Forest conservation bonds

(a)

Tax-Exempt bond financing

(1)

In general

For purposes of the Internal Revenue Code of 1986, any qualified forest conservation bond shall be treated as an exempt facility bond under section 142 of such Code. (2)

Qualified forest conservation bond

For purposes of this section, the term qualified forest conservation bond means any bond issued as part of an issue if— (A)95 percent or more of the net proceeds (as defined in section 150(a)(3) of such Code) of such issue are to be used for qualified project costs, (B)such bond is issued for a qualified organization, and (C)such bond is issued before the date which is 36 months after the date of the enactment of this Act. (3)

Limitation on aggregate amount issued

(A)

In general

The maximum aggregate face amount of bonds which may be issued under this subsection shall not exceed $10,000,000,000 for all projects (excluding refunding bonds). (B)

Allocation of limitation

The limitation described in subparagraph (A) shall be allocated by the Secretary of the Treasury among qualified organizations as follows: (i)40 percent for qualified project costs with respect to the cost of acquisition by any qualified organization in the Pacific Northwest region. (ii)25 percent for qualified project costs with respect to the cost of acquisition by any qualified organization in the Western region. (iii)17.5 percent for qualified project costs with respect to the cost of acquisition by any qualified organization in the Southeast region. (iv)17.5 percent for qualified project costs with respect to the cost of acquisition by any qualified organization in the Northeast region. (C)

Procedure for issuance

The amount of the limitation under each of the clauses of subparagraph (B) shall be allocated on a first-come, first-served basis. (D)

Regions

For purposes of this paragraph— (i)

Pacific Northwest region

The term Pacific Northwest region means Region 6 as defined by the United States Forest Service of the Department of Agriculture under section 202.2 of title 36, Code of Federal Regulations. (ii)

Western region

The term Western region means Regions 1, 2, 3, 4, 5, and 10 (as so defined). (iii)

Southeast region

The term Southeast region means Region 8 (as so defined). (iv)

Northeast region

The term Northeast region means Region 9 (as so defined). (4)

Qualified project costs

For purposes of this subsection, the term qualified project costs means the sum of— (A)the cost of acquisition by the qualified organization from an unrelated person of forests and forest land which at the time of acquisition or immediately thereafter are subject to a conservation restriction described in subsection (c)(2), (B)capitalized interest on the qualified forest conservation bonds for the 3-year period beginning on the date of issuance of such bonds, and (C)credit enhancement fees which constitute qualified guarantee fees (within the meaning of section 148 of such Code). (5)

Special rules

In applying the Internal Revenue Code of 1986 to any qualified forest conservation bond, the following modifications shall apply: (A)Section 146 of such Code (relating to volume cap) shall not apply. (B)For purposes of section 147(b) of such Code (relating to maturity may not exceed 120 percent of economic life), the land and standing timber acquired with proceeds of qualified forest conservation bonds shall have an economic life of 35 years. (C)Subsections (c) and (d) of section 147 of such Code (relating to limitations on acquisition of land and existing property) shall not apply. (D)Section 57(a)(5) of such Code (relating to tax-exempt interest) shall not apply to interest on qualified forest conservation bonds. (6)

Treatment of current refunding bonds

Paragraphs (2)(C) and (3) shall not apply to any bond (or series of bonds) issued to refund a qualified forest conservation bond issued before the date which is 36 months after the date of the enactment of this Act, if— (A)the average maturity date of the issue of which the refunding bond is a part is not later than the average maturity date of the bonds to be refunded by such issue, (B)the amount of the refunding bond does not exceed the outstanding amount of the refunded bond, and (C)the net proceeds of the refunding bond are used to redeem the refunded bond not later than 90 days after the date of the issuance of the refunding bond.

For purposes of subparagraph (A), average maturity shall be determined in accordance with section 147(b)(2)(A) of such Code.

(7)

Effective date

This subsection shall apply to obligations issued on or after the date which is 180 days after the enactment of this Act. (b)

Items from qualified harvesting activities not subject to tax or taken into account

(1)

In general

Income, gains, deductions, losses, or credits from a qualified harvesting activity conducted by a qualified organization shall not be subject to tax or taken into account under subtitle A of the Internal Revenue Code of 1986. (2)

Limitation

The amount of income excluded from gross income under paragraph (1) for any taxable year shall not exceed the amount used by the qualified organization to make debt service payments during such taxable year for qualified forest conservation bonds. (3)

Qualified harvesting activity

For purposes of paragraph (1)— (A)

In general

The term qualified harvesting activity means the sale, lease, or harvesting, of standing timber— (i)on land owned by a qualified organization which was acquired with proceeds of qualified forest conservation bonds, and (ii)pursuant to a qualified conservation plan adopted by the qualified organization. (B)

Exceptions

(i)

Cessation as qualified organization

The term qualified harvesting activity shall not include any sale, lease, or harvesting for any period during which the organization ceases to qualify as a qualified organization. (ii)

Exceeding limits on harvesting

The term qualified harvesting activity shall not include any sale, lease, or harvesting of standing timber on land acquired with proceeds of qualified forest conservation bonds to the extent that— (I)the average annual area of timber harvested from such land exceeds 2.5 percent of the total area of such land, or (II)the quantity of timber removed from such land exceeds the quantity which can be removed from such land annually in perpetuity on a sustained-yield basis with respect to such land.

The limitations under subclauses (I) and (II) shall not apply to post-fire restoration and rehabilitation or sanitation harvesting of timber stands which are substantially damaged by fire, windthrow, or other catastrophes, or which are in imminent danger from insect or disease attack.

(4)

Termination

This subsection shall not apply to any qualified harvesting activity of a qualified organization occurring after the date on which there is no outstanding qualified forest conservation bond with respect to such qualified organization or any such bond ceases to be a tax-exempt bond. (5)

Partial recapture of benefits if harvesting limit exceeded

If, as of the date that this subsection ceases to apply under paragraph (3), the average annual area of timber harvested from the land exceeds the requirement of subclause (I) or (II) of paragraph (3)(B)(ii), the tax imposed by chapter 1 of the Internal Revenue Code of 1986 shall be increased, under rules prescribed by the Secretary of the Treasury, by the sum of the tax benefits attributable to such excess and interest at the underpayment rate under section 6621 of such Code for the period of the underpayment. (c)

Definitions

For purposes of this section— (1)

Qualified conservation plan

The term qualified conservation plan means a multiple land use program or plan which— (A)is designed and administered primarily for the purposes of protecting and enhancing wildlife and fish, timber, scenic attributes, recreation, and soil and water quality of the forest and forest land, (B)mandates that conservation of forest and forest land is the single-most significant use of the forest and forest land, and (C)requires that timber harvesting be consistent with— (i)restoring and maintaining reference conditions for the region’s ecotype, (ii)restoring and maintaining a representative sample of young, mid, and late successional forest age classes, (iii)maintaining or restoring the resources’ ecological health for purposes of preventing damage from fire, insect, or disease, (iv)maintaining or enhancing wildlife or fish habitat, or (v)enhancing research opportunities in sustainable renewable resource uses. (2)

Conservation restriction

The conservation restriction described in this paragraph is a restriction which— (A)is granted in perpetuity to an unrelated person which is described in section 170(h)(3) of such Code and which, in the case of a nongovernmental unit, is organized and operated for conservation purposes, (B)meets the requirements of clause (ii) or (iii)(II) of section 170(h)(4)(A) of such Code, (C)obligates the qualified organization to pay the costs incurred by the holder of the conservation restriction in monitoring compliance with such restriction, and (D)requires an increasing level of conservation benefits to be provided whenever circumstances allow it. (3)

Qualified organization

The term qualified organization means an organization— (A)more than half of the value of the property of which consists of forests and forest land acquired with the proceeds from qualified forest conservation bonds, (B)which periodically conducts educational programs designed to inform the public of environmentally sensitive forestry management and conservation techniques, (C)which has at all times a board of directors— (i)at least 20 percent of the members of which are representatives of the conservation community, (ii)at least 20 percent of the members of which are public officials, and (iii)not more than one-third of the members of which are individuals who are or were at any time within 5 years before the beginning of a term of membership on the board, an employee of, independent contractor with respect to, officer of, director of, or held a material financial interest in, a commercial forest products enterprise with which the qualified organization has a contractual or other financial arrangement, (D)the bylaws of which require at least two-thirds of the members of the board of directors to vote affirmatively to approve the qualified conservation plan and any change thereto, and (E)upon dissolution, is required to dedicate its assets to— (i)an organization described in section 501(c)(3) of such Code which is organized and operated for conservation purposes, or (ii)a governmental unit described in section 170(c)(1) of such Code. (4)

Unrelated person

The term unrelated person means a person who is not a related person. (5)

Related person

A person shall be treated as related to another person if— (A)such person bears a relationship to such other person described in section 267(b) (determined without regard to paragraph (9) thereof), or 707(b)(1), of such Code, determined by substituting 25 percent for 50 percent each place it appears therein, and (B)in the case such other person is a non-profit organization, if such person controls directly or indirectly more than 25 percent of the governing body of such organization.