[Congressional Record Volume 144, Number 41 (Thursday, April 2, 1998)]
[Senate]
[Pages S3123-S3124]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DASCHLE:
  S. 1907. A bill to amend the Internal Revenue Code of 1986 to allow a 
refundable tax credit for wetland restoration and conservation 
expenses; to the Committee on Finance.


           wetlands restoration and conservation legislation

  Mr. DASCHLE. Mr. President, today I am introducing legislation to 
provide a refundable tax credit to farmers for the restoration and 
conservation of wetlands.
  We have learned over the years the extraordinary value that wetlands 
can provide as habitat for plants and waterfowl, as a filter for water 
and as a buffer against flooding. At the same time, anyone who has ever 
owned a farm in South Dakota with what we call prairie potholes can 
appreciate the frustration wetlands can generate, making it 
logistically difficult to till the field efficiently and, of course, 
impossible to grow crops on lands that are flooded.
  To add insult to injury, farmers often need to pay property taxes on 
these wetlands, even though they provide no financial return.
  As a nation, we have recognized the dilemma this presents and have 
taken steps in the past to provide farmers with a means of obtaining 
some value for their efforts to protect wetlands. For years the 
Department of Agriculture has allowed farmers to enroll wetlands into 
the Wetland Reserve Program, while the U.S. Fish and Wildlife Service 
has worked with conservation groups to provide farmers with long-term 
easement options. Recently, Congress enacted legislation I sponsored to 
allow farmers to enroll wetlands in the Conservation Reserve Program.
  Unfortunately, due to the funding caps, many farmers cannot enroll 
their wetlands into the CRP while others are reluctant to use the WRP 
or U.S. Fish and Wildlife easements. Consequently, despite these 
efforts, many wetlands throughout this country continue to present 
farmers with a challenge: ensuring their protection without any 
compensation.
  In addition, over the last century, many wetlands have been drained, 
filled or otherwise degraded. These areas represent a vast reservoir of 
potentially important wetlands that could provide useful environmental 
functions if fully restored. The time has come for Congress to 
establish a more comprehensive set of incentives to both restore 
degraded wetlands and ensure their long-term protection.
  Under the legislation I am introducing today, owners of wetlands, 
farmed wetlands and prior-converted croplands that are surrounded by or 
immediately adjacent to actively farmed cropland in the same ownership 
are eligible for a tax credit. To take advantage of this credit, 
farmers must restore to fully functioning condition their farmed 
wetlands or prior converted croplands condition according to a 
restoration plan approved by the Natural Resources Conservation 
Service. A tax credit equal to the restoration costs will be available 
under this bill. To protect the water quality of wildlife values, a 
maximum of three associated acres of non-wetland may be eligible for 
the credit for every acre of wetland. To ensure that the federal 
government does not pay twice to protect the same wetlands, those 
enrolled in CRP or WRP are not eligible for this credit.
  The bill provides a tax credit equal to 50% to 70% of the soil-
specific Conservation Reserve Program (CRP) rental rate for eligible 
wetland and associated non-wetland acres, plus any certification fee. 
This may be taken in each year of the conservation agreement in which 
the eligible land is not used for agricultural production or drained, 
dredged, filled, leveled, or otherwise manipulated for that purpose.
  A farmer who enters into an agreement to conserve the eligible 
wetland and associated non-wetland acres for a period of not less than 
10 years will receive 50% of the annual CRP rental rate; a farmer who 
agrees to conserve the wetland for not less than 20 years will receive 
60% of the annual CRP rental rate; and a farmer who agrees to conserve 
the wetland for 30 years will receive 70% of the annual CRP rental 
rate. Certification of compliance with the agreement must be made at 
least every 5 years.
  As a long-term alternative to the conservation credit, farmers may 
opt for an easement credit, which would be equal to the fair market 
value of the land in agricultural use, as determined by a certified 
appraisal. This would be based on the charitable donation by the 
landowner of a deed restriction, granted in perpetuity on the use which 
may be made of the eligible land to a qualified conservation 
organization, exclusively for conservation purposes. The full credit 
may be taken in the year in which the deed restriction is recorded.
  Mr. President, Americans increasingly are becoming aware of the 
tremendous environmental benefits that wetlands provide. From critical 
waterfowl habitat to reducing the severity of flooding, wetlands are a 
critical component of our landscape. What may not be as widely 
appreciated is the nature of the farmer's role in protecting this 
resource.
  The time has come for us to both acknowledge the contributions made 
by farmers to the conservation of wetlands and provide them with 
appropriate incentive to preserve them. Farmers should not be penalized 
for doing the right thing. This legislation will take a giant step 
toward making available fair and reasonable compensation for their 
efforts in this regard.
  I urge my colleagues to join me in supporting this legislation. It 
represents an idea that is popular with conservation organizations as 
well as producers, and I am hopeful that Congress will enact it in the 
very near future. I ask unanimous consent that the full text of the 
bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1907

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

     SECTION 1. REFUNDABLE CREDIT FOR WETLAND RESTORATION AND 
                   CONSERVATION EXPENSES.

       (a) In General.--Subpart C of part IV of subchapter A of 
     chapter 1 of the Internal Revenue Code of 1986 (relating to 
     refundable credits) is amended by redesignating section 35 as 
     section 36 and by inserting after section 34 the following 
     new section:

     ``SEC. 35. WETLAND RESTORATION AND CONSERVATION EXPENSES.

       ``(a) Allowance of Credit.--In the case of an eligible 
     taxpayer, there shall be allowed as a credit against the tax 
     imposed by this subtitle for the taxable year in an amount 
     equal to the sum of--
       ``(1) the wetland restoration credit, plus
       ``(2) the wetland conservation credit, plus
       ``(3) the wetland easement credit.
       ``(b) Wetland Restoration Credit.--
       ``(1) In general.--The wetland restoration credit for any 
     taxable year is an amount equal to the wetland restoration 
     expenditures paid or incurred by the eligible taxpayer for 
     such taxable year.
       ``(2) Wetland restoration expenditures.--For purposes of 
     this subsection, the term `wetland restoration expenditure' 
     means an expenditure for the restoration of farmed wetland or 
     prior converted wetland to fully functioning wetland 
     condition--
       ``(A) pursuant to a restoration plan approved by the 
     Natural Resources Conservation Service of the Department of 
     Agriculture, and
       ``(B) paid or incurred during the first 5 years of the 
     qualified conservation agreement or qualified conservation 
     easement relating to such farmed wetland or prior converted 
     wetland.

     Such term shall not include any expenditure which is required 
     to be made pursuant to any Federal or State law.

[[Page S3124]]

       ``(c) Wetland Conservation Credit.--
       ``(1) In general.--The wetland conservation credit for any 
     taxable year is an amount equal to the sum of--
       ``(A) the applicable percentage of the soil-specific 
     Conservation Reserve Program rental rate applicable to the 
     eligible taxpayer's qualified wetland for such taxable year 
     under title XII of the Food Security Act of 1985, plus
       ``(B) any fee for certification of compliance paid or 
     incurred by the eligible taxpayer in such taxable year with 
     respect to the qualified conservation agreement relating to 
     such qualified wetland.
       ``(2) Applicable percentage.--For purposes of paragraph 
     (1)(A), the applicable percentage is equal to, in the case of 
     an eligible taxpayer who has entered into a qualified 
     conservation agreement with a term of--
       ``(A) at least 10 years, but less than 20 years, 50 
     percent,
       ``(B) at least 20 years, but less than 30 years, 60 
     percent, and
       ``(C) 30 years, 70 percent.
       ``(3) Denial of credit if wetland easement credit is 
     elected.--With respect to any qualified wetland with respect 
     to which the taxpayer makes an election under subsection (d) 
     for any taxable year, the wetland conservation credit with 
     respect to such qualified wetland for such taxable year is 
     zero.
       ``(d) Wetland Easement Credit.--
       ``(1) In general.--At the election of the eligible 
     taxpayer, the wetland easement credit for any taxable year is 
     an amount equal to the fair market value of any qualified 
     wetland of the taxpayer subject to a qualified conservation 
     easement.
       ``(2) Determination of value.--For purposes of paragraph 
     (1), the value of such qualified wetland is the fair market 
     value of such qualified wetland in agricultural use (as 
     determined by a certified appraisal) during the taxable year 
     (determined as of the date of the grant of the easement).
       ``(3) Election.--An election under this subsection shall 
     apply to the taxable year for which made.
       ``(e) Definitions.--For purposes of this section--
       ``(1) Eligible taxpayer.--The term `eligible taxpayer' 
     means a taxpayer who--
       ``(A) owns property which consists of--
       ``(i) wetlands, farmed wetlands, or prior converted 
     wetlands, and
       ``(ii) the surrounding or immediately adjacent actively 
     farmed cropland, and
       ``(B) with respect to such property, has entered into a 
     qualified conservation agreement or a qualified conservation 
     easement.
       ``(2) Qualified wetland.--
       ``(A) In general.--The term `qualified wetland' means--
       ``(i) wetland, including farmed wetland or prior converted 
     wetland, which through the use of wetland restoration 
     expenditures is being converted to fully functioning wetland 
     condition, plus
       ``(ii) as determined under a qualified conservation 
     agreement or a qualified conservation easement, such 
     surrounding or immediately adjacent nonwetland as is 
     appropriate to buffer the water quality or wildlife habitat 
     values associated with the wetland, but only to the extent 
     the nonwetland acreage is not more than 3 times greater than 
     the wetland acreage.
       ``(B) Certain property excluded.--Such term shall not 
     include any acre of land with respect to which contract or 
     easement payments are received in the taxable year from the 
     Conservation Reserve Program or the Wetlands Reserve Program 
     under title XII of the Food Security Act of 1985.
       ``(3) Wetland, farmed wetland, and prior converted 
     wetland.--The terms `wetland', `farmed wetland', and `prior 
     converted wetland' shall have the meanings given such terms 
     by title XII of the Food Security Act of 1985.
       ``(4) Qualified conservation agreement.--
       ``(A) In general.--The term `qualified conservation 
     agreement' means an agreement by the eligible taxpayer--
       ``(i) with a governmental unit referred to in section 
     170(c)(1),
       ``(ii) for a term of not less than 10 years and not more 
     than 30 years,
       ``(iii) under which the taxpayer agrees to comply with the 
     conservation requirements of subparagraph (B) with respect to 
     the qualified wetland, and
       ``(iv) under which the taxpayer agrees to obtain a 
     certification of compliance not less than every 5 years 
     during the period of the agreement.
       ``(B) Conservation requirements.--An eligible taxpayer 
     complies with the conservation requirements of this 
     subparagraph if--
       ``(i) the taxpayer does not use the qualified wetland for 
     agricultural production, and
       ``(ii) the taxpayer does not drain, dredge, fill, level, or 
     otherwise manipulate the qualified wetland (including the 
     removal of woody vegetation, or any activity which results in 
     impairing or reducing the flow, circulation, or reach of 
     water) for the purpose, or that has the effect, of making 
     production of an agricultural commodity or development of 
     built structures on such wetland possible.
       ``(5) Qualified conservation easement.--The term `qualified 
     conservation easement' means an easement granted in 
     perpetuity by the eligible taxpayer restricting the use which 
     may be made of the qualified wetland to a qualified 
     organization exclusively for conservation purposes (as 
     defined in section 170(h)).
       ``(f) Special Rules.--
       ``(1) Denial of double benefit.--
       ``(A) In general.--No credit shall be allowed under 
     subsection (a) for any expense for which a deduction or 
     credit is allowed under any other provision of this chapter.
       ``(B) Grants.--No credit shall be allowed under subsection 
     (a) for any expense to the extent that funds for such expense 
     are received under any Federal, State, or local program.
       ``(2) Married Couples Must File Joint Returns.--If the 
     taxpayer is a married individual (within the meaning of 
     section 7703), this section shall apply only if the taxpayer 
     and the taxpayer's spouse file a joint return for the taxable 
     year.''
       (b) Conforming Amendments.--
       (1) Paragraph (2) of section 1324(b) of title 31, United 
     States Code, is amended by inserting before the period ``, or 
     from section 35 of such Code''.
       (2) The table of sections for subpart C of part IV of 
     subchapter A of chapter 1 of the Internal Revenue Code of 
     1986 is amended by striking the last item and inserting the 
     following:

``Sec. 35. Wetland restoration and conservation expenses.
``Sec. 36. Overpayments of tax.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1998.
                                 ______