[Congressional Record Volume 164, Number 124 (Tuesday, July 24, 2018)]
[House]
[Pages H7110-H7112]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              WATER AND AGRICULTURE TAX REFORM ACT OF 2018

  Mr. ROSKAM. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 519) to amend the Internal Revenue Code of 1986 to 
facilitate water leasing and water transfers to promote conservation 
and efficiency, as amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                                H.R. 519

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Water and Agriculture Tax 
     Reform Act of 2018''.

[[Page H7111]]

  


     SEC. 2. FACILITATE WATER LEASING AND WATER TRANSFERS TO 
                   PROMOTE CONSERVATION AND EFFICIENCY.

       (a) In General.--Paragraph (12) of section 501(c) of the 
     Internal Revenue Code of 1986 is amended by adding at the end 
     the following new subparagraph:
       ``(J) Treatment of mutual ditch irrigation companies.--
       ``(i) In general.--In the case of a mutual ditch or 
     irrigation company or of a like organization to a mutual 
     ditch or irrigation company, subparagraph (A) shall be 
     applied without taking into account--

       ``(I) any income received or accrued from the sale, lease, 
     or exchange of fee or other interests in real and personal 
     property, including interests in water (other than income 
     derived from the sale, lease, or transfer of water to 
     nonmembers outside the river basin or basins within which the 
     mutual ditch or irrigation company operates),
       ``(II) any income received or accrued from the sale or 
     exchange of stock in a mutual ditch or irrigation company (or 
     in a like organization to a mutual ditch or irrigation 
     company) or contract rights for the delivery or use of water, 
     or
       ``(III) any income received or accrued from the investment 
     of income described in subclause (I) or (II),

     except that any income described in subclause (I), (II), or 
     (III) which is distributed or expended for expenses (other 
     than for operations, maintenance, and capital improvements) 
     of the mutual ditch or irrigation company or of the like 
     organization to a mutual ditch or irrigation company (as the 
     case may be) shall be treated as nonmember income in the year 
     in which it is distributed or expended. For purposes of the 
     preceding sentence, expenses (other than for operations, 
     maintenance, and capital improvements) include expenses for 
     the construction of conveyances designed to deliver water 
     outside of the system of the mutual ditch or irrigation 
     company or of the like organization.
       ``(ii) Treatment of organizational governance.--In the case 
     of a mutual ditch or irrigation company or of a like 
     organization to a mutual ditch or irrigation company, where 
     State law provides that such a company or organization may be 
     organized in a manner that permits voting on a basis which is 
     pro rata to share ownership on corporate governance matters, 
     subparagraph (A) shall be applied without taking into account 
     whether its member shareholders have one vote on corporate 
     governance matters per share held in the corporation. Nothing 
     in this clause shall be construed to create any inference 
     about the requirements of this subsection for companies or 
     organizations not included in this clause.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2018.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Illinois (Mr. Roskam) and the gentleman from California (Mr. Thompson) 
each will control 20 minutes.
  The Chair recognizes the gentleman from Illinois.


                             General Leave

  Mr. ROSKAM. Mr. Speaker, I ask unanimous consent that all Members 
have 5 legislative days within which to revise and extend their remarks 
and include extraneous material on H.R. 519, currently under 
consideration.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Illinois?
  There was no objection.
  Mr. ROSKAM. Mr. Speaker, I yield the balance of my time to the 
gentleman from Arizona (Mr. Schweikert), and I ask unanimous consent 
that he be allowed to control that time.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Illinois?
  There was no objection.
  Mr. SCHWEIKERT. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, I rise in support of H.R. 519, which would provide tax-
exempt mutual irrigation companies with more flexibility in respect to 
funding their operations, maintenance, and improvement of their water 
infrastructure, especially in drought-stricken areas.
  Tax-exempt mutual ditch or irrigation companies are important to 
rural communities and to agriculture. These companies allow farmers, 
ranchers, and others, including water users and even some urban water 
users, to collaborate and pool resources to install and maintain vital 
infrastructure for the delivery of water.
  To maintain their tax-exempt status, however, mutual ditch or 
irrigation companies must satisfy Tax Code requirements that the bulk 
of their income, which is used to fund operations and capital 
improvements, must be from the shareholders of these irrigation and 
water delivery districts.
  H.R. 519 allows these companies to receive other sources of income 
and still maintain their tax-exempt status. The bill provides that, for 
the income from other sources to receive this preferential tax 
treatment, it generally must be used for operations and maintenance to 
ensure that these funds will be reinvested in irrigation infrastructure 
systems.
  This bill would provide mutual irrigation companies with more 
flexibility with respect to funding their operations and maintaining 
improvements to their water infrastructure, especially in the drought-
stricken areas, and it will facilitate more efficient water allocation 
in support of these rural economies.
  This bill also clarifies that governance matters in regard to these 
mutual ditch or irrigation companies may be arranged as permitted under 
the State laws.
  This bill supports local economies, promotes more efficient use of 
water, helps farmers and ranchers in many arid areas, and actually is 
just much fairer in how these resources are maintained and the ability 
to maintain these districts under the understanding of the current Tax 
Code.
  Mr. Speaker, I reserve the balance of my time.
  Mr. THOMPSON of California. Mr. Speaker, I yield myself as much time 
as I may consume.
  Mr. Speaker, the bill before us will allow certain entities to retain 
their tax exemption so long as they are generally reinvesting that 
revenue in operations and maintenance, including capital projects.
  As a farmer from California, I know well how critical water 
infrastructure improvements are to small irrigation districts. This 
change will help irrigation districts continue to invest in drought-
resilient projects instead of relying on rate increases.
  In States like mine, both drought-stricken and reliant on irrigation 
districts for water deliveries, infrastructure investment is a critical 
tool to help us prepare for future droughts. But we must also ensure 
that Federal policy changes do not create unintended consequences for 
water users.
  Mr. Speaker, I want to thank Representative Buck and Chairman Brady 
for working with me to include guardrails in this bill that will 
eliminate financial incentives to transfer water among regions in a way 
that disadvantages agricultural enterprise, impairs water quality, or 
causes environmental harm. This protection against potential for abuse 
resulting from the policy changes in H.R. 519 should prevent undue harm 
to my northern California constituents.
  Mr. Speaker, I reserve the balance of my time.
  Mr. SCHWEIKERT. Mr. Speaker, just sort of a quick commentary.
  I want to thank the gentleman from California for his input, his 
observations. He has been incredibly constructive and paid a lot of 
attention to protecting his constituents. Those of us from arid areas, 
we care a lot about this.
  Mr. Speaker, I yield 4 minutes to the gentleman from Colorado (Mr. 
Buck).

  Mr. BUCK. Mr. Speaker, I thank the gentleman from Arizona (Mr. 
Schweikert) for giving me this opportunity to speak on behalf of H.R. 
519, the Water and Agriculture Tax Reform Act of 2018.
  Mr. Speaker, I want to thank Mr. Thompson for his work on this and 
making sure that this is, in fact, a bipartisan effort and a much 
better bill than it started out as.
  I also want to thank Chairman Brady in the Ways and Means Committee 
for working with me to bring this bill to the floor. I introduced this 
bill last year, and Chairman Brady has been a good partner in assisting 
with its passage from the committee.
  Mr. Speaker, farmers, ranchers, and families, businesses, sportsmen, 
everyone in my district relies on water for their livelihood, but in 
the arid prairies of the Great Plains, water is running short. Under 
the blistering Colorado Sun, poorly watered crops quickly become less 
productive and may die altogether.
  Farmers around my district tell me they are moving operations 
elsewhere because they don't have access to water or they simply can't 
afford it. Agricultural communities around the Nation will face 
economic crisis if farmers and ranchers cannot afford water.

[[Page H7112]]

  H.R. 519 is a key step towards solving this problem. It offers 
farmers and ranchers an affordable water supply; and in doing so, it 
supports not only our agricultural communities, but everyone in America 
who relies on farms and ranches for food.
  My bill seeks to help farmers by empowering them to support each 
other. Many farmers rely on nonprofit, member-owned cooperatives to 
supply their water. These mutual irrigation and ditch companies give 
farmers ownership in their water supply. However, current IRS 
regulations prohibit these nonprofits from generating more than 15 
percent of their revenue from nonmember sources. If they exceed this 15 
percent threshold, they lose their tax-exempt status.
  H.R. 519 responds by removing caps on how much revenue these water 
companies can raise from nonmember sources, allowing them, for example, 
to sell water access for recreational use or raise funds through 
crossing fees. The only requirement is that this revenue must be 
reinvested in maintenance, operations, and infrastructure improvements, 
keeping water prices affordable for the members and upholding the 
nonprofit ideals of the cooperative. With this financial freedom, 
mutual irrigation and ditch companies can continue to play a vital role 
in supporting our Nation's farmers.
  The bill also reforms the IRS treatment of member voting eligibility 
for cooperatives, protecting mutual associations that have complied 
with State law for years. By empowering nonprofit mutual irrigation 
ditch companies to raise revenue from nonmember sources, H.R. 519 will 
reduce the cost of water for cash-strapped farmers.
  Mr. Speaker, I urge the House to help our rural communities and, 
frankly, all of America by passing the Water and Agriculture Tax Reform 
Act.
  Mr. SCHWEIKERT. Mr. Speaker, I have no other speakers, and I reserve 
the balance of my time.
  Mr. THOMPSON of California. Mr. Speaker, I am prepared to close, and 
I yield myself the balance of my time.
  Mr. Speaker, I thank the sponsors of this bill, in particular 
Congressman Buck for his good work working with me to ensure that we 
were able to take care of some concerns that we had in the original 
drafting of the bill.
  Mr. Speaker, I urge my colleagues on both sides of the aisle to vote 
for this piece of legislation, and I yield back the balance of my time.
  Mr. SCHWEIKERT. Mr. Speaker, I yield myself such time as I may 
consume for a very quick closing.
  In a previous life, I was the treasurer of Maricopa County. We had 
3,300 taxing districts in this county. A substantial number of those 
taxing districts were actually just these, irrigation and water 
delivery. Many of them were in the rural parts of my county, but a lot 
of them, you would be surprised, were actually in the suburban and even 
some in downtown Phoenix.
  I have actually had a conversation with a couple of them, one asking 
if they had an excess water allocation that year, could they actually 
sell it to the local pond, the little conservation reserve in our 
riverbed, and those things; and if they did so, if that amount of money 
exceeded 15 percent of their revenues, would they blow up their tax 
status.
  In this case, this legislation would prevent that, but they still 
have to use that money to constantly improve their infrastructure, 
therefore, I believe, being more water economical.
  So this is a good thing for our communities, particularly rural, 
particularly the uniqueness of those of us in the desert Southwest.
  Mr. Speaker, I urge my colleagues to vote ``yes,'' and I yield back 
the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Illinois (Mr. Roskam) that the House suspend the rules 
and pass the bill, H.R. 519, as amended.
  The question was taken; and (two-thirds being in the affirmative) the 
rules were suspended and the bill, as amended, was passed.
  A motion to reconsider was laid on the table.

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