[Federal Register Volume 61, Number 189 (Friday, September 27, 1996)]
[Notices]
[Page 50801]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-24811]


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DEPARTMENT OF AGRICULTURE

Skaneateles Lake Watershed Agricultural Program; Determination of 
Primary Purpose of Program Payments for Consideration as Excludable 
From Income Under Section 126 of the Internal Revenue Code of 1954

AGENCY: Office of the Secretary, USDA.

ACTION: Notice of determination.

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SUMMARY: The Secretary of Agriculture has determined that all payments 
for implementation of best management practices made to individuals by 
the City of Syracuse under the Skaneateles Lake Watershed Agricultural 
Program (``SLWAP'') are made primarily for the purpose of conserving 
soil and water resources and protecting or restoring the environment. 
This determination is made in accordance with Section 126 of the 
Internal Revenue Code of 1954, as amended, 26 U.S.C. 126. This 
determination permits recipients of these payments for implementation 
of best management practices to exclude them from gross income to the 
extent allowed by the Internal Revenue Service.

FOR FURTHER INFORMATION CONTACT: Lee Neville, Watershed Control 
Coordinator, City of Syracuse Department of Water, 101 N. Beech St., 
Syracuse, NY 13210, (315) 473-2609 or Director, Land Treatment Program 
Division, Soil Conservation Service, USDA, P.O. Box 2890, Washington, 
DC 20013, (202) 720-1870.

SUPPLEMENTARY INFORMATION: Section 126 of the Internal Revenue Code of 
1954, as amended, 26 U.S.C. 126, provides that certain payments made to 
persons under state conservation programs may be excluded from the 
recipients' gross income for Federal income tax purposes, if the 
Secretary of Agriculture determines that payments are made ``primarily 
for the purpose of conserving soil and water resources, protecting or 
restoring the environment, improving forests, or providing a habitat 
for wildlife.'' The Secretary of Agriculture evaluates the conservation 
programs on the basis of criteria set forth in 7 CFR Part 14, and makes 
a ``primary purpose'' determination for the payments made under each 
program. Before there may be an exclusion, the Secretary of the 
Treasury must determine that payments made under these conservation 
programs do not substantially increase the annual income derived from 
the property benefited by the payments.
    The City of Syracuse is authorized by Article 11 of the New York 
State Public Health Law and 10 New York Code of Rules and Regulations 
(NYCRR) part 131.1 to regulate and protect the Skaneateles Lake 
Watershed. Skaneateles Lake is the City's prime source of drinking 
water. It provides an average of 45 million gallons per day to 200,000 
people. The City has been able to avoid the filtration mandate of the 
Federal Safe Drinking Water Act by successfully implementing a 
watershed protection program in accordance with 40 CFR Sec. 141.71. 
Filtration avoidance is considered the proper option for the city to 
pursue because of the high quality of Skaneateles Lake Water and the 
City's belief that water quality should be maintained at the source and 
not through the imposition of a chemical treatment process. One of the 
City of Syracuse's water quality improvement programs establishes Best 
Management Practices (BMPs) for agricultural operations, especially 
dairy farms, in the Skaneateles Lake Watershed. The program is set 
forth and authorized pursuant to City of Syracuse Ordinances #1994-93, 
#1994-442, #1995-383, and #1995-392. The City of Syracuse has 
jurisdiction over the Skaneateles Lake Watershed pursuant to 10 NYCRR 
Sec. 131.1. The City's Watershed agricultural program is designed, 
following the model set forth by New York City, to protect the Lake 
from non-point source pollution while at the same time maintaining the 
economic viability of agriculture in the watershed. Agriculture is 
believed to be the best land use for the long term environmental health 
of the Lake's watershed. The Program uses a ``whole farm planning''/
best management practices approach to watershed protection. Payments to 
farmers participating in the Program for which the Section 126 
exclusion is sought will be made for implementation of best management 
practices which further the water quality goals of the Program. The 
exclusion would not apply to incentive payments to farmers to be made 
under the Program to encourage assistance in preparation of whole farm 
plans and participation in demonstration field days or farm tours.

Procedural Matters

    The authorizing legislation, regulations, and operating procedures 
regarding the Skaneateles Lake Watershed Agricultural Program have been 
examined using the criteria set forth in 7 CFR Part 14. The Department 
of Agriculture has concluded that the payments made for implementation 
of best management practices under this program are made to provide 
financial assistance to eligible persons primarily for the purpose of 
conserving soil and water resources and protecting or restoring the 
environment.
    A ``Record of Decision, Skaneateles Lake Watershed Agricultural 
Program, Primary Purpose Determination for Federal Tax Purpose'' has 
been prepared and is available upon request from the Director, Land 
Treatment Program Division, Soil Conservation Service, P.O. Box 2890, 
Washington, DC 20013, or from the Watershed Program Coordinator, City 
of Syracuse Department of Water, 101 N. Beech St., Syracuse NY 13210.

Determination

    As required by Section 126(b) of the Internal Revenue Code of 1954, 
as amended, I have examined the authorizing legislation, regulations, 
and operating procedures regarding the Skaneateles Lake Watershed 
Agricultural Program. In accordance with the criteria set out in 7 CFR 
Part 14, I have determined that all payments for the implementation of 
best management practices made under this program are primarily for the 
purpose of conserving soil and water resources and protecting or 
restoring the environment. Subject to further determination by the 
Secretary of the Treasury, this determination permits payment 
recipients to exclude from gross income, for Federal income tax 
purposes, all or part of such payments for implementation of best 
management practices made under said program.
Dan Glickman,
Secretary.
[FR Doc. 96-24811 Filed 9-26-96; 8:45 am]
BILLING CODE 3014-16-M