
plus
(iv)the amount (if
any) allocated under subparagraph (G) to such State by the Secretary.
(D)For purposes of subparagraph (C)(i), the aggregate
annual credit is determined in accordance with the following table:
For the
calendarThe
aggregate
year
ending:annual
credit is:
December 31, 2006$4,000,000,000
December 31, 2007$4,500,000,000
December 31, 2008$5,000,000,000
December 31, 2009$5,500,000,000
December 31, 2010$6,000,000,000.
(E)State
conservation credit ceiling returnedFor purposes of clause
(iii), the amount of State conservation credit ceiling returned in the calendar
year equals the conservation credit dollar amount previously allocated within
the State to any proposed acquisition of a qualified real property interest
which is not acquired within the period required by the terms of the allocation
or to any proposed acquisition of a qualified real property interest with
respect to which an allocation is canceled by mutual consent of the
conservation credit agency and the qualified conservation organization
receiving the allocation.
(F)Unused
aggregate annual creditAny portion of the aggregate annual
credit for a calendar year that is not allocated to a State’s conservation
credit ceiling because of the 4 percent limitation under subparagraph
(C)(i)(II) shall be allocated by the Secretary among the remaining States,
subject to such 4 percent limitation, in proportion to their respective land
used for agricultural purposes and private forest land.
(G)Unused
conservation credit carryovers allocated among certain states
(i)The unused conservation credit carryover of a State for
any calendar year shall be assigned to the Secretary for allocation among
qualified States for the succeeding calendar year.
(ii)Unused
conservation credit carryoverFor purposes of this paragraph, the
unused conservation credit carryover of a State for any calendar year is the
excess (if any) of the State conservation credit ceiling for such year (as
defined in subparagraph (C)) over the aggregate conservation credit dollar
amount allocated by such State for such year.
(iii)Formula for
allocation of unused conservation credit carryovers among qualified
statesThe Secretary shall determine the formula for allocating
the unused conservation credit carryovers among the qualified States for a
calendar year. In the determination of such formula, the Secretary shall assure
that each qualified State in a calendar year shall receive some allocated
amount of the unused conservation credit carryover for that year but that such
carryovers shall otherwise be allocated among the qualified States in a manner
that best realizes the purpose of this section.
(iv)For purposes of this subparagraph, the term qualified
State means, with respect to a calendar year, any State—
(I)which has adopted
a statewide conservation plan designed to preserve the natural estate in the
form of forests, farms, ranches, and wetlands located within the boundaries of
that State,
(II)which allocated
its entire State conservation credit ceiling for the preceding calendar year,
and
(III)for which a
request is made (not later than May 1 of the calendar year) to receive an
allocation under clause (iii).
(H)Special rule
for states with constitutional home rule citiesFor purposes of
this subsection—
(i)The aggregate conservation credit dollar amount for any
constitutional home rule city for any calendar year shall be an amount which
bears the same ratio to the State conservation credit ceiling for such calendar
year as—
(I)the land used for
agricultural purposes and private forest land within a 25-mile radius of such
city, bears to
(II)the land used
for agricultural purposes and private forest land in the entire State.
(ii)Coordination
with other allocationsIn the case of any state which contains 1
or more constitutional home rule cities, for purposes of applying this
paragraph with respect to conservation credit agencies in such State other than
constitutional home rule cities, the State conservation credit ceiling for any
calendar year shall be reduced by the aggregate conservation credit dollar
amounts determined for such year for all constitutional home rule cities in
such State.
(iii)Constitutional
home rule cityFor purposes of this subparagraph, the term
constitutional home rule city has the meaning given such term by
section 146(d)(3)(C).
(I)State may
provide for different allocationRules similar to the rules of
section 146(e) (other than paragraph (2)(B) thereof) shall apply for purposes
of this paragraph.
(J)Land used for
agricultural purposes and private forest landFor purposes of
this paragraph—
(i)Land used for
agricultural purposesThe term land used for agricultural
purposes means the number of acres classified as land in farms in the
1997 Census of Agriculture conducted by the United States Department of
Agriculture.
(ii)The term private forest land means the number
of acres classified as private forest land in the 1997 Forest Inventory and
Analysis conducted by the United States Forest Service, excluding any acres so
classified therein that are also included as land in farms in the 1997 Census
of Agriculture described in clause (i).
(K)For
purposes of this paragraph, the term Secretary means the Secretary
of Agriculture and the Secretary of the Interior, acting pursuant to jointly
established rules and procedures.
(3)
(A)Interests must
be located within jurisdiction of credit agencyA conservation
credit agency may allocate its aggregate conservation credit dollar amount only
with respect to acquisitions of qualified real property interests located in
the jurisdiction of the governmental unit of which such agency is a
part.
(B)Agency
allocations in excess of limitIf the aggregate conservation
credit dollar amounts allocated by a conservation credit agency for any
calendar year exceed the portion of the State conservation credit ceiling
allocated to such agency for such calendar year, the conservation credit dollar
amounts so allocated shall be reduced (to the extent of such excess) for
acquisitions of qualified real property interests in the reverse order in which
the allocations of such amounts were made.
(4)Conservation
credit agencyFor purposes of this subsection, the term
conservation credit agency means any agency authorized to carry
out this subsection.
(i)Except
as provided in subsection (h)(2)(K), the Secretary shall prescribe such
regulations as may be necessary to carry out the purposes of this
section.
(j)Subparagraph
(A) of subsection (h)(1) shall not apply to any amount allocated after December
31,
2010.
.
(b)Section 1001 (relating to determination of amount of and
recognition of gain or loss) is amended by adding at the end the following new
subsection:
(f)Qualified real
property interestsGain shall be recognized on the sale of a
qualified real property interest (as defined in section 30D(d)) to a qualified
conservation organization (as defined in section 30D(c)) exclusively for
conservation purposes (as defined in section 30D(e)) only to the extent that
the amount realized on the sale exceeds the taxpayer’s adjusted basis in the
entire property to which the qualified real property interest
relates.
.
(c)Section 1016 (relating to adjustments to basis) is
amended by redesignating subsection (e) as subsection (f) and by inserting
after subsection (d) the following new subsection:
(e)Adjustments to
Basis of Certain Real PropertyIf the taxpayer has sold a
qualified real property interest in a transaction to which section 1001(f)
applies, then the taxpayer’s basis in the remaining property shall be reduced
(but not below zero) by the amount realized on the
sale.
.
(d)
(1)Passive loss
rules inapplicableSection 469(d)(2)(A)(i) is amended to read as
follows:
(i)subpart D (other
than section 30D) of part IV of subchapter A,
or
.
(2)Unrelated
business income taxSection 511(a)(1) is amended by striking
section 11.
and inserting section 11, less any credits to
which the organization is entitled under section 30D.
.
(3)Denial of
charitable contribution deductionSection 170(e) is amended by
adding at the end the following new paragraph:
(7)Special rule
for contributions of interests in qualified conservation
organizationsNo deduction shall be allowed for the contribution
of an interest in a qualified conservation organization (as defined in section
30D(c)) that has acquired 1 or more qualified real property interests in
transactions to which section 30D
applies.
.
(4)Classification
as partnershipSection 761(a) is amended by adding at the end the
following new sentence: Such term also includes an organization
described in either section 30D(c)(2) or section 30D(c)(3).
.
(5)The table of sections for subpart B of part IV of
subchapter A of chapter 1 is amended by adding at the end the following new
item:
Sec. 30D. Qualified conservation
credit.
.
(e)The amendments made by this section shall apply to taxable
years beginning after December 31, 2005.