[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 50 Introduced in Senate (IS)]







110th CONGRESS
  1st Session
                                 S. 50

    To amend the Internal Revenue Code of 1986 to provide economic 
   incentives for the preservation of open space and conservation of 
               natural resources, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 4, 2007

  Mr. Isakson 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 economic 
   incentives for the preservation of open space and conservation of 
               natural resources, 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 ``Paul Coverdell 
Homestead Open Space Preservation and Conservation Act of 2006''.
    (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. FINDINGS AND PURPOSE.

    (a) Findings.--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) Purpose.--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.

SEC. 3. QUALIFIED CONSERVATION CREDIT.

    (a) In General.--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:

``SEC. 30D. QUALIFIED CONSERVATION CREDIT.

    ``(a) General Rule.--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 Expenditures.--For purposes of this 
section--
            ``(1) In general.--The term `qualified conservation 
        expenditures' means the sum of the qualified conservation 
        organization's--
                    ``(A) acquisition costs, plus
                    ``(B) reserve funds.
            ``(2) Acquisition costs.--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) Reserve funds.--
                    ``(A) In general.--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) Endowment.--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) Limitation.--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 Organization.--For 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 Interest.--For 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 Purposes.--For 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) Appraised Value.--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 Tax.--The 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) In general.--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 allocation.--An 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 agency.--Any 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) In general.--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 agencies.--Except 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 ceiling.--The 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) Aggregate annual credit.--For purposes of 
                subparagraph (C)(i), the aggregate annual credit is 
                determined in accordance with the following table:

``For the calendar                                        The 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 returned.--
                For 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 credit.--Any 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) In general.--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 
                        carryover.--For 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 
                        states.--The 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) Qualified state.--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 cities.--For purposes of this subsection--
                            ``(i) In general.--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 
                        allocations.--In 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 city.--For 
                        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 allocation.--
                Rules 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 land.--For purposes of this paragraph--
                            ``(i) Land used for agricultural 
                        purposes.--The 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) Private forest land.--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) Secretary.--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) Special rules.--
                    ``(A) Interests must be located within jurisdiction 
                of credit agency.--A 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 limit.--If 
                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 agency.--For purposes of this 
        subsection, the term `conservation credit agency' means any 
        agency authorized to carry out this subsection.
    ``(i) Regulations.--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) Termination.--Subparagraph (A) of subsection (h)(1) shall not 
apply to any amount allocated after December 31, 2010.''.
    (b) Recognition of Gain.--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 Interests.--Gain 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) Basis Adjustment.--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 Property.--If 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) Conforming Amendments.--
            (1) Passive loss rules inapplicable.--Section 
        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 tax.--Section 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 deduction.--Section 
        170(e) is amended by adding at the end the following new 
        paragraph:
            ``(7) Special rule for contributions of interests in 
        qualified conservation organizations.--No 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 partnership.--Section 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) Clerical amendment.--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) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2005.
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