[Federal Register Volume 64, Number 37 (Thursday, February 25, 1999)]
[Notices]
[Pages 9304-9305]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-4725]


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 Notices
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 This section of the FEDERAL REGISTER contains documents other than rules 
 or proposed rules that are applicable to the public. Notices of hearings 
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  Federal Register / Vol. 64, No. 37 / Thursday, February 25, 1999 / 
Notices  

[[Page 9304]]


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DEPARTMENT OF AGRICULTURE

Natural Resources Conservation Service


Mill and Deer Creeks Water Exchange Projects; Determination of 
Primary Purpose of Program Payments for Consideration as Excludable 
From Income Under Section 126 of the Internal Revenue Code of 1954, as 
Amended

AGENCY: Office of the Secretary, USDA.

ACTION: Notice of determination.

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SUMMARY: The Secretary of Agriculture has determined that all program 
payments made to individuals by the State of California under the Mill 
and Deer Creeks Water Exchange Projects are made primarily for the 
purposes of protecting or restoring the environment and providing a 
habitat for wildlife. This determination is made in accordance with 
Section 126 of the Internal Revenue Code of 1954, as amended (26 U.S.C. 
126). The determination permits recipients of these cost-share payments 
to exclude them from gross income to the extent allowed by the Internal 
Revenue Service.

FOR FURTHER INFORMATION CONTACT: David N. Kennedy, Director, Department 
of Water Resources, 1416 Ninth Street, Room 1115-1, Sacramento, 
California 95814 (916) 653-7007, or Conservation Operations Division, 
Natural Resources Conservation Service, USDA, Post Office Box 2890, 
Washington, DC 20013 (202) 720-1845.

SUPPLEMENTARY INFORMATION: Section 126 of the Internal Revenue Code of 
1954, as amended (26 U.S.C. 126), provides that certain payments made 
to individuals under State conservation programs may be excluded from 
the recipient's 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 these 
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 
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.
    Under an agreement between the Department of Water Resources and 
the Department of Fish and Game, the State Water Project, in 1986, set 
aside $15 million to begin a program to restore the fish populations of 
the Sacramento-San Joaquin Delta. Additional funds are also provided 
each year to compensate for continuing losses of striped bass, chinook 
salmon, and steelhead at the Harvey O. Banks Delta Pumping Plant. The 
Mill and Deer Creeks Water Exchange Projects are fishery restoration 
and enhancement projects eligible for funding under this agreement.
    Mill and Deer Creeks, tributaries of the Upper Sacramento River, 
are two of only a few waterways in the Central Valley that continue to 
support native populations of wild spring-run salmon and steelhead 
trout. These species are candidates for either State or Federal listing 
for endangered species status. In recent years the spring-run 
population has dwindled to a few hundred adults. A key factor that 
limits the population in some years is the lack of sufficient water to 
provide passage to upstream habitat.
    In dry years, water right holders may divert nearly the entire flow 
of Mill and Deer Creeks during the critical migration period of May 
through June. As a result, upstream migration of adult spring-run 
chinook and downstream migration of juvenile salmon and steelhead can 
be impeded. Supplemental flows will help restore the population of wild 
spring-run chinook and steelhead trout by allowing migrating adults to 
reach their spawning habitat and by providing transportation flows for 
juveniles en route to the Sacramento River.
    The program is funded by the State Water Contractors through the 
Department of Water Resources, upon the recommendation of the Delta 
Pumps Fish Protection Agreement Committee.
    Agreements have been completed between the Los Molinos Mutual Water 
Company, private parties, and the State of California to address fish 
passage issues on Mill Creek. Agreements are being completed between 
the Deer Creek Irrigation District, Stanford Vina Ranch Irrigation 
Company, and the State of California to address similar problems on 
Deer Creek. Under the agreements, natural flow that would otherwise be 
diverted for irrigation will be left in the creek to aid fish passage 
during critical migration periods. The instream flow will be repaid by 
a combination of ground water pumping and renovation of canals.
    In all cases, the agreements guarantee the State certain creek 
flows and, upon request, provide flows far in excess of the State's 
ability to instantaneously replace supplemental instream flow. The 
agreements, however, do not modify the water rights of individuals or 
agencies. The water exchanges are based upon a one-to-one repayment or 
credit. The agreements also provide a minimum term of 15 years and are 
open to renegotiation at completion of the term, which could, in 
effect, extend the agreements indefinitely.

Procedural Matters

     Authorizing legislation, regulations and operating procedures 
regarding the Water Exchange Projects have been examined using the 
criteria set forth in 7 CFR part 14. The U.S. Department of Agriculture 
has concluded that the program payments made for implementation of the 
project under the Delta Pumps Fish Protection Agreement program are 
made to eligible persons primarily for the purpose of protecting or 
restoring the environment and providing a habitat for wildlife.
    A ``Record of Decision, Mill and Deer Creeks Water Exchange 
Projects, Primary Purpose Determination for Federal Tax Purpose'' has 
been prepared and is available upon request from the Director, 
Conservation Operations Division, Natural Resources Conservation 
Service, Post Office Box 2890, Washington, DC 20013, or Director 
Department of Water Resources, 1416 Ninth Street, Sacramento, CA 95814.

[[Page 9305]]

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 Mill and Deer Creeks Water 
Exchange Projects. In accordance with the criteria set out in 7 CFR 
Part 14, I have determined that all program payments for implementation 
of these projects made under the Delta Pumps Fish Protection Agreement 
are primarily for the purposes of protecting or restoring the 
environment and providing a habitat for wildlife. Subject to further 
determination by the Secretary of the Treasury, this determination 
permits program payment recipients to exclude from gross income, for 
Federal income tax purposes, all part of such program payments made 
under said project.

    Signed at Washington, D.C. on February 5, 1999.
Dan Glickman,
Secretary, United States Department of Agriculture.
[FR Doc. 99-4725 Filed 2-23-99; 11:08 am]
BILLING CODE 3410-16-U