[Federal Register Volume 70, Number 121 (Friday, June 24, 2005)]
[Notices]
[Page 36557]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-12516]


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 Notices
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  Federal Register / Vol. 70, No. 121 / Friday, June 24, 2005 / 
Notices  

[[Page 36557]]



DEPARTMENT OF AGRICULTURE


Conservation Security Program; Primary Purpose Determination To 
Exclude Program Payments From Gross Income Under Section 126 of the 
Internal Revenue Code

AGENCY: Office of the Secretary, USDA.

ACTION: Notice of determination.

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SUMMARY: The Secretary of Agriculture has determined that existing 
practice, new practice, and enhancement activity payments made to 
producers under the Conservation Security Program (CSP), authorized 
under the provision of Title II, Subtitle A, Section 2001 of the Farm 
Security and Rural Investment Act of 2002 (Pub. Law 107-171), are made 
primarily for the purpose of conserving soil and water resources, 
protecting or restoring the environment, and providing a habitat for 
wildlife. This determination is in accordance with Section 126 of the 
Internal Revenue Code of 1954, as amended. Subject to a finding by the 
Secretary of the Treasury that the program is a small watershed program 
administered by the Secretary of Agriculture substantially similar to 
the type of programs described in 26 U.S.C. 126(a)(1) through (8), this 
determination permits recipients to exclude from gross income, for 
Federal income tax purposes, all or part of the existing practice, new 
practice, and enhancement activity cost-share payments made under said 
program to the extent allowed by the Internal Revenue Service.

FOR FURTHER INFORMATION CONTACT: Craig Derickson, Program Manager, 
Conservation Security Program, Natural Resources Conservation Service, 
USDA, Box 2890, Washington, DC 20013; (202) 720-3524.

SUPPLEMENTARY INFORMATION: Section 126 of the Internal Revenue Code of 
1954, as amended, 26 U.S.C. 126, provides that part or all of certain 
payments made to persons under certain small watershed programs 
administered by the Secretary of Agriculture, which are determined by 
the Secretary of the Treasury to be substantially similar to the type 
of programs described in 26 U.S.C. 126(a)(1) and (8), may be excluded 
from the recipient's gross income for Federal income tax purposes if 
certain determinations are made. One such determination is made by the 
Secretary of Agriculture that program 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.'' To make such a ``primary purpose'' determination, the 
Secretary evaluates conservation program payments based on criteria set 
forth at 7 CFR Part 14. Following a primary purpose determination by 
the Secretary of Agriculture, the Secretary of the Treasury must 
determine, during individual audits, that payments made under the 
conservation program do not substantially increase the annual income 
derived from the property benefited by the payments.
    CSP supports ongoing conservation stewardship of agricultural lands 
by providing assistance to producers to maintain and enhance natural 
resources. CSP will help producers maintain conservation stewardship 
and implement additional conservation practices that provide added 
environmental enhancement.
    Under CSP program, the Secretary is authorized to make payments to 
the participant for the Federal share in accordance with subsection 
(C)ii, for not more than 75 percent (or in the case of a beginning 
farmer or rancher, 90 percent) of the average county costs of practices 
for the 2001 crop year that are included in the conservation security 
contract, as determined by the Secretary, including the costs of (I) 
the adoption of new management, vegetative, and land-based structural 
practices; (II) the maintenance of existing land management and 
vegetative practices; and (III) the maintenance of existing land-based 
structural practices that are approved by the Secretary but not already 
covered by a Federal or State maintenance requirement.
    In implementing the program, the Natural Resources Conservation 
Service, on behalf of the Commodity Credit Corporation (CCC), will 
allocate resources locally, as appropriate for the agriculture 
operation, to address significant resource concerns, meet the 
appropriate nondegradation standard, and to implement or maintain 
vegetative, active land management, and structural conservation 
practices included in the plan. Participants will enter into cost share 
contracts with the CCC for 5 to 10 years, under which the CCC and the 
participants will share the cost of installing new conservation 
practices and activities at a Federal rate not to exceed 75 percent or 
as a flat rate, as appropriate.
    Having carefully examined the authorizing legislation, and planned 
operating procedures for CSP, using the criteria set forth at 7 CFR 
Part 14, we concluded that the payments for implementing approved 
contract practices under this program are made primarily for the 
purpose of conserving soil and water resources, protecting and 
restoring the environment, and providing a habitat for wildlife.
    Determination: As provided by Section 126(b) of the Internal 
Revenue Code, the authorizing legislation, and planned operating 
procedures regarding CSP have been examined in accordance with criteria 
set out at 7 CFR Part 14. Based on this examination, we determined that 
those payments made for planning, installing, and maintaining approved 
practices under this program are primarily for the purpose of 
conserving soil and water resources or protecting and restoring the 
environment.
    Subject to a finding by the Secretary of the Treasury that the 
program is a small watershed program administered by the Secretary of 
Agriculture substantially similar to the type of programs described in 
26 U.S.C. 126(a)(1) through (8), this determination permits recipients 
to exclude from gross income, for Federal income tax purposes, all or 
part of the existing practice, new practice, and enhancement activity 
payments under the extent allowed by the Internal Revenue Service.

    Signed in Washington, DC on June 14, 2005
Mike Johanns,
Secretary of Agriculture.
[FR Doc. 05-12516 Filed 6-23-05; 8:45 am]
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