Short title

This Act may be cited as the

Family Farm Preservation and Conservation Estate Tax Act

Exclusion from gross estate for certain farmland so long as farmland use continues

(a)

In General

Part III of subchapter A of chapter 11 of the Internal Revenue Code of 1986 (relating to gross estate) is amended by inserting after section 2033 the following new section:

2033A.

Exclusion of certain farmland so long as use as farmland continues

(a)

In general

In the case of an estate of a decedent to which this section applies, if the executor makes the election described in subsection (f), the value of the gross estate shall not include the adjusted value of qualified farmland included in the estate. (b)

Estates to which section applies

This section shall apply to an estate if— (1)the decedent was (at the date of the decedent’s death) a citizen or resident of the United States, and (2)during the 8-year period ending on the date of the decedent’s death there have been periods aggregating 5 years or more during which— (A)the qualified farmland was owned by the decedent or a member of the decedent’s family, and (B)there was material participation (within the meaning of section 2032A(e)(6)) by the decedent or a member of the decedent’s family in the operation of such farmland, except that material participation shall also include any rental of real estate and related property between the estate of the decedent or any successor thereto and any tenant so long as the tenant uses the real estate and related property to produce agricultural or horticultural commodities, including but not limited to livestock, bees, poultry, orchards and woodlands, timber and fur-bearing animals and wildlife on such farmland.

Rules similar to the rules of paragraphs (4) and (5) of section 2032A(b) shall apply for purposes of subparagraph (B).

(c)

Definitions and special rule

For purposes of this section— (1)

Qualified farmland

The term qualified farmland means any real property or other property related to the farm operation— (A)which is located in the United States, (B)which is used as a farm for farming purposes, and (C)which was acquired from or passed from the decedent to a qualified heir of the decedent and which, on the date of the decedent’s death, was being so used by the decedent or a member of the decedent’s family. (2)

Member of family

A member of a family, with respect to any individual, means— (A)a member of the family (as defined by section 2031A(e)(2)), and (B)includes— (i)a lineal descendant of any spouse described in subparagraph (D) of section 2032A(e)(2), (ii)a lineal descendant of a sibling of a parent of such individual, (iii)a spouse of any lineal descendant described in clause (ii), and (iv)a lineal descendant of a spouses described in clause (iii). (3)

Adjusted value

The term adjusted value means the value of farmland for purposes of this chapter (determined without regard to this section), reduced by the amount deductible under paragraph (3) or (4) of section 2053(a). (4)

Other terms

Any other term used in this section which is also used in section 2032A shall have the same meaning given such term by section 2032A. (d)

Tax treatment of dispositions and failures To use for farming purposes

(1)

Imposition of recapture tax

If, at any time after the decedent’s death— (A)the qualified heir disposes of any interest in qualified farmland (other than by a disposition to a member of his family), or (B)the qualified heir ceases to use the real property which was acquired (or passed) from the decedent as a farm for farming purposes,

then there is hereby imposed a recapture tax on such disposition or cessation of use.

(2)

Amount of recapture tax

The amount of the tax imposed by paragraph (1) shall be the excess of— (A)the tax which would have been imposed by section 2001 on the estate of the decedent but determined as if such estate included the interest in qualified farmland described in paragraph (1) which was so disposed of or ceased to be so used, reduced by the credits allowable against such tax, over (B)the tax imposed by section 2001 on the estate of the decedent, reduced by such credits.

For purposes of this paragraph, the value of the interest in qualified farmland specified in subparagraph (A) shall be the adjusted value of such interest as of the date of the disposition or cessation of such interest described in paragraph (1).

(3)

Regulations

The Secretary may prescribe such regulations as may be necessary or appropriate to carry out this subsection, including regulations requiring record keeping and information reporting, except that the Secretary may not impose a lien on the estate of the decedent or qualified farmland for such purposes. (e)

Application of other rules

Rules similar to the rules of subsections (e) (other than paragraph (13) thereof), (f), (g), (h), and (i) of section 2032A shall apply for purposes of this section. (f)

Election

The election under this subsection shall be made on or before the due date (including extensions) for filing the return of tax imposed by section 2001 and shall be made on such return.

(b)

Clerical Amendment

The table of sections for part III of subchapter A of chapter 11 of such Code is amended by inserting after the item relating to section 2033 the following new item:

Sec. 2033A. Exclusion of certain farmland so long as use as farmland continues.

(c)

Effective Date

The amendments made by this section shall apply to estates of decedents dying after the date of the enactment of this Act.

Temporary exclusion of qualified conservation easements

(a)

In general

Part III of subchapter A of chapter 11 of the Internal Revenue Code of 1986 (relating to gross estate), as amended by section 2, is amended by inserting after section 2033A the following new section:

2033B.

Temporary exclusion of qualified conservation easements

(a)

In general

In the case of an estate of a decedent to which this section applies, if the executor makes the election described in subsection (d)— (1)the value of the gross estate shall not include the value of land subject to a qualified conservation easement included in the estate, but (2)a tax under subsection (b) shall apply. (b)

Tax treatment of dispositions and for use incompatible with conservation easement

(1)

Imposition of recapture tax

If, at any time after the decedent’s death— (A)the qualified heir disposes of any interest in the land described in subsection (a)(1) (other than by a disposition to a member of his family), or (B)the qualified heir uses any portion of the land described in subsection (a)(1) in a manner which violates the terms of such easement,

then there is hereby imposed a recapture tax on such disposition or use.

(2)

Amount of recapture tax

The amount of the tax imposed by paragraph (1) shall be the excess of— (A)the tax which would have been imposed by section 2001 on the estate of the decedent, determined as if— (i)section 2031(c) did not apply, and (ii)as if such estate included the interest described in paragraph (1)(A) or the portion described in paragraph (1)(B), as applicable,

reduced by the credits allowable against such tax, over

(B)the tax imposed by section 2001 on the estate of the decedent, reduced by such credits.

For purposes of this paragraph, the value of any interest in land or portion of land subject to a qualified conservation easement shall be the fair market value of such interest or portion as of the date of the disposition or use of such interest or portion described in paragraph (1).

(3)

Regulations

Land subject to qualified conservation easement

For purposes of this section, the terms land subject to a qualified conservation easement and qualified conservation easement have the meanings given such terms by section 2031(c)(8). (d)

Election

The election under this subsection shall be made on or before the due date (including extensions) for filing the return of tax imposed by section 2001 and shall be made on such return.

(b)

Clerical amendment

The table of sections for subchapter B of chapter 62 of such Code is amended by adding at the end the following new item:

Sec. 2033B. Temporary exclusion of qualified conservation easements.

(c)

Effective date

The amendments made by this section shall apply to estates of decedents dying after the date of the enactment of this Act.

Modification of definition of qualified conservation easement

(a)

In general

Subparagraph (B) of section 2031(c)(8) of the Internal Revenue Code of 1986 is amended by striking and the restriction on the use of such interest described in section 170(h)(2)(C) shall include a prohibition on more than a de minimis use for a commercial recreational activity. (b)

Effective date

The amendments made by this section shall apply to estates of decedents dying after the date of the enactment of this Act.

Modification of rules relating to valuation of certain farm, etc., real property

(a)

Disposition of interest subject to qualified conservation easement

Subparagraph (A) of section 2032A(c)(1) of the Internal Revenue Code of 1986 is amended by striking family) and inserting family or by a disposition to any other person when such interest in real property is subject to a qualified conservation easement (as defined in section 2031(c)(8)(B))). (b)

Woodlands subject to management plan

Paragraph (2) of section 2032A(c) of such Code is amended by adding at the end the following new subparagraph:

(F)

Exception for woodlands subject to management plan

Subparagraph (E) shall not apply to any disposition or severance of standing timber on a qualified woodland that is made pursuant to— (i)a written forest management plan developed by a credentialed professional forester, (ii)a written forest management plan that is equivalent to a forest stewardship plan, or (iii)a third-party audited forest certification system or similar land management protocol.

(c)

Sale of conservation easement not a disposition

Paragraph (8) of section 2032A(c) of such Code is amended— (1)by striking A qualified and inserting Neither a qualified, and (2)by inserting nor a sale of a conservation easement limiting the use of qualified real property after otherwise. (d)

Farm defined

Paragraph (4) of section 2032A(e) of such Code is amended by striking orchards and woodlands and inserting orchards, woodlands, and properties managed to provide habitat in support of fish and wildlife dependent recreation. (e)

Farming purpose defined

Paragraph (5) of section 2032A(e) of such Code is amended— (1)in subparagraph (A) by inserting , silvicultural, after agricultural, and (2)by striking and at the end of subparagraph (B), by striking the period at the end of subparagraph (C) and inserting , and, and by adding at the end the following:

(D)creating, restoring, enhancing, or maintaining habitat for the purpose of generating revenue from nature-oriented recreational opportunities, including hunting, fishing, wildlife observation, and related fish and wildlife dependent recreation.

(f)

Effective date

The amendments made by this section shall apply to estates of decedents dying after the date of the enactment of this Act.