II
Calendar No. 446
110th CONGRESS
1st Session
S. 2242
[Report No. 110–206]
IN THE SENATE OF THE UNITED STATES
October 25, 2007
Mr. Baucus, from the Committee on Finance, reported the following original bill; which was read twice and placed on the calendar
A BILL
To amend the Trade Act of 1974 to establish supplemental agricultural disaster assistance and to amend the Internal Revenue Code of 1986 to provide tax incentives for conservation and alternative energy sources and to provide tax relief for farmers, and for other purposes.
Short title; amendments to 1986 Code; table of contents
Short title
This Act may be cited
as the Heartland, Habitat, Harvest,
and Horticulture Act of 2007
.
Amendments to 1986 Code
Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.
Table of contents
The table of contents for this Act is as follows:
Sec. 1. Short title; amendments to 1986 Code; table of contents.
TITLE I—Supplemental agricultural disaster assistance from the Agriculture Disaster Relief Trust Fund
Sec. 101. Supplemental agriculture disaster assistance.
TITLE II—Conservation provisions
Subtitle A—Land and species preservation provisions
Sec. 201. Conservation reserve tax credit.
Sec. 202. Exclusion of Conservation Reserve Program payments from SECA tax for certain individuals.
Sec. 203. Permanent extension of special rule encouraging contributions of capital gain real property for conservation purposes.
Sec. 204. Tax credit for recovery and restoration of endangered species.
Sec. 205. Deduction for endangered species recovery expenditures.
Sec. 206. Exclusion for certain payments and programs relating to fish and wildlife.
Sec. 207. Credit for easements granted under certain Department of Agriculture conservation programs.
Subtitle B—Timber provisions
Sec. 211. Forest conservation bonds.
Sec. 212. Deduction for qualified timber gain.
Sec. 213. Excise tax not applicable to section 1203 deduction of real estate investment trusts.
Sec. 214. Timber REIT modernization.
Sec. 215. Mineral royalty income qualifying income for timber REITs.
Sec. 216. Modification of taxable REIT subsidiary asset test for timber REITs.
Sec. 217. Safe harbor for timber property.
TITLE III—Energy provisions
Subtitle A—Electricity generation
Sec. 301. Credit for residential and business wind property.
Sec. 302. Landowner incentive to encourage electric transmission build-out.
Sec. 303. Exception to reduction of renewable electricity credit.
Subtitle B—Alcohol fuel
Sec. 311. Expansion of special allowance to cellulosic biomass alcohol fuel plant property.
Sec. 312. Credit for production of cellulosic biomass alcohol.
Sec. 313. Extension of small ethanol producer credit.
Sec. 314. Credit for producers of fossil free alcohol.
Sec. 315. Modification of alcohol credit.
Sec. 316. Calculation of volume of alcohol for fuel credits.
Sec. 317. Ethanol tariff extension.
Sec. 318. Elimination and reductions of duty drawback on certain imported ethanol.
Subtitle C—Biodiesel and renewable diesel fuel
Sec. 321. Extension and modification of credit for biodiesel and renewable diesel used as fuel.
Sec. 322. Treatment of qualified alcohol fuel mixtures and qualified biodiesel fuel mixtures as taxable fuels.
Subtitle D—Alternative fuel
Sec. 331. Extension and modification of alternative fuel credit.
Sec. 332. Extension of alternative fuel vehicle refueling property credit.
TITLE IV—Agricultural provisions
Sec. 401. Increase in loan limits on agricultural bonds.
Sec. 402. Modification of installment sale rules for certain farm property.
Sec. 403. Allowance of section 1031 treatment for exchanges involving certain mutual ditch, reservoir, or irrigation company stock.
Sec. 404. Credit to holders of rural renaissance bonds.
Sec. 405. Agricultural chemicals security credit.
Sec. 406. Credit for drug safety and effectiveness testing for minor animal species.
Sec. 407. Certain farming business machinery and equipment treated as 5-year property.
Sec. 408. Expensing of broadband Internet access expenditures.
Sec. 409. Credit for energy efficient motors.
TITLE V—Revenue raising provisions
Subtitle A—Miscellaneous revenue provisions
Sec. 501. Limitation on farming losses of certain taxpayers.
Sec. 502. Modification to optional method of computing net earnings from self-employment.
Sec. 503. Information reporting for Commodity Credit Corporation transactions.
Sec. 504. Modification of section 1031 treatment for certain real estate.
Sec. 505. Modification of effective date of leasing provisions of the American Jobs Creation Act of 2004.
Sec. 506. Time for payment of corporate estimated taxes.
Sec. 507. Ineligibility of collectibles for nontaxable like kind exchange treatment.
Sec. 508. Denial of deduction for certain fines, penalties, and other amounts.
Sec. 509. Increase in information return penalties.
Subtitle B—Economic substance doctrine
Sec. 511. Clarification of economic substance doctrine.
Sec. 512. Penalty for understatements attributable to transactions lacking economic substance, etc.
Sec. 513. Denial of deduction for interest on underpayments attributable to noneconomic substance transactions.
Supplemental agricultural disaster assistance from the Agriculture Disaster Relief Trust Fund
Supplemental agriculture disaster assistance
In general
The Trade Act of 1974 (19 U.S.C. 2101 et seq.) is amended by adding at the end the following:
Supplemental agriculture disaster assistance
Permanent authority for supplemental revenue assistance
Definitions
In this section:
Actual production history yield
The term actual production history yield means the weighted average actual production history for each insurable commodity or noninsurable commodity, as calculated under the Federal Crop Insurance Act (7 U.S.C. 1501 et seq.) or the noninsured crop disaster assistance program, respectively.
Counter-cyclical program payment yield
The term counter-cyclical program payment yield means the weighted average payment yield established under section 1102 of the Farm Security and Rural Investment Act of 2002 (7 U.S.C. 7912).
Disaster county
In general
The term disaster county means a county included in the geographic area covered by a qualifying natural disaster declaration.
Inclusion
The term disaster county includes—
a county contiguous to a county described in subparagraph (A); and
any farm in which, during a calendar year, the total loss of production of the farm relating to weather is greater than 50 percent of the normal production of the farm, as determined by the Secretary.
Eligible producer on a farm
In general
The term eligible producer on a farm means an individual or entity described in subparagraph (B) that, as determined by the Secretary, assumes the production and market risks associated with the agricultural production of crops or livestock.
Description
An individual or entity referred to in subparagraph (A) is—
a citizen of the United States;
a resident alien;
a partnership of citizens of the United States; or
a corporation, limited liability corporation, or other farm organizational structure organized under State law.
Farm
In general
The term farm means, in relation to an eligible producer on a farm, the sum of all crop acreage in all counties that—
is used for grazing by the eligible producer; or
is planted or intended to be planted for harvest by the eligible producer.
Aquaculture
In the case of aquaculture, the term farm means, in relation to an eligible producer on a farm, all fish being produced in all counties that are intended to be harvested for sale by the eligible producer.
Honey
In the case of honey, the term farm means, in relation to an eligible producer on a farm, all bees and beehives in all counties that are intended to be harvested for a honey crop by the eligible producer.
Farm-raised fish
The term farm-raised fish means any aquatic species (including any species of finfish, mollusk, crustacean, or other aquatic invertebrate, amphibian, reptile, or aquatic plant) that is propagated and reared in a controlled or semicontrolled environment.
Insurable commodity
The term insurable commodity means an agricultural commodity (excluding livestock) for which the producer on a farm is eligible to obtain a policy or plan of insurance under the Federal Crop Insurance Act (7 U.S.C. 1501 et seq.).
Livestock
The term livestock includes—
cattle (including dairy cattle);
bison;
poultry;
sheep;
swine;
horses; and
other livestock, as determined by the Secretary.
Moving 5-year olympic average county yield
The term moving 5-year Olympic average county yield means the weighted average yield obtained from the 5 most recent years of yield data provided by the National Agriculture Statistics Service obtained from data after dropping the highest and the lowest yields.
Noninsurable commodity
The term noninsurable commodity means a crop for which the eligible producers on a farm are eligible to obtain assistance under the noninsured crop assistance program.
Noninsured crop assistance program
The term noninsured crop assistance program means the program carried out under section 196 of the Federal Agriculture Improvement and Reform Act of 1996 (7 U.S.C. 7333).
Qualifying natural disaster declaration
The term qualifying natural disaster declaration means a natural disaster declared by the Secretary for production losses under section 321(a) of the Consolidated Farm and Rural Development Act (7 U.S.C. 1961(a)).
Secretary
The term Secretary means the Secretary of Agriculture.
State
The term State means—
a State;
the District of Columbia;
the Commonwealth of Puerto Rico; and
any other territory or possession of the United States.
Trust Fund
The term Trust Fund means the Agriculture Disaster Relief Trust Fund established under section 902.
United States
The term United States when used in a geographical sense, means all of the States.
Supplemental revenue assistance payments
In general
The Secretary shall use such sums as are necessary from the Trust Fund to make crop disaster assistance payments to eligible producers on farms in disaster counties that have incurred crop production losses or crop quality losses, or both, during the crop year.
Amount
In general
Subject to subparagraph (B), the Secretary shall provide crop disaster assistance payments under this section to an eligible producer on a farm in an amount equal to 52 percent of the difference between—
the disaster assistance program guarantee, as described in paragraph (3); and
the total farm revenue for a farm, as described in paragraph (4).
Limitation
The disaster assistance program guarantee for a crop used to calculate the payments for a farm under subparagraph (A)(i) may not be greater than 90 percent of the sum of the expected revenue, as described in paragraph (5) for each of the crops on a farm, as determined by the Secretary.
Supplemental revenue assistance program guarantee
In general
Except as otherwise provided in this paragraph, the supplemental assistance program guarantee shall be the sum obtained by adding—
for each insurable commodity on the farm, the product obtained by multiplying—
the greatest of—
the actual production history yield;
85 percent of the moving 5-year Olympic average county yield; and
the counter-cyclical program payment yield for each crop;
the percentage of the crop insurance yield guarantee;
the percentage of crop insurance price elected by the eligible producer;
the crop insurance price; and
115 percent; and
for each noninsurable commodity on a farm, the product obtained by multiplying—
the weighted noninsured crop assistance program yield guarantee;
except as provided in subparagraph (B), 100 percent of the noninsured crop assistance program established price; and
115 percent.
Supplemental buy-up noninsured assistance program
Beginning on the date that the Secretary makes available supplemental buy-up coverage under the noninsured assistance program in accordance with subsection (h), the percentage described in subclause (II) of subparagraph (A)(ii) shall be equal to the percentage of the noninsured assistance program price guarantee elected by the producer.
Adjustment insurance guarantee
Notwithstanding subparagraph (A), in the case of an insurable commodity for which a plan of insurance provides for an adjustment in the guarantee, such as in the case of prevented planting, the adjusted insurance guarantee shall be the basis for determining the disaster assistance program guarantee for the insurable commodity.
Adjusted assistance level
Notwithstanding subparagraph (A), in the case of a noninsurable commodity for which the noninsured crop assistance program provides for an adjustment in the level of assistance, such as in the case of prevented harvesting, the adjusted assistance level shall be the basis for determining the disaster assistance program guarantee for the noninsurable commodity.
Equitable treatment for non-yield based policies
The Secretary shall establish equitable treatment for non-yield based policies and plans of insurance, such as the Adjusted Gross Revenue Lite insurance program.
Public managed land
Notwithstanding subparagraph (A), if rangeland is managed by a Federal agency and the carrying capacity of the managed rangeland is reduced as a result of a disaster in the preceding year that was the basis for a qualifying natural disaster declaration—
the calculation for the supplemental assistance program guarantee determined under subparagraph (A) as the guarantee applies to the managed rangeland shall be not less than 75 percent of the guarantee for the preceding year; and
the requirement for a designation by the Secretary for the current year is waived.
Farm revenue
In general
For purposes of this subsection, the total farm revenue for a farm, shall equal the sum obtained by adding—
the estimated actual value for grazing and for each crop produced on a farm by using the product obtained by multiplying—
the actual crop acreage grazed or harvested by an eligible producer on a farm;
the estimated actual yield of the grazing land or crop production; and
subject to subparagraphs (B) and (C), the average market price received or value of the production during the first 5 months of the marketing year for the county in which the farm or portion of a farm is located;
20 percent of amount of any direct payments made to the producer under section 1103 of the Farm Security and Rural Investment Act of 2002 (7 U.S.C. 7913);
the amount of payments for prevented planting on a farm;
the amount of crop insurance indemnities received by an eligible producer on a farm for each crop on a farm, including indemnities for grazing losses;
the amount of payments an eligible producer on a farm received under the noninsured crop assistance program for each crop on a farm, including grazing losses; and
the value of any other natural disaster assistance payments provided by the Federal Government to an eligible producer on a farm for each crop on a farm for the same loss for which the eligible producer is seeking assistance.
Adjustment
The Secretary shall adjust the average market price received by the eligible producer on a farm—
to reflect the average quality discounts applied to the local or regional market price of a crop, hay, or forage due to a reduction in the intrinsic characteristics of the production resulting from adverse weather, as determined annually by the State office of the Farm Service Agency; and
to account for a crop the value of which is reduced due to excess moisture resulting from a disaster-related condition.
Maximum amount for certain crops
With respect to a crop for which an eligible producer on a farm receives assistance under the noninsured crop assistance program, the average market price received or value of the production during the first 5 months of the marketing year for the county in which the farm or portion of a farm is located shall be an amount not more than 100 percent of the price of the crop established under the noninsured crop assistance program.
Expected revenue
The expected revenue for each crop on a farm shall equal the sum obtained by adding—
the expected value of grazing;
the product obtained by multiplying—
the greatest of—
the actual production history yield of the eligible producer on a farm;
the moving 5-year Olympic average county yield; and
the counter-cyclical program payment yield;
the acreage planted or intended to be planted for each crop; and
100 percent of the insurance price guarantee; and
the product obtained by multiplying—
100 percent of the noninsured crop assistance program yield; and
100 percent of the noninsured crop assistance program price for each of the crops on a farm.
Livestock indemnity payments
In general
The Secretary shall use such sums as are necessary from the Trust Fund to make livestock indemnity payments to eligible producers on farms that have incurred livestock death losses in excess of the normal mortality due to adverse weather, as determined by the Secretary, during the calendar year, including losses due to hurricanes, floods, blizzards, disease, wildfires, extreme heat, and extreme cold.
Payment rates
Indemnity payments to an eligible producer on a farm under paragraph (1) shall be made at a rate of 75 percent of the market value of the applicable livestock on the day before the date of death of the livestock, as determined by the Secretary.
Emergency assistance for livestock, honey bees, and farm-raised fish
In general
The Secretary shall use up to $35,000,000 per year from the Trust Fund to provide emergency relief to eligible producers of livestock, honey bees, and farm-raised fish to aid in the reduction of losses due to adverse weather or other environmental conditions, such as blizzards and wildfires, as determined by the Secretary, that are not covered under the authority of the Secretary to make qualifying natural disaster declarations.
Use of funds
Funds made available under this subsection shall be used to reduce losses caused by feed or water shortages, disease, or other factors as determined by the Secretary.
Availability of funds
Any funds made available under this subsection and not used in a crop year shall remain available until expended.
Tree assistance program
Definitions
In this subsection:
Eligible orchardist
The term eligible orchardist means a person that—
produces annual crops from trees for commercial purposes; or
produces nursery, ornamental, fruit, nut, or Christmas trees for commercial sale.
Natural disaster
The term natural disaster means plant disease, insect infestation, drought, fire, freeze, flood, earthquake, lightning, or other occurrence, as determined by the Secretary.
Tree
The term tree includes a tree, bush, and vine.
Eligibility
Loss
Subject to subparagraph (B), the Secretary shall provide assistance under paragraph (3) to eligible orchardists that planted trees for commercial purposes but lost the trees as a result of a natural disaster, as determined by the Secretary.
Limitation
An eligible orchardist shall qualify for assistance under subparagraph (A) only if the tree mortality of the eligible orchardist, as a result of damaging weather or related condition, exceeds 15 percent (adjusted for normal mortality).
Assistance
The assistance provided by the Secretary to eligible orchardists for losses described in paragraph (2) shall consist of—
reimbursement of 75 percent of the cost of replanting trees lost due to a natural disaster, as determined by the Secretary, in excess of 15 percent mortality (adjusted for normal mortality); or
at the option of the Secretary, sufficient seedlings to reestablish a stand; and
reimbursement of 50 percent of the cost of pruning, removal, and other costs incurred by an eligible orchardist to salvage existing trees or, in the case of tree mortality, to prepare the land to replant trees as a result of damage or tree mortality due to a natural disaster, as determined by the Secretary, in excess of 15 percent damage or mortality (adjusted for normal tree damage and mortality).
Pest and disease management and disaster prevention
Definitions
In this subsection:
Early pest detection and surveillance
The term early pest detection and surveillance means the full range of activities undertaken to find newly introduced pests, whether the pests are new to the United States or new to certain areas of the United States, before—
the pests become established; or
the pest infestations become too large and costly to eradicate or control.
Pest
The term pest
has the
meaning given the term plant pest
in section 403 of the Plant
Protection Act (7 U.S.C. 7702).
Specialty crop
The term specialty crop
has the meaning given
the term in section 3 of the Specialty Crops Competitiveness Act of 2004 (7
U.S.C. 1621 note; Public Law 108–465).
State department of agriculture
The term State department of agriculture means an agency of a State that has a legal responsibility to perform early pest detection and surveillance activities.
Establishment
The Secretary shall establish a program—
to conduct early pest detection and surveillance activities in cooperation with State departments of agriculture;
to determine and prioritize pest and disease threats to domestic production of specialty crops;
to create an audit-based certification approach to protect against the spread of plant pests and to facilitate the interstate movement of plants and plant products; and
to prevent potential damage from crop disasters caused by pests and diseases.
Early pest detection and surveillance improvement program
Cooperative agreements
The Secretary shall enter into cooperative agreements with State departments of agriculture to provide grants to the State departments of agriculture for early pest detection and surveillance activities.
Application
In general
A State department of agriculture seeking to enter into a cooperative agreement under this subsection shall submit to the Secretary an application containing such information as the Secretary may require.
Notification
The Secretary shall notify applicants of—
the requirements to be imposed on a State department of agriculture for auditing of, and reporting on, the use of any funds provided by the Secretary under the cooperative agreement;
the criteria to be used to ensure that early pest detection and surveillance activities supported under the cooperative agreement are based on sound scientific data or thorough risk assessments; and
the means of identifying pathways of pest introductions.
Use of funds
Pest detection and surveillance activities
A State department of agriculture that receives funds under this subsection shall use the funds to carry out early pest detection and surveillance activities approved by the Secretary to prevent the introduction or spread of a pest.
Subagreements
A State department of agriculture may use funds received under this subsection to enter into subagreements with political subdivisions in the State that have legal responsibilities relating to agricultural pest and disease surveillance.
Special funding considerations
Subject to the availability of funds under paragraph (9), the Secretary shall provide funds to a State department of agriculture that the Secretary determines is in a State that has a high risk of being affected by 1 or more pest, based on—
the number of international airports and maritime facilities in the State;
the volume of international passenger and cargo entry into the State;
the geographic location of the State; and
whether the location is conducive to agricultural pest and disease establishment due to the climate or crop diversity of the State;
the types of agricultural commodities or plants produced in the State; and
whether the commodities or plants produced are conducive to agricultural pest and disease establishment due to the climate or crop diversity of the State;
whether the Secretary has declared an emergency in the State pursuant to section 442 of the Plant Protection Act (7 U.S.C. 7772) due to an agricultural pest or disease of Federal concern; and
such other factors as the Secretary considers appropriate.
Cost-share
Federal cost share; form of non-Federal cost share
Except as provided in clause (ii), a cooperative agreement entered into under subparagraph (A) shall provide that—
the Federal share of carrying out the cooperative agreement shall not exceed 75 percent of the total cost;
the non-Federal share of the cost of carrying out the agreement may be provided in-kind; and
any in-kind costs may include indirect costs as considered appropriate by the Secretary.
Ability to provide funds
The Secretary shall not take the ability to provide non-Federal costs to carry out a cooperative agreement entered into under subparagraph (A) into consideration in deciding whether to enter into a cooperative agreement with a State department of agriculture.
Special funding considerations
The non-Federal share of carrying out subparagraph (D) shall not exceed 40 percent of the total costs of carrying out that subparagraph.
Reporting requirement
Not later than 180 days after the date of completion of an early pest detection and surveillance activity conducted by a State department of agriculture using funds provided under this subsection, the State department of agriculture shall submit to the Secretary a report that describes the purposes and results of the activities, including any activities conducted pursuant to a subagreement referred to in subparagraph (C)(ii).
Threat identification and mitigation program
In general
In conducting the program established under paragraph (2), the Secretary shall—
develop risk assessments of the existing and potential threat to the specialty crop industry in the United States from pests and disease;
prepare a list that prioritizes pest and disease threats to the specialty crop industry;
develop action plans, in consultation with State departments of agriculture and other State or regional resource partnerships, that effectively address pest and disease threats to the specialty crop industry, including pathway analysis, domestic and offshore mitigation measures, and comprehensive exclusion measures at ports of entry and other key distribution centers, in addition to strategies to employ if a pest or disease is introduced;
implement the action plans as soon as the action plans are developed to test the effectiveness of the action plans and help prevent new foreign and domestic pest and disease threats from being introduced or widely disseminated in the United States; and
collaborate with the nursery industry, research institutions, and other appropriate entities to develop a nursery pest risk management system—
to identify nursery pests and diseases;
to prevent the introduction, establishment, and spread of the pests and diseases; and
to reduce the risk of, prioritize, mitigate, and eradicate the pests and diseases.
Reports
Not later than 1 year after the date of enactment of this title, and annually thereafter, the Secretary shall update and submit to Congress the priority list and action plans described in subparagraph (A), including an accounting of funds expended on the action plans.
Audit-based approach to specialty crop phytosanitary certification
In conducting the program established under paragraph (2), the Secretary shall provide funds and technical assistance to specialty crop growers, organizations representing specialty crop growers, and State and local agencies working with specialty crop growers and organizations for the development and implementation of certification systems based on audit-based approaches (such as best management practices or nursery pest risk management systems) to address plant pests and mitigate the risk of plant pests in the movement of plants and plant products.
Cooperative agreements
The Secretary may enter into cooperative agreements with other Federal departments or agencies, States or political subdivisions of States, national governments, local governments of other nations, domestic or international organizations, domestic or international associations, and other persons to carry out this subsection.
Consultation
The Secretary shall consult with the National Plant Board, State departments of agriculture, and specialty crop grower organizations to establish funding priorities under this subsection for each fiscal year.
Administrative costs
Not more than 5 percent of the funds provided under this subsection may be used for administrative costs.
Funding
The Secretary shall use from the Trust Fund to carry out this subsection—
$10,000,000 for fiscal year 2008;
$15,000,000 for fiscal year 2009;
$30,000,000 for fiscal year 2010;
$45,000,000 for fiscal year 2011; and
$60,000,000 for fiscal year 2012.
Risk management purchase requirement
In general
Except as otherwise provided in this subsection, the eligible producers on a farm shall not be eligible for assistance under this section with respect to losses to an insurable commodity or noninsurable commodity if the eligible producers on the farm—
in the case of an insurable commodity, did not obtain a policy or plan of insurance for the insurable commodity under the Federal Crop Insurance Act (7 U.S.C. 1501 et seq.) (excluding a crop insurance pilot program under that Act) for the crop incurring the losses; or
in the case of a noninsurable commodity, did not file the required paperwork, and pay the administrative fee by the applicable State filing deadline, for the noninsurable commodity under the noninsured crop assistance program for the crop incurring the losses.
Minimum
To be considered to have obtained insurance under paragraph (1), an eligible producer on a farm shall have obtained a policy or plan of insurance with not less than 50 percent yield coverage at 55 percent of the insurable price for each crop grazed, planted, or intended to be planted for harvest on a whole farm.
Waiver
With respect to eligible producers that are limited resource, minority, or beginning farmers or ranchers, as determined by the Secretary, the Secretary may—
waive paragraph (1); and
provide disaster assistance under this section at a level that the Secretary determines to be equitable and appropriate.
Equitable relief
The Secretary may provide equitable relief to eligible producers on a farm that unintentionally fail to meet the requirements of paragraph (1) for 1 or more crops on a farm on a case-by-case basis, as determined by the Secretary.
Supplemental buy-up noninsured assistance program
In general
The Secretary shall establish a program under which eligible producers on a farm may purchase under the noninsured crop assistance program additional yield and price coverage for a crop, including a forage, hay, or honey crop, of—
60 or 65 percent (as elected by the producers on the farm) of the yield established for the crop under the program; and
100 percent of the price established for the crop under the program.
Fees
The Secretary shall establish and collect fees from eligible producers on a farm participating in the program established under paragraph (1) to offset all of the costs of the program, as determined by the Secretary.
Payment limitations
In general
The total amount of disaster assistance that an eligible producer on a farm may receive under this section may not exceed $100,000.
AGI limitation
Section 1001D of the Food Security Act of 1985 (7 U.S.C. 1308–3a or any successor provision) shall apply with respect to assistance provided under this section.
Period of effectiveness
This section shall be effective only for losses that are incurred as the result of a disaster, adverse weather, or other environmental condition that occurs on or before September 30, 2012, as determined by the Secretary.
Agriculture Disaster Relief Trust Fund
Creation of trust fund
There is established in the Treasury of the United
States a trust fund to be known as the Agriculture Disaster Relief Trust
Fund
, consisting of such amounts as may be appropriated or credited to
such Trust Fund as provided in this section.
Transfer to Trust Fund
In general
There are appropriated to the Agriculture Disaster Relief Trust Fund amounts equivalent to 3.34 percent of the amounts received in the general fund of the Treasury of the United States during fiscal years 2008 through 2012 attributable to the duties collected on articles entered, or withdrawn from warehouse, for consumption under the Harmonized Tariff Schedule of the United States.
Amounts based on estimates
The amounts appropriated under this section shall be transferred at least monthly from the general fund of the Treasury of the United States to the Agriculture Disaster Relief Trust Fund on the basis of estimates made by the Secretary of the Treasury. Proper adjustments shall be made in the amounts subsequently transferred to the extent prior estimates were in excess of or less than the amounts required to be transferred.
Administration
Reports
The Secretary of the Treasury shall be the trustee of the Agriculture Disaster Relief Trust Fund and shall submit an annual report to Congress each year on the financial condition and the results of the operations of such Trust Fund during the preceding fiscal year and on its expected condition and operations during the 5 fiscal years succeeding such fiscal year. Such report shall be printed as a House document of the session of Congress to which the report is made.
Investment
In general
The Secretary of the Treasury shall invest such portion of the Agriculture Disaster Relief Trust Fund as is not in his judgment required to meet current withdrawals. Such investments may be made only in interest bearing obligations of the United States. For such purpose, such obligations may be acquired—
on original issue at the issue price, or
by purchase of outstanding obligations at the market price.
Sale of obligations
Any obligation acquired by the Agriculture Disaster Relief Trust Fund may be sold by the Secretary of the Treasury at the market price.
Interest on certain proceeds
The interest on, and the proceeds from the sale or redemption of, any obligations held in the Agriculture Disaster Relief Trust Fund shall be credited to and form a part of such Trust Fund.
Expenditures from trust fund
Amounts in the Agriculture Disaster Relief Trust Fund shall be available for the purposes of making expenditures to meet those obligations of the United States incurred under section 901.
Authority to borrow
In general
There are authorized to be appropriated, and are appropriated, to the Agriculture Disaster Relief Trust Fund, as repayable advances, such sums as may be necessary to carry out the purposes of such Trust Fund.
Repayment of advances
In general
Advances made to the Agriculture Disaster Relief Trust Fund shall be repaid, and interest on such advances shall be paid, to the general fund of the Treasury when the Secretary determines that moneys are available for such purposes in such Trust Fund.
Rate of interest
Interest on advances made pursuant to this subsection shall be—
at a rate determined by the Secretary of the Treasury (as of the close of the calendar month preceding the month in which the advance is made) to be equal to the current average market yield on outstanding marketable obligations of the United States with remaining periods to maturity comparable to the anticipated period during which the advance will be outstanding, and
compounded annually.
.
Secretarial discretion
Section 442(c) of the Plant Protection Act (7 U.S.C.
7772(c)) is amended by striking of longer than 60 days
.
Conservation provisions
Land and species preservation provisions
Conservation reserve tax credit
Allowance of credit
Subpart B of part IV of subchapter A of chapter 1 is amended by adding at the end the following new section:
Conservation reserve credit
In general
There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the rental value of any land enrolled in the conservation reserve program.
Limitations
Limitation based on amount of tax
The credit allowed under this section for any taxable year shall not exceed the excess of—
the regular tax liability for the taxable year reduced by the sum of the credits allowable under subpart A and sections 27, 30, 30B, and 30C, over
the tentative minimum tax for the taxable year.
Limitation based on allocated portion of national limitation
The credit allowed under subsection (a) for any taxpayer for any taxable year shall not exceed the excess of—
the amount of the national credit limitation allocated to such taxpayer under subsection (c) for the fiscal year in which such taxable year ends and all prior fiscal years, over
the credit allowed under subsection (a) for all prior taxable years.
Conservation reserve credit limitation
In general
There is a conservation reserve credit limitation for each fiscal year of the United States. Such limitation is—
$750,000,000 for each of fiscal years 2008 through 2012, and
zero thereafter.
Allocation
In general
The Secretary, in consultation with the Secretary of Agriculture, shall allocate the conservation reserve credit limitation to taxpayers—
who are owners or operators of land enrolled in the conservation reserve program, and
who have entered into an agreement with the Secretary of Agriculture to receive an allocation under this paragraph in lieu of a rental payment for such year under section 1234 of the Food Security Act of 1985.
Allocation limitation
The Secretary may not allocate more than $50,000 to any 1 taxpayer for any fiscal year.
Carryforward of limitation
In general
If for any fiscal year the limitation under paragraph (1) (after the application of this paragraph) exceeds the amount allocated to all eligible taxpayers for such fiscal year, the limitation amount for the following fiscal year shall be increased by the amount of such excess.
Special rule for 2012
Notwithstanding subparagraph (A), no amount of the conservation reserve credit limitation may be carried to any fiscal year following fiscal year 2012.
Carryforward
If the amount of the credit allowable under subsection (a) for any taxpayer for any taxable year (determined without regard to subsection (b)(1)) exceeds the limitation under subsection (b)(1), such excess may be carried forward to the succeeding taxable year and added to the credit allowable under subsection (a) for such succeeding taxable year.
Other definitions and special rules
For purposes of this section—
Conservation reserve program
For purposes of this subsection, the term conservation reserve program means the conservation reserve program established under subchapter B of chapter 1 of subtitle D of title XII of the Food Security Act of 1985.
Denial of double benefit
No deduction or other credit shall be allowed under this chapter for any amount with respect to which a credit is allowed under subsection (a).
Recapture of allocation
If a taxpayer terminates a contract under the conservation reserve program before the end of the fiscal year with respect to which an allocation under subsection (c)(2) is made, the Secretary shall recapture the amount of the credit allowed under this section which bears the same ratio to the amount so allocated as the number of days in the fiscal year during which the contract was not in effect bears to 365.
Treatment of credit under income tax and self-employment income tax
Notwithstanding any agreement between the taxpayer and the Secretary of Agriculture, for purposes of this chapter and chapter 2, the amount of any credit received under this section shall not be treated as income.
.
Conforming amendment
The table of sections for subpart B of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 30C the following new item:
Sec. 30D. Conservation reserve credit.
.
Effective date
The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.
Exclusion of Conservation Reserve Program payments from SECA tax for certain individuals
Internal Revenue Code
Section 1402(a)(1) (defining net earnings from
self-employment) is amended by inserting , and including payments under
section 1233(2) of the Food Security Act of 1985 (16 U.S.C. 3833(2)) to
individuals receiving benefits under section 202 or 223 of the Social Security
Act
after crop shares
.
Social Security Act
Section
211(a)(1) of the Social Security Act
is amended by inserting , and including payments under section 1233(2)
of the Food Security Act of 1985 (16 U.S.C. 3833(2)) to individuals receiving
benefits under section 202 or 223
after crop
shares
.
Effective date
The amendments made by this section shall apply to payments made after December 31, 2007.
Permanent extension of special rule encouraging contributions of capital gain real property for conservation purposes
In general
Individuals
Subparagraph (E) of section 170(b)(1) (relating to contributions of qualified conservation contributions) is amended by striking clause (vi).
Corporations
Subparagraph (B) of section 170(b)(2) (relating to qualified conservation contributions by certain corporate farmers and ranchers) is amended by striking clause (iii).
Effective date
The amendments made by this section shall apply to contributions made in taxable years beginning after December 31, 2007.
Tax credit for recovery and restoration of endangered species
In general
Subpart B of part IV of subchapter A of chapter 1, as amended by this Act, is amended by adding at the end the following new section:
Endangered species recovery and restoration credit
In general
In the case of an eligible taxpayer, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of—
the habitat protection easement credit, plus
the habitat restoration credit.
Limitation
In general
The credit allowed under subsection (a) for any taxpayer for any taxable year shall not exceed the endangered species recovery credit limitation allocated to the eligible taxpayer under subsection (f) for the calendar year in which the taxpayer's taxable year ends.
Carryforwards
In general
If the amount of the credit allowable under subsection (a) for any taxpayer for any taxable year (determined without regard to paragraph (1)) exceeds the endangered species recovery credit limitation allocated under subsection (f) to such taxpayer for the calendar year in which the taxpayer's taxable year ends, such excess may be carried forward to the next taxable year for which an allocation is made to such taxpayer under subsection (f). Any amount carried to another taxable year under this subparagraph shall be treated as added to the credit allowable under subsection (a)(1) or (a)(2), whichever is appropriate, for such taxable year.
Carryforward of allocation amount
If the amount of the endangered species recovery credit limitation allocated to a taxpayer for any calendar year under subsection (f) exceeds the amount of the credit allowed to the taxpayer under subsection (a) for the taxable year ending in such calendar year, such excess may be carried forward to the next taxable year of the taxpayer. Any amount carried to another taxable year under this subparagraph shall be treated as allocated to the taxpayer for use in such taxable year under subsection (f).
Eligible taxpayer; qualified agreements
For purposes of this section—
In general
The term eligible taxpayer means—
a taxpayer who—
owns real property which contains the habitat of a qualified species, and
enters into a qualified perpetual habitat protection agreement, a qualified 30-year habitat protection agreement, or a qualified habitat protection agreement with respect to such real property, and
any other taxpayer who—
is a party to a qualified perpetual habitat protection agreement, a qualified 30-year habitat protection agreement, or a qualified habitat protection agreement, and
as part of any such agreement, agrees to assume responsibility for costs paid or incurred as a result of implementing such agreement.
Qualified perpetual habitat protection agreement
The term qualified perpetual habitat protection agreement means an agreement—
under which a taxpayer described in paragraph (1)(A) grants to the appropriate Secretary, the Secretary of Agriculture, the Secretary of Defense, or a State an easement in perpetuity for the protection of the habitat of a qualified species, and
which meets the requirements of paragraph (5).
Qualified 30-year habitat protection agreement
The term qualified 30-year habitat protection agreement means an agreement not described in paragraph (2)—
under which a taxpayer described in paragraph (1)(A) grants to the appropriate Secretary, the Secretary of Agriculture, the Secretary of Defense, or a State an easement for a period of 30 years or greater for the protection of the habitat of a qualified species, and
which meets the requirements of paragraph (5).
Qualified habitat protection agreement
The term qualified habitat protection agreement means an agreement—
under which a taxpayer described in paragraph (1)(A) enters into an agreement not described in paragraph (2) or (3) with the appropriate Secretary, the Secretary of Agriculture, the Secretary of Defense, or a State to protect the habitat of a qualified species for a specified period of time, and
which meets the requirements of paragraph (5).
Requirements
An agreement meets the requirements of this paragraph if the agreement—
is consistent with any recovery plan which is applicable and which has been approved for a qualified species under section 4 of the Endangered Species Act of 1973,
includes a habitat management plan agreed to by the appropriate Secretary and the eligible taxpayer, and
requires that technical assistance with respect to the duties under the habitat management plan be provided to the taxpayer by the appropriate Secretary or an entity approved by the appropriate Secretary.
Habitat protection easement credit
In general
For purposes of subsection (a)(1), the habitat protection easement credit for any taxable year is an amount equal to—
in the case of a taxpayer described in subsection (c)(1)(A) who has entered into a qualified perpetual habitat protection agreement during such taxable year, 100 percent of the excess (if any) of—
the fair market value of the real property with respect to which the qualified perpetual habitat protection agreement is made, determined on the day before such agreement is entered into, over
the fair market value of such property, determined on the day after such agreement is entered into,
in the case of a taxpayer described in subsection (c)(1)(A) who has entered into a qualified 30-year habitat protection agreement during such taxable year, 75 percent of such excess, and
in the case of any other taxpayer, zero.
Reduction for amount received for easement
The amount determined under paragraph (1) shall be reduced by any amount received by the taxpayer in connection with the easement.
Limitation based on amount of tax
The credit allowed under subsection (a)(1) for any taxable year shall not exceed the sum of—
the taxpayer's regular tax liability for the taxable year reduced by the sum of the credits allowable under subpart A and sections 27, 30, 30B, 30C, and 30D, and
the tax imposed by section 55(a) for the taxable year.
Carryforward of unused credit
If the credit allowable under subsection (a)(1) for any taxable year exceeds the limitation imposed by paragraph (3) for such taxable year, such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a)(1) for such succeeding taxable year.
Qualified appraisals required
No amount shall be taken into account under this subsection unless the eligible taxpayer includes with the taxpayer's return for the taxable year a qualified appraisal (within the meaning of section 170(f)(11)(E)) of the real property.
Habitat restoration credit
In general
For purposes of subsection (a)(2), the habitat restoration credit for any taxable year shall be an amount equal to—
in the case of a qualified perpetual habitat protection agreement, 100 percent of the costs paid or incurred by an eligible taxpayer during such taxable year pursuant to the habitat management plan under such agreement,
in the case of a qualified 30-year habitat protection agreement, 75 percent of the costs paid or incurred by an eligible taxpayer during such taxable year pursuant to the habitat management plan under such agreement, and
in the case of a qualified habitat protection agreement, 50 percent of the costs paid or incurred by an eligible taxpayer during such taxable year pursuant to the habitat management plan under such agreement.
Limitation based on amount of tax
The credit allowed under subsection (a)(2) for any taxable year shall not exceed the excess (if any) of—
the regular tax liability for the taxable year reduced by the sum of the credits allowable under subpart A, sections 27, 30, 30B, 30C, 30D, and subsection (a)(1), over
the tentative minimum tax for the taxable year.
Carryforward of unused credit
If the credit allowable under subsection (a)(2) for any taxable year exceeds the limitation imposed by paragraph (2) for such taxable year, such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a)(2) for such succeeding taxable year.
Special rules
Certain costs not included
No amount shall be taken into account with respect to any cost which is paid or incurred by a taxpayer to comply with any requirement of a Federal, State, or local government (other than costs required under an agreement described in subsection (c)).
Subsidized financing
For purposes of paragraph (1), the amount of costs paid or incurred by an eligible taxpayer pursuant to any habitat management plan described in subsection (c)(5)(B) shall be reduced by the amount of any financing provided under any Federal or State program a principal purpose of which is to subsidize financing for the conservation of the habitat of a qualified species.
Endangered species recovery credit limitation
In general
There is an endangered species recovery credit limitation for each calendar year. Such limitation is—
for 2008, 2009, 2010, 2011, and 2012—
with respect to allocations described in paragraph (2)(A)—
$5,000,000 with respect to qualified perpetual habitat protection agreements,
$2,000,000 with respect to qualified 30-year habitat protection agreements, and
$1,000,000 with respect to qualified habitat protection agreements, and
with respect to allocations described in paragraph (2)(B)—
$290,000,000 with respect to qualified perpetual habitat protection agreements,
$55,000,000 with respect to qualified 30-year habitat protection agreements, and
$35,000,000 with respect to qualified habitat protection agreements, and
except as provided in paragraph (3), zero thereafter.
Allocation of limitation
Allocations in coordination with the Secretary of Agriculture
The limitations described in paragraph (1)(A)(i) shall be allocated to eligible taxpayers by the Secretary in consultation with the Secretary of Agriculture.
Other allocations
In general
The limitations described in paragraph (1)(A)(ii) shall be allocated to eligible taxpayers in consultation with the Secretary of the Interior and the Secretary of Commerce.
Establishment of allocation program
Not later than 180 days after the date of the enactment of this Act, the Secretary, in consultation with the Secretary of the Interior and the Secretary of Commerce, shall, by regulation, establish a program to process applications from eligible taxpayers and to determine how to best allocate the credit limitations under clause (i) taking into account the considerations described in clause (iii).
Considerations
In accepting applications to make allocations to eligible taxpayers under this section, priority shall be given to taxpayers with agreements—
relating to habitats that will significantly increase the likelihood of recovering and delisting a species as an endangered species or a threatened species (as defined under section 2 of the Endangered Species Act of 1973),
that are cost-effective and maximize the benefits to a qualified species per dollar expended,
relating to habitats of species which have a federally approved recovery plan pursuant to section 4 of the Endangered Species Act of 1973,
relating to habitats with the potential to contribute significantly to the improvement of the status of a qualified species,
relating to habitats with the potential to contribute significantly to the eradication or control of invasive species that are imperiling a qualified species,
with habitat management plans that will manage multiple qualified species,
with habitat management plans that will create adjacent or proximate habitat for the recovery of a qualified species,
relating to habitats for qualified species with an urgent need for protection,
with habitat management plans that assist in preventing the listing of a species as endangered or threatened under the Endangered Species Act of 1973 or a similar State law,
with habitat management plans that may resolve conflicts between the protection of qualified species and otherwise lawful human activities, and
with habitat management plans that may resolve conflicts between the protection of a qualified species and military training or other military operations.
Carryover of unused limitation
If for any calendar year any of the limitations under paragraph (1) (after the application of this paragraph) exceeds the amount allocated to eligible taxpayers for such calendar year, such limitation amount for the following calendar year shall be increased by the amount of such excess.
Other definitions and special rules
Appropriate Secretary
The term appropriate Secretary has the meaning given to the term Secretary under section 3(15) of the Endangered Species Act of 1973.
Habitat management plan
The term habitat management plan means, with respect to any habitat, a plan which—
identifies one or more qualified species to which the plan applies,
is designed to—
restore or enhance the habitat of the qualified species, or
reduce threats to the qualified species through the management of the habitat,
describes the current condition of the habitat to be restored or enhanced,
describes the threats to the qualified species that are intended to be reduced through the plan,
describes the management practices to be undertaken by the taxpayer,
provides a schedule of deadlines for undertaking such management practices and the expected responses of the habitat and the species,
requires monitoring of the management practices and the status of the qualified species and its habitat, and
describes the technical assistance to be provided to the taxpayer and identifies the entity that will provide such assistance.
Qualified species
The term qualified species means—
any species listed as an endangered species or threatened species under the Endangered Species Act of 1973, or
any species for which a finding has been made under section 4(b)(3) of the Endangered Species Act of 1973 that listing under such Act may be warranted.
Taking
The term taking has the meaning given to such term under the Endangered Species Act of 1973.
Reduction in basis
For purposes of this subtitle—
Habitat protection easement credit
The basis of any property for which a credit is allowed under subsection (a)(1) shall be reduced by the amount of basis which is allocated, under regulations prescribed by the Secretary, to the easement granted as part of a qualified perpetual habitat protection agreement or a qualified 30-year habitat protection agreement.
Habitat restoration credit
If a credit is allowed under subsection (a)(2) for any expenditure with respect to any property, the increase in the basis of such property which would (but for this subparagraph) result from such expenditure shall be reduced by the amount of the credit so allowed.
Denial of double benefit
No deduction or other credit shall be allowed under this chapter for any amount with respect to which a credit is allowed under subsection (a).
Certification
No credit shall be allowed under subsection (a) unless the appropriate Secretary certifies that any agreement described in subsection (c) will contribute to the recovery of a qualified species.
Request for authorization of incidental takings
The Secretary shall request the appropriate Secretary to consider whether to authorize under the Endangered Species Act of 1973 takings by an eligible taxpayer of a qualified species to which an agreement described in subsection (c) relates if the takings are incidental to—
the restoration, enhancement, or management of the habitat pursuant to the habitat management plan under the agreement, or
the use of the property to which the agreement pertains at any time after the expiration of the easement or the specified period described in subsection (c)(4)(A), but only if such use will leave the qualified species at least as well off on the property as it was before the agreement was made.
Recapture
The Secretary shall, by regulations, provide for recapturing the benefit under any credit allowable under subsection (a) if the Secretary determines that—
the taxpayer has failed to carry out the duties of the taxpayer under the terms of a qualified perpetual habitat protection agreement, a qualified 30-year habitat protection agreement, or a qualified habitat protection agreement, and
there are no other available means to remediate such failure.
.
GAO Study
In general
The Comptroller General of the United States shall undertake a study on the effectiveness of the credit allowed under section 30E of the Internal Revenue Code of 1986 (as added by this Act).
Issues to be studied
The study under paragraph (1) shall—
evaluate—
the contributions that habitat management plans established under such credit have made in restoring or enhancing species habitat and reducing threats to species, and
the implementation of the credit allocation program established in section 30E(f)(2) of such Code (as so added), and
include recommendations for improving the effectiveness of such credit.
Reports
Interim report
Not later than 3 years after the date of the enactment of this Act, the Comptroller General of the United States shall submit to Congress an interim report on the study conducted under paragraph (1).
Final report
Not later than 5 years after the date of the enactment of this Act, the Comptroller General of the United States shall submit to Congress a final report on the study conducted under paragraph (1).
Conforming amendments
Section 1016(a) is amended by striking
and
at the end of paragraph (36), by striking the period at the
end of paragraph (37) and inserting , and
, and by inserting
after paragraph (37) the following new paragraph:
to the extent provided in section 30E(g)(5).
.
The table of sections for subpart B of part IV of subchapter A of chapter 1, as amended by this Act, is amended by inserting after the item relating to section 30D the following new item:
Sec. 30E. Endangered species recovery and restoration credit.
.
Effective date
The amendments made by this section shall apply to taxable years beginning after December 31, 2007.
Deduction for endangered species recovery expenditures
Deduction for endangered species recovery expenditures
In general
Paragraph (1) of section 175(c) (relating
to definitions) is amended by inserting after the first sentence the following
new sentence: Such term shall include expenditures paid or incurred for
the purpose of achieving site-specific management actions recommended in
recovery plans approved pursuant to the Endangered Species Act of
1973.
.
Conforming amendments
Section 175 is amended by inserting
, or for endangered species recovery
after prevention of
erosion of land used in farming
each place it appears in subsections
(a) and (c).
The heading of section 175 is amended by
inserting ; endangered
species recovery expenditures
before the
period.
The item relating to section 175 in the
table of sections for part VI of subchapter B of chapter 1 is amended by
inserting ; endangered species recovery expenditures
before the
period.
Limitations
Paragraph (3) of section 175(c) (relating to additional limitations) is amended—
in the heading, by inserting
or endangered species
recovery plan
after conservation plan
,
and
in subparagraph (A)(i), by inserting
or the recovery plan approved pursuant to the Endangered Species Act of
1973
after Department of Agriculture
.
Effective date
The amendments made by this section shall apply to expenditures paid or incurred after the date of the enactment of this Act.
Exclusion for certain payments and programs relating to fish and wildlife
In general
Subsection (a) of section 126 (relating to certain cost-sharing payments) is amended by redesignating paragraph (10) as paragraph (13) and by inserting after paragraph (9) the following new paragraphs:
The Partners for Fish and Wildlife Program authorized by the Partners for Fish and Wildlife Act.
The Landowner Incentive Program, the State Wildlife Grants Program, and the Private Stewardship Grants Program authorized by the Fish and Wildlife Act of 1956.
The Forest Health Protection Program and the program related to integrated pest management authorized by the Cooperative Forestry Assistance Act of 1978.
.
Effective date
The amendments made by this section shall apply to payments received after the date of the enactment of this Act.
Credit for easements granted under certain Department of Agriculture conservation programs
In general
Subpart B of part IV of subchapter A of chapter 1, as amended by this Act, is amended by adding at the end the following new section:
Agriculture conservation easement credit
In general
There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of—
the wetlands reserve conservation credit, plus
the working grassland protection credit.
Limitations
Limitation based on amount of tax
The credit allowed under this section for any taxable year shall not exceed the excess of—
the regular tax liability for the taxable year reduced by the sum of the credits allowable under subpart A and sections 27, 30, 30B, 30C, 30D, 30E(a)(1), and 30E(a)(2), over
the tentative minimum tax for the taxable year.
Limitation based on allocated portion of national limitation
The credit allowed under subsection (a) for any taxpayer for any taxable year shall not exceed the excess of—
the amount of the national credit limitation allocated to such taxpayer under subsection (e) for such taxable year and all prior taxable years, over
the credit allowed under subsection (a) for all prior taxable years.
Wetlands reserve conservation credit
In general
For purposes of subsection (a)(1), in the case of a wetlands reserve eligible taxpayer, the wetlands reserve conservation credit for any taxable year is an amount equal to the applicable percentage of the wetlands reserve easement value.
Wetlands reserve eligible taxpayer
For purposes of this section, the term wetlands reserve eligible taxpayer means any taxpayer who—
has granted an easement to the Secretary of Agriculture under the wetlands reserve program, and
who has entered into an agreement with the Secretary of Agriculture to receive an allocation under subsection (e)(2) in lieu of a payment under section 1237A(f) of the Food Security Act of 1985.
Applicable percentage
For purposes of paragraph (1), the term applicable percentage means the percentage equal to—
100 percent, minus
the highest percentage of tax which would apply under section 1 or 11 with respect to the taxpayer if the taxable income of the taxpayer were increased by an amount equal to the wetlands reserve easement value.
Wetlands reserve easement value
For purposes of this section, the term wetlands reserve easement value means the lesser of—
the product of—
the wetlands reserve geographic area rate for the area in which the real property to which the easement pertains is located, and
the number of acres to which the easement applies, or
the value of any payment to which the taxpayer would be entitled with respect to such easement under section 1237A(f) of the Food Security Act of 1985 if the taxpayer had not entered into an agreement described in paragraph (2)(B).
Wetlands reserve geographic area rate
For purposes of paragraph (4)(A)(i), the wetlands reserve geographic area rate shall be the rate per acre, determined by the Secretary in consultation with the Secretary of Agriculture, appropriate for easements granted under the wetlands reserve program in different geographic areas.
Working grassland protection credit
In general
For purposes of subsection (a)(2), in the case of any working grassland eligible taxpayer, the working grassland protection credit for any taxable year is an amount equal to the applicable percentage of the working grassland easement value.
Working grassland eligible taxpayer
For purposes of this section, the term working grassland eligible taxpayer means any taxpayer who—
has granted an easement under the working grassland protection program to an eligible easement holder, and
who has entered into an agreement with the Secretary of Agriculture to receive an allocation under subsection (e)(2) in lieu of a payment under section 1238P(b) of the Food Security Act of 1985.
Applicable percentage
For purposes of paragraph (1), the term applicable percentage means the percentage equal to—
100 percent, minus
the highest percentage of tax which would apply under section 1 or 11 with respect to the taxpayer if the taxable income of the taxpayer were increased by an amount equal to the working grassland easement value.
Working grassland easement value
For purposes of this section, the term working grassland easement value means—
in the case of a permanent conservation easement (within the meaning of section 1238N of the Food Security Act of 1985), the lesser of—
the product of—
the working grassland protection geographic area rate for the area in which the real property to which the easement pertains is located, and
the number of acres to which the easement applies, or
the value of any payment to which the taxpayer would be entitled in return for such easement under section 1238P(b)(1)(A)(i) of the Food Security Act of 1985 if the taxpayer had not entered into an agreement described in paragraph (2)(B), and
in the case of a 30-year conservation easement (within the meaning of section 1238N of such Act), the lesser of—
30 percent of the lesser of the amount determined under clause (i) or (ii) of subparagraph (A), or
the value of any payment to which the taxpayer would be entitled in return for such easement under section 1238P(b)(1)(A)(ii) of such Act if the taxpayer had not entered into an agreement described in paragraph (2)(B).
Working grassland protection geographic area rate
For purposes of paragraph (4)(A)(i)(I), the working grassland protection geographic area rate shall be the rate, determined by the Secretary in consultation with the Secretary of Agriculture, appropriate for easements granted under the working grassland protection program in different geographic areas.
National conservation credit limitation
In general
The aggregate credits allowed under subsection (a) for all taxpayers shall not exceed $1,000,000,000.
Allocation
The Secretary, in consultation with the Secretary of Agriculture, shall allocate the credit limitation under paragraph (1) to taxpayers who grant easements under the wetlands reserve program and the working grassland protection program.
Limitation on allocation
No amount of the credit limitation may be allocated to any taxpayer for any taxable year which ends after September 30, 2012.
Carryforward
If the amount of the credit allowable under subsection (a) for any taxpayer for any taxable year (determined without regard to subsection (b)(1)) exceeds the limitation under subsection (b)(1), such excess may be carried forward to the succeeding taxable year and added to the credit allowable under subsection (a) for such succeeding taxable year.
Other definitions and special rules
For purposes of this section—
Wetlands reserve program
The term wetlands reserve program means the wetlands reserve program established under subchapter C of chapter 1 of subtitle D of title XII of the Food Security Act of 1985.
Working grassland protection program
The term working grassland protection program means the grassland reserve program established under subchapter C of chapter 2 of subtitle D of title XII of the Food Security Act of 1985.
Eligible easement holder
The term eligible easement holder means the Secretary of Agriculture or a State.
Denial of double benefit
No deduction or other credit shall be allowed under this chapter for any amount with respect to which a credit is allowed under subsection (a).
Reduction in basis
For purposes of this subtitle, the basis of any property for which a credit is allowed under subsection (a) shall be reduced by the amount of basis which is allocated, under regulations prescribed by the Secretary, to the easement granted under the wetlands reserve program or the working grassland protection program.
Recapture
The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) if the Secretary, in consultation with the Secretary of Agriculture, determines that—
the eligible taxpayer has failed to carry out the duties of the taxpayer under the terms of the easement, and
there are no other available means to remediate such failure.
.
Conforming amendments
Section 1016(a), as amended by this Act, is
amended by striking and
at the end of paragraph (37), by
striking the period at the end of paragraph (38) and inserting ,
and
, and by inserting after paragraph (38) the following new
paragraph:
to the extent provided in section 30F(g)(5).
.
The table of sections for subpart B of part IV of subchapter A of chapter 1, as amended by this Act, is amended by inserting after the item relating to section 30E the following new item:
.
Effective date
The amendments made by this section shall apply to easements granted after September 30, 2007, in taxable years ending after such date.
Timber provisions
Forest conservation bonds
Tax-Exempt bond financing
In general
For purposes of the Internal Revenue Code of 1986, any qualified forest conservation bond shall be treated as an exempt facility bond under section 142 of such Code.
Qualified forest conservation bond
For purposes of this section, the term qualified forest conservation bond means any bond issued as part of an issue if—
95 percent or more of the net proceeds (as defined in section 150(a)(3) of such Code) of such issue are to be used for qualified project costs, and
such bond is issued before the date which is 36 months after the date of the enactment of this Act.
Limitation on aggregate amount issued
In general
The maximum aggregate face amount of bonds which may be issued under this subsection shall not exceed $1,500,000,000 for all projects (excluding refunding bonds).
Enforcement of limitation
An issue shall not be treated as an issue described in paragraph (2) if the aggregate face amount of bonds issued pursuant to such issue for any qualified projects costs (when added to the aggregate face amount of bonds previously so issued for such costs) exceeds the amount allocated under subparagraph (C).
Initial allocation of limitation
The limitation described in subparagraph (A) shall be allocated by the Secretary of the Treasury among qualified organizations as follows:
35 percent for qualified project costs with respect to the cost of acquisition by any qualified organization in the Pacific Northwest region.
30 percent for qualified project costs with respect to the cost of acquisition by any qualified organization in the Western region.
17.5 percent for qualified project costs with respect to the cost of acquisition by any qualified organization in the Southeast region.
17.5 percent for qualified project costs with respect to the cost of acquisition by any qualified organization in the Northeast region.
Secondary allocation procedure
If for the period ending on the last day of the 24th month after the date of the enactment of this Act, the limitation amount for any region under subparagraph (C) exceeds the amount of bonds allocated by the Secretary of the Treasury during such period, the Secretary of the Treasury may allocate such excess among qualified organizations in any other region in such manner as the Secretary of the Treasury determines appropriate.
Regions
For purposes of this paragraph—
Pacific Northwest region
The term Pacific Northwest region means Region 6 as defined by the United States Forest Service of the Department of Agriculture under section 200.2 of title 36, Code of Federal Regulations.
Western region
The term Western region means Regions 1, 2, 3, 4, 5, and 10 (as so defined).
Southeast region
The term Southeast region means Region 8 (as so defined).
Northeast region
The term Northeast region means Region 9 (as so defined).
Qualified project costs
For purposes of this subsection, the term qualified project costs means the costs of acquisition by a qualified organization from an unrelated person of forests and forest land which, at the time of acquisition or immediately thereafter, are subject to a conservation restriction described in subsection (c)(2).
Special rules
In applying the Internal Revenue Code of 1986 to any qualified forest conservation bond, the following modifications shall apply:
Section 146 of such Code (relating to volume cap) shall not apply.
For purposes of section 147(b) of such Code (relating to maturity may not exceed 120 percent of economic life), the land and standing timber acquired with proceeds of qualified forest conservation bonds shall have an economic life of 35 years.
Subsections (c) and (d) of section 147 of such Code (relating to limitations on acquisition of land and existing property) shall not apply.
Treatment of current refunding bonds
Paragraphs (2)(B) and (3) shall not apply to any bond (or series of bonds) issued to refund a qualified forest conservation bond issued before the date which is 36 months after the date of the enactment of this Act, if—
the average maturity date of the issue of which the refunding bond is a part is not later than the average maturity date of the bonds to be refunded by such issue,
the amount of the refunding bond does not exceed the outstanding amount of the refunded bond, and
the net proceeds of the refunding bond are used to redeem the refunded bond not later than 90 days after the date of the issuance of the refunding bond.
Effective date
This subsection shall apply to obligations issued on or after the date which is 180 days after the date of the enactment of this Act.
Items from qualified harvesting activities not subject to tax or taken into account
In general
Income, gains, deductions, losses, or credits from a qualified harvesting activity conducted by a qualified organization shall not be subject to tax or taken into account under subtitle A of the Internal Revenue Code of 1986.
Limitation
The amount of income excluded from gross income under paragraph (1) for any taxable year shall not exceed the amount used by the qualified organization to make debt service payments during such taxable year for qualified forest conservation bonds.
Qualified harvesting activity
For purposes of paragraph (1)—
In general
The term qualified harvesting activity means the sale, lease, or harvesting, of standing timber—
on land owned by a qualified organization which was acquired with proceeds of qualified forest conservation bonds, and
pursuant to a qualified conservation plan adopted by the qualified organization.
Exceptions
Cessation as qualified organization
The term qualified harvesting activity shall not include any sale, lease, or harvesting for any period during which the organization ceases to qualify as a qualified organization.
Exceeding limits on harvesting
The term qualified harvesting activity shall not include any sale, lease, or harvesting of standing timber on land acquired with proceeds of qualified forest conservation bonds to the extent that—
the average annual area of timber harvested from such land exceeds 2.5 percent of the total area of such land, or
the quantity of timber removed from such land exceeds the quantity which can be removed from such land annually in perpetuity on a sustained-yield basis with respect to such land.
Termination
This subsection shall not apply to any qualified harvesting activity of a qualified organization occurring after the date on which—
there is no outstanding qualified forest conservation bond with respect to such qualified organization, or
any such bond ceases to be a tax-exempt bond.
Partial recapture of benefits if harvesting limit exceeded
If, as of the date that this subsection ceases to apply under paragraph (4)(B), the average annual area of timber harvested from the land exceeds the requirement of subclause (I) or (II) of paragraph (3)(B)(ii), the tax imposed by chapter 1 of the Internal Revenue Code of 1986 shall be increased, under rules prescribed by the Secretary of the Treasury, by the sum of the tax benefits attributable to such excess and interest at the underpayment rate under section 6621 of such Code for the period of the underpayment.
Definitions
For purposes of this section—
Qualified conservation plan
The term qualified conservation plan means a multiple land use program or plan which—
is designed and administered primarily for the purposes of protecting and enhancing wildlife and fish, timber, scenic attributes, recreation, and soil and water quality of the forest and forest land,
mandates that conservation of forest and forest land is the single-most significant use of the forest and forest land, and
requires that timber harvesting be consistent with—
restoring and maintaining reference conditions for the region’s ecotype,
restoring and maintaining a representative sample of young, mid, and late successional forest age classes,
maintaining or restoring the resources’ ecological health for purposes of preventing damage from fire, insect, or disease,
maintaining or enhancing wildlife or fish habitat, or
enhancing research opportunities in sustainable renewable resource uses.
Conservation restriction
The conservation restriction described in this paragraph is a restriction which—
is granted in perpetuity to an unrelated person which is described in section 170(h)(3) of such Code and which, in the case of a nongovernmental unit, is organized and operated for conservation purposes,
meets the requirements of clause (ii) or (iii)(II) of section 170(h)(4)(A) of such Code,
obligates the qualified organization to pay the costs incurred by the holder of the conservation restriction in monitoring compliance with such restriction, and
requires an increasing level of conservation benefits to be provided whenever circumstances allow it.
Qualified organization
The term qualified organization means a nonprofit organization—
substantially all the activities of which are charitable, scientific, or educational, including acquiring, protecting, restoring, managing, and developing forest lands and other renewable resources for the long-term charitable, educational, scientific, and public benefit,
which periodically conducts educational programs designed to inform the public of environmentally sensitive forestry management and conservation techniques,
which has at all times a board of directors—
at least 20 percent of the members of which are representatives of the conservation community,
at least 20 percent of the members of which are public officials, and
not more than one-third of the members of which are individuals who are or were at any time within 5 years before the beginning of a term of membership on the board, an employee of, independent contractor with respect to, officer of, director of, or held a material financial interest in, a commercial forest products enterprise with which the qualified organization has a contractual or other financial arrangement,
the bylaws of which require at least two-thirds of the members of the board of directors to vote affirmatively to approve the qualified conservation plan and any change thereto, and
upon dissolution, is required to dedicate its assets to—
an organization described in section 501(c)(3) of such Code which is organized and operated for conservation purposes, or
a governmental unit described in section 170(c)(1) of such Code.
Unrelated person
The term unrelated person means a person who is not a related person.
Related person
A person shall be treated as related to another person if—
such person bears
a relationship to such other person described in section 267(b) (determined
without regard to paragraph (9) thereof), or 707(b)(1), of such Code,
determined by substituting 25 percent
for 50
percent
each place it appears therein, and
in the case such other person is a non-profit organization, if such person controls directly or indirectly more than 25 percent of the governing body of such organization.
Deduction for qualified timber gain
In general
Part I of subchapter P of chapter 1 is amended by adding at the end the following new section:
Deduction for qualified timber gain
In general
In the case of a taxpayer which elects the application of this section for a taxable year, there shall be allowed a deduction against gross income in an amount equal to 60 percent of the lesser of—
the taxpayer's qualified timber gain for such year, or
the taxpayer's net capital gain for such year.
Qualified timber gain
For purposes of this section, the term qualified timber gain means, with respect to any taxpayer for any taxable year, the excess (if any) of—
the sum of the taxpayer's gains described in subsections (a) and (b) of section 631 for such year, over
the sum of the taxpayer's losses described in such subsections for such year.
Special rules for pass-thru entities
In the case of any qualified timber gain of a pass-thru entity (as defined in section 1(h)(10)) other than a real estate investment trust, the election under this section shall be made separately by each taxpayer subject to tax on such gain.
In the case of any qualified timber gain of a real estate investment trust, the election under this section shall be made by the real estate investment trust.
Election
An election under this section may be made only with respect to the first taxable year beginning after the date of the enactment of this section.
.
Coordination with maximum capital gains rates
Taxpayers other than corporations
Paragraph (2) of section 1(h) is amended to read as follows:
Reduction of net capital gain
For purposes of this subsection, the net capital gain for any taxable year shall be reduced (but not below zero) by the sum of—
the amount which the taxpayer takes into account as investment income under section 163(d)(4)(B)(iii), and
in the case of a taxable year with respect to which an election is in effect under section 1203, the lesser of—
the amount described in paragraph (1) of section 1203(a), or
the amount described in paragraph (2) of such section.
.
Corporations
Section 1201 is amended by redesignating subsection (b) as subsection (c) and inserting after subsection (a) the following new subsection:
Qualified timber gain not taken into account
For purposes of this section, in the case of a corporation with respect to which an election is in effect under section 1203, the net capital gain for any taxable year shall be reduced (but not below zero) by the corporation's qualified timber gain (as defined in section 1203(b)).
.
Deduction allowed whether or not individual itemizes other deductions
Subsection (a) of section 62 is amended by inserting before the last sentence the following new paragraph:
Qualified timber gains
The deduction allowed by section 1203.
.
Deduction allowed in computing adjusted current earnings
Subparagraph (C) of section 56(g)(4) is amended by adding at the end the following new clause:
Deduction for qualified timber gain
Clause (i) shall not apply to any deduction allowed under section 1203.
.
Deduction allowed in computing taxable income of electing small business trusts
Subparagraph (C) of section 641(c)(2) is amended by inserting after clause (iii) the following new clause:
The deduction allowed under section 1203.
.
Treatment of qualified timber gain of real estate investment trusts
Paragraph (3) of section 857(b) is amended by inserting after subparagraph (F) the following new subparagraph:
Treatment of qualified timber gain
For purposes of this part, in the case of a real estate investment trust with respect to which an election is in effect under section 1203—
Reduction of net capital gain
The net capital gain of the real estate investment trust for any taxable year shall be reduced (but not below zero) by the real estate investment trust's qualified timber gain (as defined in section 1203(b)).
Adjustment to shareholder’s basis attributable to deduction for qualified timber gains
In general
The adjusted basis of shares in the hands of the shareholder shall be increased by the amount of the deduction allowable under section 1203(a) as provided in subclauses (II) and (III).
Allocation of basis increase for distributions made during taxable year
For any taxable year of a real estate investment trust for which an election is in effect under section 1203, in the case of a distribution made with respect to shares during such taxable year of amounts attributable to the deduction allowable under section 1203(a), the adjusted basis of such shares shall be increased by the amount of such distributions.
Allocation of excess
If the deduction allowable under section 1203(a) for a taxable year exceeds the amount of distributions described in subclause (II), the excess shall be allocated to every shareholder of the real estate investment trust at the close of the trust’s taxable year in the same manner as if a distribution of such excess were made with respect to such shares.
Designations
To the extent provided in regulations, a real estate investment trust shall designate the amounts described in subclauses (II) and (III) in a manner similar to the designations provided with respect to capital gains described in subparagraphs (C) and (D).
Definitions
As used in this subparagraph, the terms
share
and shareholder
shall include beneficial
interests and holders of beneficial interests, respectively.
Earnings and profits deduction for qualified timber gains
The deduction allowable under section 1203(a) for a taxable year shall be allowed as a deduction in computing the earnings and profits of the real estate investment trust for such taxable year. The earnings and profits of any such shareholder which is a corporation shall be appropriately adjusted in accordance with regulations prescribed by the Secretary.
.
Loss attributable to basis adjustment for deduction for qualified timber gain of real estate investment trusts
Section 857(b)(8) is amended by redesignating subparagraphs (B) and (C) as subparagraphs (C) and (D), respectively, and by inserting after subparagraph (A) the following new subparagraph:
Loss attributable to basis adjustment for deduction for qualified timber gain
If—
a shareholder of a real estate investment trust receives a basis adjustment provided under subsection (b)(3)(G)(ii), and
the taxpayer has held such share or interest for 6 months or less,
.
Subparagraph (D) of section 857(b)(8), as
redesignated by paragraph (1), is amended by striking subparagraph
(A)
and inserting subparagraphs (A) and (B)
.
Conforming amendments
Subparagraph (B) of section 172(d)(2) is amended to read as follows:
the exclusion under section 1202, and the deduction under section 1203, shall not be allowed.
.
Paragraph (4) of section 642(c) is amended
by striking the first sentence and inserting To the extent that the
amount otherwise allowable as a deduction under this subsection consists of
gain described in section 1202(a) or qualified timber gain (as defined in
section 1203(b)), proper adjustment shall be made for any exclusion allowable
to the estate or trust under section 1202 and for any deduction allowable to
the estate or trust under section 1203.
Paragraph (3) of section 643(a) is amended
by striking the last sentence and inserting The exclusion under section
1202 and the deduction under section 1203 shall not be taken into
account.
.
Subparagraph (C) of section 643(a)(6) is amended to read as follows:
Paragraph (3) shall not apply to a foreign trust. In the case of such a trust—
there shall be included gains from the sale or exchange of capital assets, reduced by losses from such sales or exchanges to the extent such losses do not exceed gains from such sales or exchanges, and
the deduction under section 1203 shall not be taken into account.
.
Paragraph (4) of section 691(c) is amended
by inserting 1203,
after 1202,
.
Paragraph (2) of section 871(a) is amended
by inserting or 1203,
after 1202,
.
The table of sections for part I of subchapter P of chapter 1 is amended by adding at the end the following new item:
Sec. 1203. Deduction for qualified
timber gain.
.
Effective date
The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.
Excise tax not applicable to section 1203 deduction of real estate investment trusts
In general
Ordinary income
Subparagraph (B) of section 4981(e)(1) is amended to read as follows:
by not taking into account—
any gain or loss from the sale or exchange of capital assets (determined without regard to any reduction that would be applied for purposes of section 857(b)(3)(G)(i)), and
any deduction allowable under section 1203, and
.
Capital gain net income
Section 4981(e)(2) is amended by adding at the end the following new subparagraph:
Qualified timber gain
The amount determined under subparagraph (A) shall be determined without regard to any reduction that would be applied for purposes of section 857(b)(3)(G)(i) but shall be reduced for any deduction allowable under section 1203 for such calendar year.
.
Effective date
The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.
Timber REIT modernization
In general
Section 856(c)(5) is amended by adding after subparagraph (G) the following new subparagraph:
Treatment of timber gains
In general
Gain from the sale of real property described in paragraph (2)(D) and (3)(C) shall include gain which is—
recognized by an election under section 631(a) from timber owned by the real estate investment trust, the cutting of which is provided by a taxable REIT subsidiary of the real estate investment trust;
recognized under section 631(b); or
income which would constitute gain under subclause (I) or (II) but for the failure to meet the 1-year holding period requirement.
Special rules
For purposes of this subtitle, cut timber, the gain of which is recognized by a real estate investment trust pursuant to an election under section 631(a) described in clause (i)(I) or so much of clause (i)(III) as relates to clause (i)(I), shall be deemed to be sold to the taxable REIT subsidiary of the real estate investment trust on the first day of the taxable year.
For purposes of this subtitle, income described in this subparagraph shall not be treated as gain from the sale of property described in section 1221(a)(1).
Termination
This subparagraph shall not apply to dispositions after the termination date.
.
Termination date
Subsection (c) of section 856 is amended by adding at the end the following new paragraph:
Termination date
For purposes of this subsection, the term termination date means the last day of the first taxable year beginning after the date of the enactment of this paragraph.
.
Effective date
The amendments made by subsection (a) shall apply to dispositions in taxable years beginning after the date of the enactment of this Act.
Mineral royalty income qualifying income for timber REITs
In general
Section 856(c)(2) is
amended by striking and
at the end of subparagraph (G), by
inserting and
at the end of subparagraph (H), and by adding
after subparagraph (H) the following new subparagraph:
mineral royalty income earned in the first taxable year beginning after the date of the enactment of this subparagraph from real property owned by a timber real estate investment trust held, or once held, in connection with the trade or business of producing timber by such real estate investment trust;
.
Timber real estate investment trust
Section 856(c)(5), as amended by this Act, is amended by adding after subparagraph (H) the following new subparagraph:
Timber real estate investment trust
The term timber real estate investment trust means a real estate investment trust in which more than 50 percent in value of its total assets consists of real property held in connection with the trade or business of producing timber.
.
Effective date
The amendments by this section shall apply to taxable years beginning after the date of the enactment of this Act.
Modification of taxable REIT subsidiary asset test for timber REITs
In general
Section
856(c)(4)(B)(ii) is amended by inserting (in the case of a quarter which
closes on or before the termination date, 25 percent in the case of a timber
real estate investment trust)
after not more than 20 percent of
the value of its total assets is represented by securities of one or more
taxable REIT subsidiaries
.
Effective date
The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.
Safe harbor for timber property
In general
Section 857(b)(6) (relating to income from prohibited transactions) is amended by adding at the end the following new subparagraph:
Special rules for sales to qualified organizations
In general
In the case of sale of a real estate asset (as defined in section 856(c)(5)(B)) to a qualified organization (as defined in section 170(h)(3)) exclusively for conservation purposes (within the meaning of section 170(h)(1)(C)), subparagraph (D) shall be applied—
by substituting
2 years
for 4 years
in clause (i), and
by substituting
2-year period
for 4-year period
in clauses (ii)
and (iii).
Termination
This subparagraph shall not apply to sales after the termination date.
.
Prohibited transactions
Section
857(b)(6)(D)(v) is amended by inserting or, in the case of a sale on or
before the termination date, a taxable REIT subsidiary
after
independent contractor (as defined in section 856(d)(3)) from whom the
trust itself does not derive or receive any income
.
Sales that are not prohibited transactions
Section 857(b)(6), as amended by subsection (a), is amended by adding at the end the following new subparagraph:
Sales of property that are not a prohibited transaction
In the case of a sale on or before the termination date, the sale of property which is not a prohibited transaction through application of subparagraph (D) shall be considered property held for investment or for use in a trade or business and not property described in section 1221(a)(1) for all purposes of this subtitle.
.
Termination date
Section 857(b)(6), as amended by subsections (a) and (c), is amended by adding at the end the following new subparagraph:
Termination date
For purposes of this paragraph, the term termination date means the last day of the first taxable year beginning after the date of the enactment of this subparagraph.
.
Effective date
The amendments made by this section shall apply to dispositions in taxable years beginning after the date of the enactment of this Act.
Energy provisions
Electricity generation
Credit for residential and business wind property
Residential wind property
In general
Section 25D(a) (relating to allowance of credit) is
amended by striking and
at the end of paragraph (2), by striking
the period at the end of paragraph (3) and inserting , and
, and
by adding at the end the following new paragraph:
30 percent of the qualified small wind energy property expenditures made by the taxpayer during such year.
.
Limitation
Section
25D(b)(1) (relating to maximum credit) is amended by striking
and
at the end of subparagraph (B), by striking the period at
the end of subparagraph (C) and inserting , and
, and by adding
at the end the following new subparagraph:
$4,000 with respect to any qualified small wind energy property expenditures.
.
Qualified small wind energy property expenditures
In general
Section 25D(d) (relating to definitions) is amended by adding at the end the following new paragraph:
Qualified small wind energy property expenditure
The term qualified small wind energy property expenditure means an expenditure for qualified small wind energy property (as defined in section 48(c)(3)(A)) installed on or in connection with a dwelling unit located in the United States and used as a residence by the taxpayer.
.
No double benefit
Section 45(d)(1) (relating to wind facility) is amended
by adding at the end the following new sentence: Such term shall not
include any facility with respect to which any qualified small wind energy
property expenditure (as defined in subsection (d)(4) of section 25D) is taken
into account in determining the credit under such section.
.
Maximum expenditures in case of joint occupancy
Section 25D(e)(4)(A)
(relating to maximum expenditures) is amended by striking and
at
the end of clause (ii), by striking the period at the end of clause (iii) and
inserting , and
, and by adding at the end the following new
clause:
$1,667 in the case of wind turbines for which qualified small wind energy property expenditures are made.
.
Business wind property
In general
Section 48(a)(3)(A) (defining energy property) is amended
by striking or
at the end of clause (iii), by adding
or
at the end of clause (iv), and by inserting after clause (iv)
the following new clause:
qualified small wind energy property,
.
30 percent credit
Section 48(a)(2)(A)(i) is amended by striking
and
at the end of subclause (II) and by inserting after
subclause (III) the following new subclause:
qualified small wind energy property, and
.
Qualified small wind energy property
Section 48(c) is amended—
by inserting
; qualified small wind
energy property
after qualified microturbine
property
in the heading,
by striking
For purposes of this subsection
and inserting For
purposes of this section
,
by striking
paragraph (1)
in paragraphs (1)(B) and (2)(B) and inserting
subsection (a)(1)
, and
by adding at the end the following new paragraph:
Qualified small wind energy property
In general
The term qualified small wind energy property means property which uses a qualifying small wind turbine to generate electricity.
Limitation
In the case of qualified small wind energy property placed in service during the taxable year, the credit otherwise determined under subsection (a)(1) for such year with respect to such property shall not exceed $4,000 with respect to any taxpayer.
Qualifying small wind turbine
The term qualifying small wind turbine means a wind turbine which—
has a nameplate capacity of not more than 100 kilowatts, and
meets the performance standards of the American Wind Energy Association.
Termination
The term qualified small wind energy property shall not include any property for any period after December 31, 2008.
.
Conforming amendment
Section 48(a)(1) is amended by striking
paragraphs (1)(B) and (2)(B)
and inserting paragraphs
(1)(B), (2)(B), and (3)(B)
.
Effective date
The amendments made by this section shall apply to expenditures after December 31, 2007.
Landowner incentive to encourage electric transmission build-out
In general
Part III of subchapter B of chapter 1 (relating to items specifically excluded from gross income) is amended by inserting after section 139A the following new section:
Electric transmission easement payments
In general
Gross income shall not include any qualified electric transmission easement payment.
Qualified electric transmission easement payment
For purposes of this section, the term qualified electric transmission payment means any payment which is made—
by an electric utility or electric transmission entity pursuant to an easement or other agreement granted by the payee (or any predecessor of such payee), and
for the right of such entity (or any successors of such entity) to locate on such payee's property transmission lines and equipment used to transmit electricity at 230 or more kilovolts, primarily from qualified facilities described in section 45(d) (without regard to any placed in service date or the last sentence of paragraph (4) thereof) or energy property (as defined in section 48(a)(3)) placed in service after the date of the enactment of this section.
No increase in basis
Notwithstanding any other provision of this subtitle, no increase in the basis or adjusted basis of any property shall result from any amount excluded under this subsection with respect to such property.
Denial of double benefit
Notwithstanding any other provision of this subtitle, no deduction or credit shall be allowed (to the person for whose benefit a qualified electric transmission easement payment is made) for, or by reason of, any expenditure to the extent of the amount excluded under this section with respect to such expenditure.
.
Clerical amendment
The table of sections for such part III is amended by inserting after the item relating to section 139A the following new item:
Sec. 139B. Electric transmission easement payments.
.
Effective date
The amendments made by this section shall apply to payments received after the date of the enactment of this Act.
Exception to reduction of renewable electricity credit
In general
Section 45(b)(3) (relating to credit reduced for grants,
tax-exempt bonds, subsidized energy financing, and other credits) is amended by
adding after the last sentence the following: This paragraph shall not
apply with respect to any loans, loan guarantees, or grants issued by the
Secretary of Agriculture under authority granted by section 9006 of the Farm
Security and Rural Investment Act of 2002.
Effective date
The amendment made by this section shall apply to facilities placed in service after the date of the enactment of this Act.
Alcohol fuel
Expansion of special allowance to cellulosic biomass alcohol fuel plant property
In general
Paragraph (3) of section 168(l) (relating to special allowance for cellulosic biomass ethanol plant property) is amended to read as follows:
Cellulosic biomass alcohol
For purposes of this subsection, the term cellulosic biomass alcohol means any alcohol produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis.
.
Conforming amendments
Subsection (l) of
section 168 is amended by striking cellulosic biomass ethanol
each place it appears and inserting cellulosic biomass
alcohol
.
The heading of
section 168(l) is amended by striking cellulosic biomass ethanol
and inserting
cellulosic biomass
alcohol
.
The heading of
paragraph (2) of section 168(l) is amended by striking cellulosic biomass
ethanol
and inserting cellulosic biomass
alcohol
.
Effective date
The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act, in taxable years ending after such date.
Credit for production of cellulosic biomass alcohol
In general
Subsection (a) of
section 40 (relating to alcohol used as fuel) is amended by striking
plus
at the end of paragraph (2), by striking the period at the
end of paragraph (3) and inserting , plus
, and by adding at the
end the following new paragraph:
the small cellulosic alcohol producer credit.
.
Small cellulosic alcohol producer credit
In general
Subsection (b) of section 40 is amended by adding at the end the following new paragraph:
Small cellulosic alcohol producer credit
In general
In addition to any other credit allowed under this section, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the applicable amount for each gallon of not more than 60,000,000 gallons of qualified cellulosic alcohol production.
Applicable amount
For purposes of subparagraph (A), the applicable amount means the excess of—
$1.28, over
the sum of—
the amount of the credit in effect for alcohol which is ethanol under subsection (b)(1) (without regard to subsection (b)(3)) at the time of the qualified cellulosic alcohol production, plus
the amount of the credit in effect under subsection (b)(4) at the time of such production.
Qualified cellulosic alcohol production
For purposes of this section, the term qualified cellulosic alcohol production means any cellulosic biomass alcohol which is produced by an eligible small cellulosic alcohol producer and which during the taxable year—
is sold by the taxpayer to another person—
for use by such other person in the production of a qualified alcohol mixture in such other person's trade or business (other than casual off-farm production),
for use by such other person as a fuel in a trade or business, or
who sells such cellulosic biomass alcohol at retail to another person and places such cellulosic biomass alcohol in the fuel tank of such other person, or
is used or sold by the taxpayer for any purpose described in clause (i).
Additional distillation excluded
The qualified cellulosic alcohol production of any taxpayer for any taxable year shall not include any alcohol which is purchased by the taxpayer and with respect to which such producer increases the proof of the alcohol by additional distillation.
Application of paragraph
This paragraph shall apply with respect to qualified cellulosic alcohol production after December 31, 2007, and before April 1, 2015.
.
Termination date not to apply
Subsection (e) of section 40 (relating to termination) is amended—
by inserting
or subsection (b)(6)(E)
after by reason of paragraph
(1)
in paragraph (2), and
by adding at the end the following new paragraph:
Exception for small cellulosic alcohol producer credit
Paragraph (1) shall not apply to the portion of the credit allowed under this section by reason of subsection (a)(4).
.
Eligible small cellulosic alcohol producer
Section 40 is amended by adding at the end the following new subsection:
Definitions and special rules for small cellulosic alcohol producer
For purposes of this section—
In general
The term eligible small cellulosic alcohol producer means a person, who at all times during the taxable year, has a productive capacity for cellulosic biomass alcohol not in excess of 60,000,000 gallons.
Cellulosic biomass alcohol
In general
The term cellulosic biomass alcohol has the meaning given such term under section 168(l)(3), but does not include any alcohol with a proof of less than 150.
Determination of proof
The determination of the proof of any alcohol shall be made without regard to any added denaturants.
Aggregation rule
For purposes of the 60,000,000 gallon limitation under paragraph (1) and subsection (b)(6)(A), all members of the same controlled group of corporations (within the meaning of section 267(f)) and all persons under common control (within the meaning of section 52(b) but determined by treating an interest of more than 50 percent as a controlling interest) shall be treated as 1 person.
Partnership, S corporations, and other pass-thru entities
In the case of a partnership, trust, S corporation, or other pass-thru entity, the limitation contained in paragraph (1) shall be applied at the entity level and at the partner or similar level.
Allocation
For purposes of this subsection, in the case of a facility in which more than 1 person has an interest, productive capacity shall be allocated among such persons in such manner as the Secretary may prescribe.
Regulations
The Secretary may prescribe such regulations as may be necessary to prevent the credit provided for in subsection (a)(4) from directly or indirectly benefitting any person with a direct or indirect productive capacity of more than 60,000,000 gallons of cellulosic biomass alcohol during the taxable year.
Allocation of small cellulosic producer credit to patrons of cooperative
Rules similar to the rules under subsection (g)(6) shall apply for purposes of this subsection.
.
Alcohol not used as a fuel, etc
In general
Paragraph (3) of section 40(d) is amended by redesignating subparagraph (D) as subparagraph (E) and by inserting after subparagraph (C) the following new subparagraph:
Small cellulosic alcohol producer credit
If—
any credit is allowed under subsection (a)(4), and
any person does not use such fuel for a purpose described in subsection (b)(6)(C),
.
Conforming amendments
Subparagraph (C)
of section 40(d)(3) is amended by striking producer
in the
heading and inserting small ethanol producer
.
Subparagraph (E)
of section 40(d)(3), as redesignated by paragraph (1), is amended by striking
or (C)
and inserting (C), or (D)
.
Alcohol produced in the United States
Section 40(d), as amended by this section, is amended by adding at the end the following new paragraph:
Special rule for small cellulosic alcohol producers
No small cellulosic alcohol producer credit shall be determined under subsection (a) with respect to any alcohol unless such alcohol is produced in the United States.
.
Effective date
The amendments made by this section shall apply to fuel produced after December 31, 2007.
Extension of small ethanol producer credit
Paragraph (1) of section 40(e) (relating to termination) is amended—
in subparagraph
(A), by inserting (December 31, 2012, in the case of the credit allowed
by reason of subsection (a)(3))
after December 31, 2010
,
and
in subparagraph
(B), by inserting (January 1, 2013, in the case of the credit allowed by
reason of subsection (a)(3))
after January 1,
2011
.
Credit for producers of fossil free alcohol
In general
Subsection (a) of
section 40 (relating to alcohol used as fuel), as amended by this Act, is
amended by striking plus
at the end of paragraph (3), by
striking the period at the end of paragraph (4) and inserting ,
plus
, and by adding at the end the following new paragraph:
the small fossil free alcohol producer credit.
.
Small fossil free alcohol producer credit
Subsection (b) of section 40, as amended by this Act, is amended by adding at the end the following new paragraph:
Small fossil free alcohol producer credit
In general
In addition to any other credit allowed under this section, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 25 cents for each gallon of not more than 60,000,000 gallons of qualified fossil free alcohol production.
Qualified fossil free alcohol production
For purposes of this section, the term qualified fossil free alcohol production means alcohol which is produced by an eligible small fossil free alcohol producer at a fossil free alcohol production facility and which during the taxable year—
is sold by the taxpayer to another person—
for use by such other person in the production of a qualified alcohol mixture in such other person's trade or business (other than casual off-farm production),
for use by such other person as a fuel in a trade or business, or
who sells such alcohol at retail to another person and places such alcohol in the fuel tank of such other person, or
is used or sold by the taxpayer for any purpose described in clause (i).
Additional distillation excluded
The qualified fossil free alcohol production of any taxpayer for any taxable year shall not include any alcohol which is purchased by the taxpayer and with respect to which such producer increases the proof of the alcohol by additional distillation.
.
Eligible small fossil free alcohol producer
Section 40, as amended by this Act, is amended by adding at the end the following new subsection:
Definitions and special rules for small fossil free alcohol producer
For purposes of this section—
In general
The term eligible small fossil free alcohol producer means a person, who at all times during the taxable year, has a productive capacity for alcohol from all fossil free alcohol production facilities of the taxpayer which is not in excess of 60,000,000 gallons.
Fossil free alcohol production facility
The term fossil free alcohol production facility means any facility at which 90 percent of the energy used in the production of alcohol is produced from biomass (as defined in section 45K(c)(3)).
Aggregation rule
For purposes of the 60,000,000 gallon limitation under paragraph (1) and subsection (b)(7)(A), all members of the same controlled group of corporations (within the meaning of section 267(f)) and all persons under common control (within the meaning of section 52(b) but determined by treating an interest of more than 50 percent as a controlling interest) shall be treated as 1 person.
Partnership, S corporations, and other pass-thru entities
In the case of a partnership, trust, S corporation, or other pass-thru entity, the limitation contained in paragraph (1) shall be applied at the entity level and at the partner or similar level.
Allocation
For purposes of this subsection, in the case of a facility in which more than 1 person has an interest, productive capacity shall be allocated among such persons in such manner as the Secretary may prescribe.
Regulations
The Secretary may prescribe such regulations as may be necessary to prevent the credit provided for in subsection (a)(5) from directly or indirectly benefitting any person with a direct or indirect productive capacity of more than 60,000,000 gallons of alcohol from fossil free alcohol production facilities during the taxable year.
Allocation of small fossil free alcohol producer credit to patrons of cooperative
Rules similar to the rules under subsection (g)(6) shall apply for purposes of this subsection.
.
Alcohol not used as a fuel, etc
In general
Paragraph (3) of section 40(d), as amended by this Act, is amended by redesignating subparagraph (E) as subparagraph (F) and by inserting after subparagraph (D) the following new subparagraph:
Small fossil free alcohol producer credit
If—
any credit is allowed under subsection (a)(5), and
any person does not use such fuel for a purpose described in subsection (b)(7)(B),
.
Conforming amendment
Subparagraph (F) of section 40(d)(3), as redesignated
by paragraph (1) and amended by this Act, is amended by striking or
(D)
and inserting (D), or (E)
.
Alcohol produced in the United States
Section 40(d)(6), as added by section 312 of this Act, is amended—
by inserting
or small fossil free alcohol producer credit
after
cellulosic alcohol producer credit
, and
by inserting
and fossil
free
after cellulosic
in the heading.
Termination
Paragraph (1) of section 40(e), as amended by this Act, is amended—
in subparagraph
(A), by striking (December 31, 2012, in the case of the credit allowed
by reason of subsection (a)(3))
and inserting (December 31,
2012, in the case of the credits allowed by reason of paragraphs (3) and (5) of
subsection (a))
, and
in subparagraph
(B), by striking (January 1, 2013, in the case of the credit allowed by
reason of subsection (a)(3))
and inserting (January 1, 2013, in
the case of the credits allowed by reason of paragraphs (3) and (5) of
subsection (a))
.
Effective date
The amendments made by this section shall apply to fuel produced after December 31, 2007.
Modification of alcohol credit
Income tax credit
Subsection (h) of section 40 (relating to reduced credit for ethanol blenders) is amended by adding at the end the following new paragraph:
Reduced amount after sale of 7,500,000,000 gallons
In general
In the case of any calendar year beginning after the date
described in subparagraph (B), the last row in the table in paragraph (2) shall
be applied by substituting 46 cents
for 51
cents
.
Date described
The date described in this subparagraph is the first date on which 7,500,000,000 gallons of ethanol (including cellulosic ethanol) have been produced in or imported into the United States after the date of the enactment of this paragraph, as certified by the Secretary, in consultation with the Administrator of the Environmental Protection Agency.
.
Excise tax credit
In general
Paragraph (2) of section 6426(b) (relating to alcohol fuel mixture credit) is amended by adding at the end the following new subparagraph:
Reduced amount after sale of 7,500,000,000 gallons
In the case of any alcohol
fuel mixture produced in a calendar year beginning after the date described in
section 40(h)(3)(B), subparagraph (A) shall be applied by substituting
46 cents
for 51
cents
.
.
Conforming amendment
Subparagraph (A) of section 6426(b)(2) is amended by
striking subparagraph (B)
and inserting subparagraphs (B)
and (C)
.
Effective date
The amendments made by this section shall take effect on the date of the enactment of this Act.
Calculation of volume of alcohol for fuel credits
In general
Paragraph (4) of section 40(d) (relating to volume of
alcohol) is amended by striking the volume of alcohol
and all
that follows and inserting the volume of alcohol shall not include any
denaturant added to such alcohol.
.
Conforming amendment for excise tax credit
Section 6426(b) (relating to alcohol fuel mixture credit) is amended by redesignating paragraph (5) as paragraph (6) and by inserting after paragraph (4) the following new paragraph:
Volume of alcohol
For purposes of determining under subsection (a) the number of gallons of alcohol with respect to which a credit is allowable under subsection (a), the volume of alcohol shall not include any denaturant added to such alcohol.
.
Effective date
The amendments made by this section shall apply to fuel sold or used after December 31, 2007.
Ethanol tariff extension
Headings 9901.00.50
and 9901.00.52 of the Harmonized Tariff Schedule of the United States are each
amended in the effective period column by striking 1/1/2009
and
inserting 1/1/2011
.
Elimination and reductions of duty drawback on certain imported ethanol
In general
Section 313(p) of the Tariff Act of 1930 (19 U.S.C. 1313(p)) is amended by adding at the end the following paragraph:
Special rules for ethyl alcohol
For purposes of this subsection and subsections (b) and (j), ethyl alcohol or a mixture of ethyl alcohol (whether imported with payment of duty or made in the United States), may not be substituted for a finished petroleum product for purposes of claiming a duty drawback unless the exported finished petroleum product contains ethyl alcohol.
.
Limitations on, and Reductions of, Drawbacks
Section 313 of the Tariff Act of 1930 (19 U.S.C. 1313) is amended by adding at the end the following new subsection:
Limitations on, and reductions of, drawbacks
Limitations
In general
Ethyl alcohol or mixture containing ethyl alcohol described in subparagraph (B) may be treated as being of the same kind and quality under subsection (b) of this section or may be treated as being commercially interchangeable with any other ethyl alcohol or mixture containing ethyl alcohol under subsection (j)(2) of this section, only if the other ethyl alcohol or mixture—
if imported, is subject to the additional duty under subheading 9901.00.50 of the Harmonized Tariff Schedule of the United States; or
if domestic, is subject to Federal excise tax under section 4041 or 4081 of the Internal Revenue Code of 1986 in an amount equal to or greater than the amount of drawback claimed.
Ethyl alcohol or mixture containing ethyl alcohol described
Ethyl alcohol or mixture containing ethyl alcohol described in this subparagraph means—
ethyl alcohol classifiable under subheading 2207.10.60 or 2207.20.00 of the Harmonized Tariff Schedule of the United States, or
a mixture containing ethyl alcohol classifiable under heading 2710 or 3824 of the Harmonized Tariff Schedule of the United States,
Reduction of drawback
For purposes of subsections (b), (j)(2), and (p) of this section, the amount of the refund as drawback under this section shall be reduced by an amount equal to any Federal tax credit or refund of any Federal tax paid on the merchandise with respect to which the drawback is claimed.
.
Effective date
The amendments made by this section apply to articles exported on or after the date that is 15 days after the date of the enactment of this Act.
Biodiesel and renewable diesel fuel
Extension and modification of credit for biodiesel and renewable diesel used as fuel
Extension
Income tax credits for biodiesel and renewable diesel and small agri-biodiesel producer credit
Section 40A(g) (relating to termination) is amended by
striking December 31, 2008
and inserting December 31,
2010 (December 31, 2012, in the case of the credit allowed by reason of
subsection (a)(3))
.
Excise tax credit
Section 6426(c)(6) (relating to termination) is amended by
striking 2008
and inserting 2010
.
Fuels not used for taxable purposes
Section 6427(e)(5)(B) (relating to
termination) is amended by striking 2008
and inserting
2010
.
Modification of credit for renewable diesel
Section 40A(f) (relating to renewable diesel) is amended by adding at the end the following new paragraph:
Special rule for co-processed renewable diesel
In the case of a taxpayer which produces renewable diesel through the co-processing of biomass and petroleum at any facility, this subsection shall not apply to so much of the renewable diesel produced at such facility and sold or used during the taxable year in a mixture described in subsection (b)(1)(B) as exceeds 60,000,000 gallons.
.
Modification relating to definition of agri-biodiesel
Paragraph (2) of section
40A(d) (relating to agri-biodiesel) is amended by striking and mustard
seeds
and inserting mustard seeds, and camelina
.
Effective dates
The amendments made by this section shall apply to fuel sold or used after the date of the enactment of this Act.
Treatment of qualified alcohol fuel mixtures and qualified biodiesel fuel mixtures as taxable fuels
In general
Qualified alcohol fuel mixtures
Paragraph (2) of section 4083(a) (relating to gasoline) is amended—
by striking
and
at the end of subparagraph (A),
by redesignating subparagraph (B) as subparagraph (C), and
by inserting after subparagraph (A) the following new subparagraph:
includes any qualified mixture (as defined in section 40(b)(1)(B)), and
.
Qualified biodiesel fuel mixtures
Subparagraph (A) of section 4083(a)(3)
(relating to diesel fuel) is amended by striking and
at the end
of clause (ii), by redesignating clause (iii) as clause (iv), and inserting
after clause (ii) the following new clause:
any qualified biodiesel mixture (as defined in section 40A(b)(1)(B)), and
.
Modification of biodiesel certification requirement
Paragraph (4) of section
40A(b) is amended by striking which identifies
and all that
follows and
inserting
which—
identifies the product produced and the percentage of biodiesel and agri-biodiesel in the product, and
documents that the biodiesel was independently tested and meets the requirements of ASTM D6751.
.
Information reporting requirement for producers of qualified mixtures
Section 4101(d) (relating to information reporting) is amended to read as follows:
Information reporting
The Secretary—
may require—
information reporting by any person registered under this section, and
information reporting by such other persons as the Secretary deems necessary to carry out this part, and
shall require information reporting by any person registered under this section and producing any qualified mixture (as defined in section 40(b)(1)(B)) or any qualified biodiesel mixture (as defined in section 40A(b)(1)(B)).
.
Effective date
The amendments made by this section shall apply to fuels removed, entered, or sold after December 31, 2007.
Alternative fuel
Extension and modification of alternative fuel credit
Extension
Alternative fuel credit
Paragraph (4) of section 6426(d) (relating to
alternative fuel credit) is amended by striking September 30,
2009
and inserting December 31, 2010
.
Alternative fuel mixture credit
Paragraph (3) of section 6426(e) (relating to
alternative fuel mixture credit) is amended by striking September 30,
2009
and inserting December 31, 2010
.
Payments
Subparagraph
(C) of section 6427(e)(5) (relating to termination) is amended by striking
September 30, 2009
and inserting December 31,
2010
.
Modifications
Alternative fuel to include compressed or liquified biomass gas
Paragraph (2)
of section 6426(d) (relating to alternative fuel credit) is amended by striking
and
at the end of subparagraph (E), by redesignating
subparagraph (F) as subparagraph (G), and by inserting after subparagraph (E)
the following new subparagraph:
compressed or liquefied biomass gas, and
.
Credit allowed for aviation use of fuel
Paragraph (1) of section 6426(d) is
amended by inserting sold by the taxpayer for use as a fuel in
aviation,
after motorboat,
.
Carbon capture requirement for certain fuels
In general
Subsection (d) of section 6426, as amended by subsection (a), is amended by redesignating paragraph (4) as paragraph (5) and by inserting after paragraph (3) the following new paragraph:
Carbon capture requirement
In general
The requirements of this paragraph are met if the fuel is certified, under such procedures as required by the Secretary, as having been derived from coal produced at a gasification facility which separates and sequesters not less than the applicable percentage of such facility's total carbon dioxide emissions.
Applicable percentage
For purposes of subparagraph (A), the applicable percentage is—
50 percent in the case of fuel produced after the date of the enactment of this paragraph and on or before the earlier of—
the date the Secretary makes a determination under subparagraph (C), or
December 30, 2010, and
75 percent in the case of fuel produced after the date on which the applicable percentage under clause (i) ceases to apply.
Determination to increase applicable percentage before December 31, 2010
If the Secretary, after considering the recommendations of the Carbon Sequestration Capability Panel, finds that the applicable percentage under subparagraph (B) should be 75 percent for fuel produced before December 31, 2010, the Secretary shall make a determination under this subparagraph. Any determination made under this subparagraph shall be made not later than 30 days after the Secretary receives from the Carbon Sequestration Panel the report required under section 331(c)(3)(D) of the Heartland, Habitat, Harvest, and Horticulture Act of 2007.
.
Conforming amendment
Subparagraph (E) of section 6426(d)(2) is amended by
inserting which meets the requirements of paragraph (4) and which
is
after any liquid fuel
.
Carbon sequestration capability panel
Establishment of panel
There is established a panel to be known as the
Carbon Sequestration Capability Panel
(hereafter in this
paragraph referred to as the Panel
).
Membership
The Panel shall be composed of—
1 individual appointed by the National Academy of Sciences,
1 individual appointed by the Chairman of the Committee on Finance of the Senate, in consultation with the Ranking Member of the Committee, and
1 individual appointed jointly by the individuals appointed under clauses (i) and (ii).
Study
The Panel shall study the appropriate percentage of carbon dioxide for separation and sequestration under section 6426(d)(4) of the Internal Revenue Code of 1986 consistent with the purposes of such section. The panel shall consider—
whether it is feasible to separate and sequester 75 percent of the carbon dioxide emissions of a facility, and
costs and other factors associated with separating and sequestering such percentage of carbon dioxide emissions.
Report
Not later than 6 months after the date of the enactment of this Act, the Panel shall report to the Secretary of Treasury, the Committee on Finance of the Senate, and the Committee on Ways and Means of the House of Representatives on the study under subparagraph (C) .
Effective date
The amendments made by this section shall apply to fuel sold or used after the date of the enactment of this Act.
Extension of alternative fuel vehicle refueling property credit
Paragraph
(2) of section 30C(g) (relating to termination) is amended by striking
December 31, 2009
and inserting December 31,
2010
.
Agricultural provisions
Increase in loan limits on agricultural bonds
In general
Subparagraph (A) of section 147(c)(2) (relating to
exception for first-time farmers) is amended by striking
$250,000
and inserting $450,000
.
Inflation adjustment
Section 147(c)(2) is amended by adding at the end the following new subparagraph:
Adjustments for inflation
In the case of any calendar year after 2008, the dollar amount in subparagraph (A) shall be increased by an amount equal to—
such dollar amount, multiplied by
the
cost-of-living adjustment determined under section 1(f)(3) for the calendar
year, determined by substituting calendar year 2007
for
calendar year 1992
in subparagraph (B) thereof.
.
Modification of substantial farmland definition
Section 147(c)(2)(E) (defining
substantial farmland) is amended by striking unless
and all that
follows through the period and inserting unless such parcel is smaller
than 30 percent of the median size of a farm in the county in which such parcel
is located.
.
Conforming amendment
Section 147(c)(2)(C)(i)(II) is amended by striking
$250,000
and inserting the amount in effect under
subparagraph (A)
.
Effective date
The amendments made by this section shall apply to bonds issued after the date of the enactment of this Act.
Modification of installment sale rules for certain farm property
In general
Section 453(i) (relating to recognition of recapture income in year of disposition) is amended by adding at the end the following new paragraph:
Exception for certain farm property
Paragraph (1) shall not apply to any installment sale of any single purpose agricultural or horticultural structure or any tree or vine bearing fruit or nuts eligible for classification as 10-year property under section 168(e)(3)(D).
.
Effective date
The amendment made by this section shall apply to installment sales occurring after the date of the enactment of this Act.
Allowance of section 1031 treatment for exchanges involving certain mutual ditch, reservoir, or irrigation company stock
In general
Section 1031 (relating to exchange of property held for productive use or investment) is amended by adding at the end the following new subsection:
Special rules for mutual ditch, reservoir, or irrigation company stock
For purposes of subsection (a)(2)(B), the term stocks shall not include shares in a mutual ditch, reservoir, or irrigation company if at the time of the exchange—
the mutual ditch, reservoir, or irrigation company is an organization described in section 501(c)(12)(A) (determined without regard to the percentage of its income that is collected from its members for the purpose of meeting losses and expenses), and
the shares in such company have been recognized by the highest court of the State in which such company was organized or by applicable State statute as constituting or representing real property or an interest in real property.
.
Effective date
The amendment made by this section shall apply to exchanges completed after the date of the enactment of this Act.
Credit to holders of rural renaissance bonds
In General
Subpart H of part IV of subchapter A of chapter 1 (relating to credits against tax) is amended by adding at the end the following new section:
Credit to holders of rural renaissance bonds
Allowance of Credit
In the case of a taxpayer who holds a rural renaissance bond on 1 or more credit allowance dates of the bond occurring during any taxable year, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of the credits determined under subsection (b) with respect to such dates.
Amount of Credit
In general
The amount of the credit determined under this subsection with respect to any credit allowance date for a rural renaissance bond is 25 percent of the annual credit determined with respect to such bond.
Annual credit
The annual credit determined with respect to any rural renaissance bond is the product of—
the credit rate determined by the Secretary under paragraph (3) for the day on which such bond was sold, multiplied by
the outstanding face amount of the bond.
Determination
For purposes of paragraph (2), with respect to any rural renaissance bond, the Secretary shall determine daily or caused to be determined daily a credit rate which shall apply to the first day on which there is a binding, written contract for the sale or exchange of the bond. The credit rate for any day is the credit rate which the Secretary or the Secretary’s designee estimates will permit the issuance of rural renaissance bonds with a specified maturity or redemption date without discount and without interest cost to the qualified issuer.
Credit allowance date
For purposes of this section, the term credit allowance date means—
March 15,
June 15,
September 15, and
December 15.
Special rule for issuance and redemption
In the case of a bond which is issued during the 3-month period ending on a credit allowance date, the amount of the credit determined under this subsection with respect to such credit allowance date shall be a ratable portion of the credit otherwise determined based on the portion of the 3-month period during which the bond is outstanding. A similar rule shall apply when the bond is redeemed or matures.
Limitation Based on Amount of Tax
The credit allowed under subsection (a) for any taxable year shall not exceed the excess of—
the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over
the sum of the credits allowable under this part (other than subpart C, section 1400N(l), and this section).
Rural Renaissance Bond
For purposes of this section—
In general
The term rural renaissance bond means any bond issued as part of an issue if—
the bond is issued by a qualified issuer pursuant to an allocation by the Secretary to such issuer of a portion of the national rural renaissance bond limitation under subsection (f)(2),
95 percent or more of the proceeds from the sale of such issue are to be used for capital expenditures incurred by qualified borrowers for 1 or more qualified projects,
the qualified issuer designates such bond for purposes of this section and the bond is in registered form,
the issue meets the requirements of subsection (h), and
such bond is not a federally guaranteed bond (within the meaning of section 149(b)(2)).
Qualified project; special use rules
In general
The term qualified project means 1 or more projects described in subparagraph (B) located in a rural area.
Projects described
A project described in this subparagraph is a project eligible for assistance under—
the utilities programs described in section 381E(d)(2) of the Consolidated Farm and Rural Development Act (7 U.S.C. 2009d(d)(2)),
the distance learning or telemedicine programs authorized pursuant to chapter 1 of subtitle D of title XXIII of the Food, Agriculture, Conservation, and Trade Act of 1990 (7 U.S.C. 950aaa et seq.),
the rural electric programs authorized pursuant to the Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.),
the rural telephone programs authorized pursuant to the Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.),
the broadband access programs authorized pursuant to title VI of the Rural Electrification Act of 1936 (7 U.S.C. 950bb et seq.), and
the rural community facility programs as described in section 381E(d)(1) of the Consolidated Farm and Rural Development Act (7 U.S.C. 2009d(d)(1)).
Refinancing rules
For purposes of paragraph (1)(B), a qualified project may be refinanced with proceeds of a rural renaissance bond only if the indebtedness being refinanced (including any obligation directly or indirectly refinanced by such indebtedness) was originally incurred by a qualified borrower after the date of the enactment of this section.
Reimbursement
For purposes of paragraph (1)(B), a rural renaissance bond may be issued to reimburse a qualified borrower for amounts paid after the date of the enactment of this section with respect to a qualified project, but only if—
prior to the payment of the original expenditure, the qualified borrower declared its intent to reimburse such expenditure with the proceeds of a rural renaissance bond,
not later than 60 days after payment of the original expenditure, the qualified issuer adopts an official intent to reimburse the original expenditure with such proceeds, and
the reimbursement is made not later than 18 months after the date the original expenditure is paid.
Treatment of changes in use
For purposes of paragraph (1)(B), the proceeds of an issue shall not be treated as used for a qualified project to the extent that a qualified borrower or qualified issuer takes any action within its control which causes such proceeds not to be used for a qualified project. The Secretary shall prescribe regulations specifying remedial actions that may be taken (including conditions to taking such remedial actions) to prevent an action described in the preceding sentence from causing a bond to fail to be a rural renaissance bond.
Treatment of other subsidies
For purposes of subparagraph (B), a qualified project does not include any portion of a project financed by grants or subsidized financing provided (directly or indirectly) under a Federal program, including any State or local obligation used to provide financing for such portion the interest on which is exempt from tax under section 103.
Maturity Limitations
Duration of term
A bond shall not be treated as a rural renaissance bond if the maturity of such bond exceeds the maximum term determined by the Secretary under paragraph (2) with respect to such bond.
Maximum term
During each calendar month, the Secretary shall determine the maximum term permitted under this paragraph for bonds issued during the following calendar month. Such maximum term shall be the term which the Secretary estimates will result in the present value of the obligation to repay the principal on the bond being equal to 50 percent of the face amount of such bond. Such present value shall be determined without regard to the requirements of paragraph (3) and using as a discount rate the average annual interest rate of tax-exempt obligations having a term of 10 years or more which are issued during the month. If the term as so determined is not a multiple of a whole year, such term shall be rounded to the next highest whole year.
Ratable principal amortization required
A bond shall not be treated as a rural renaissance bond unless it is part of an issue which provides for an equal amount of principal to be paid by the qualified issuer during each calendar year that the issue is outstanding.
Limitation on Amount of Bonds Designated
National limitation
There is a national rural renaissance bond limitation of $400,000,000.
Allocation by Secretary
In general
In accordance with subparagraph (B), the Secretary shall allocate the amount described in paragraph (1) among at least 20 qualified projects, or such lesser number of qualified projects with proper applications filed after 12 months after the adoption of the selection process under subparagraph (B).
Selection process
In consultation with the Secretary of Agriculture, the Secretary shall adopt a process to select projects described in subparagraph (A). Under such process, the Secretary shall not allocate more than 15 percent of the allocation under subparagraph (A) to qualified projects within a single State.
Credit Included in Gross Income
Gross income includes the amount of the credit allowed to the taxpayer under this section (determined without regard to subsection (c)) and the amount so included shall be treated as interest income.
Special Rules Relating to Expenditures
In general
An issue shall be treated as meeting the requirements of this subsection if, as of the date of issuance, the qualified issuer reasonably expects—
at least 95 percent of the proceeds from the sale of the issue are to be spent for 1 or more qualified projects within the 5-year period beginning on the date of issuance of the rural renaissance bond,
a binding commitment with a third party to spend at least 10 percent of the proceeds from the sale of the issue will be incurred within the 6-month period beginning on the date of issuance of the rural renaissance bond or, in the case of a rural renaissance bond the proceeds of which are to be loaned to 2 or more qualified borrowers, such binding commitment will be incurred within the 6-month period beginning on the date of the loan of such proceeds to a qualified borrower, and
such projects will be completed with due diligence and the proceeds from the sale of the issue will be spent with due diligence.
Extension of period
Upon submission of a request prior to the expiration of the period described in paragraph (1)(A), the Secretary may extend such period if the qualified issuer establishes that the failure to satisfy the 5-year requirement is due to reasonable cause and the related projects will continue to proceed with due diligence.
Failure to spend required amount of bond proceeds within 5 years
To the extent that less than 95 percent of the proceeds of such issue are expended by the close of the 5-year period beginning on the date of issuance (or if an extension has been obtained under paragraph (2), by the close of the extended period), the qualified issuer shall redeem all of the nonqualified bonds within 90 days after the end of such period. For purposes of this paragraph, the amount of the nonqualified bonds required to be redeemed shall be determined in the same manner as under section 142.
Special Rules Relating to Arbitrage
A bond which is part of an issue shall not be treated as a rural renaissance bond unless, with respect to the issue of which the bond is a part, the qualified issuer satisfies the arbitrage requirements of section 148 with respect to proceeds of the issue.
Definitions and special rules relating to issuers and borrowers
For purposes of this section—
Qualified issuer
The term qualified issuer means—
a rural renaissance bond lender,
a cooperative electric company, or
a governmental body.
Qualified borrower
The term qualified borrower means—
a mutual or cooperative electric company described in section 501(c)(12) or 1381(a)(2)(C), or
a governmental body.
Rural renaissance bond lender
The term rural renaissance bond lender means a lender which is a cooperative which is owned by, or has outstanding loans to, 100 or more cooperative electric companies and is in existence on February 1, 2002, and shall include any affiliated entity which is controlled by such lender.
Cooperative electric company
The term cooperative electric company means a mutual or cooperative electric company described in section 501(c)(12) or section 1381(a)(2)(C), or a not-for-profit electric utility which has received a loan or loan guarantee under the Rural Electrification Act.
Governmental body
The term governmental body means any State, territory, possession of the United States, the District of Columbia, Indian tribal government, and any political subdivision thereof.
Special Rules Relating to Pool Bonds
No portion of a pooled financing bond may be allocable to loan unless the borrower has entered into a written loan commitment for such portion prior to the issue date of such issue.
Other Definitions and Special Rules
For purposes of this section—
Bond
The term bond includes any obligation.
Pooled financing bond
The term pooled financing bond shall have the meaning given such term by section 149(f)(4)(A).
Rural area
The term rural area shall have the meaning given such term by section 1393(a)(2).
Partnership; s corporation; and other pass-thru entities
In general
Under regulations prescribed by the Secretary, in the case of a partnership, trust, S corporation, or other pass-thru entity, rules similar to the rules of section 41(g) shall apply with respect to the credit allowable under subsection (a).
No basis adjustment
In the case of a bond held by a partnership or an S corporation, rules similar to the rules under section 1397E(i) shall apply.
Bonds held by regulated investment companies
If any rural renaissance bond is held by a regulated investment company, the credit determined under subsection (a) shall be allowed to shareholders of such company under procedures prescribed by the Secretary.
Reporting
Issuers of rural renaissance bonds shall submit reports similar to the reports required under section 149(e).
Termination
This section shall not apply with respect to any bond issued after December 31, 2008.
.
Reporting
Subsection (d) of section 6049 (relating to returns regarding payments of interest) is amended by adding at the end the following new paragraph:
Reporting of credit on rural renaissance bonds
In general
For purposes of subsection (a), the term interest includes amounts includible in gross income under section 54A(g) and such amounts shall be treated as paid on the credit allowance date (as defined in section 54A(b)(4)).
Reporting to corporations, etc
Except as otherwise provided in regulations, in the case of any interest described in subparagraph (A), subsection (b)(4) shall be applied without regard to subparagraphs (A), (H), (I), (J), (K), and (L)(i) of such subsection.
Regulatory authority
The Secretary may prescribe such regulations as are necessary or appropriate to carry out the purposes of this paragraph, including regulations which require more frequent or more detailed reporting.
.
Conforming Amendments
The table of sections for subpart H of part IV of subchapter A of chapter 1 is amended by adding at the end the following new item:
Sec. 54A. Credit to holders of rural renaissance bonds.
.
Section 54(c)(2)
is amended by inserting section 54A,
after subpart
C,
.
Issuance of Regulations
The Secretary of Treasury shall issue regulations required under section 54A (as added by this section) not later than 120 days after the date of the enactment of this Act.
Effective Date
The amendments made by this section shall apply to bonds issued after the date of the enactment of this Act.
Agricultural chemicals security credit
In general
Subpart D of part IV of subchapter A of chapter 1 (relating to business related credits) is amended by adding at the end the following new section:
Agricultural chemicals security credit
In general
For purposes of section 38, in the case of an eligible agricultural business, the agricultural chemicals security credit determined under this section for the taxable year is 30 percent of the qualified security expenditures for the taxable year.
Facility limitation
The amount of the credit determined under subsection (a) with respect to any facility for any taxable year shall not exceed—
$100,000, reduced by
the aggregate amount of credits determined under subsection (a) with respect to such facility for the 5 prior taxable years.
Annual limitation
The amount of the credit determined under subsection (a) with respect to any taxpayer for any taxable year shall not exceed $2,000,000.
Qualified chemical security expenditure
For purposes of this section, the term qualified chemical security expenditure means, with respect to any eligible agricultural business for any taxable year, any amount paid or incurred by such business during such taxable year for—
employee security training and background checks,
limitation and prevention of access to controls of specified agricultural chemicals stored at the facility,
tagging, locking tank valves, and chemical additives to prevent the theft of specified agricultural chemicals or to render such chemicals unfit for illegal use,
protection of the perimeter of specified agricultural chemicals,
installation of security lighting, cameras, recording equipment, and intrusion detection sensors,
implementation of measures to increase computer or computer network security,
conducting a security vulnerability assessment,
implementing a site security plan, and
such other measures for the protection of specified agricultural chemicals as the Secretary may identify in regulation.
Eligible agricultural business
For purposes of this section, the term eligible agricultural business means any person in the trade or business of—
selling agricultural products, including specified agricultural chemicals, at retail predominantly to farmers and ranchers, or
manufacturing, formulating, distributing, or aerially applying specified agricultural chemicals.
Specified agricultural chemical
For purposes of this section, the term specified agricultural chemical means—
any fertilizer commonly used in agricultural operations which is listed under—
section 302(a)(2) of the Emergency Planning and Community Right-to-Know Act of 1986,
section 101 of part 172 of title 49, Code of Federal Regulations, or
part 126, 127, or 154 of title 33, Code of Federal Regulations, and
any pesticide (as defined in section 2(u) of the Federal Insecticide, Fungicide, and Rodenticide Act), including all active and inert ingredients thereof, which is customarily used on crops grown for food, feed, or fiber.
Controlled groups
Rules similar to the rules of paragraphs (1) and (2) of section 41(f) shall apply for purposes of this section.
Regulations
The Secretary may prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including regulations which—
provide for the proper treatment of amounts which are paid or incurred for purpose of protecting any specified agricultural chemical and for other purposes, and
provide for the treatment of related properties as one facility for purposes of subsection (b).
Termination
This section shall not apply to any amount paid or incurred after December 31, 2012.
.
Credit allowed as part of general business credit
Section 38(b) is amended by
striking plus
at the end of paragraph (30), by striking the
period at the end of paragraph (31) and inserting , plus
, and by
adding at the end the following new paragraph:
in the case of an eligible agricultural business (as defined in section 45O(e)), the agricultural chemicals security credit determined under section 45O(a).
.
Denial of double benefit
Section 280C is amended by adding at the end the following new subsection:
Credit for security of agricultural chemicals
No deduction shall be allowed for that portion of the expenses otherwise allowable as a deduction taken into account in determining the credit under section 45O for the taxable year which is equal to the amount of the credit determined for such taxable year under section 45O(a).
.
Clerical amendment
The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by adding at the end the following new item:
Sec. 45O. Agricultural chemicals security credit.
.
Effective Date
The amendments made by this section shall apply to amounts paid or incurred after the date of the enactment of this Act.
Credit for drug safety and effectiveness testing for minor animal species
In general
Subpart D of part IV of subchapter A of chapter 1 (relating to business related credits), as amended by this Act, is amended by adding at the end the following new section:
Drug safety and effectiveness testing for minor animal species
Allowance of credit
For purposes of section 38, in the case of an eligible taxpayer, the drug safety and effectiveness testing for minor animal species credit determined under this section for the taxable year shall be an amount equal to 50 percent of the qualified safety and effectiveness testing expenses paid or incurred by the taxpayer during the taxable year.
Eligible taxpayer
For purposes of this section, the term eligible taxpayer any taxpayer—
which—
applies for the designation of a new animal drug for use on a minor animal species under section 573 of the Federal Food, Drug, and Cosmetic Act, or
owns animals which are the subject of safety and effectiveness testing, and
which elects the application of this section for the taxable year.
Qualified safety and effectiveness testing expenses
For purposes of this section—
In general
The term qualified safety and effectiveness testing expenses means the sum of the following amounts which are paid or incurred by the eligible taxpayer during the taxable year in carrying on any trade or business of such taxpayer:
In-house safety and effectiveness testing expenses.
Contract safety and effectiveness testing expenses.
In-house safety and effectiveness testing expenses
In general
The term in-house safety and effectiveness testing expenses means—
any wages paid or incurred to an employee for qualified services performed by such employee,
any amount paid or incurred for supplies used in the conduct of safety and effectiveness testing, and
under regulations prescribed by the Secretary, any amount paid or incurred to another person for the right to use computers in the conduct of safety and effectiveness testing.
Qualified services
The term qualified services means services consisting of—
engaging in safety and effectiveness testing, or
engaging in the direct supervision or direct support of such testing.
Wages and supplies
The terms wages and supplies have the meanings given such terms by section 41(b).
Contract safety and effectiveness testing expenses
In general
The term contract safety and effectiveness testing expenses means any amount paid or incurred by the taxpayer to any person (other than an employee of the taxpayer) for safety and effectiveness testing.
Prepaid amounts
If any contract safety and effectiveness testing expenses paid or incurred during any taxable year are attributable to safety and effectiveness testing to be conducted after the close of such taxable year, such amount shall be treated as paid or incurred during the period during which the safety and effectiveness testing is conducted.
Safety and effectiveness testing
For purposes of this section—
In general
The term safety and effectiveness testing means any testing which—
is related to the use of a new animal drug for use on a minor animal species for which it was designated under section 573 of the Federal Food, Drug, and Cosmetic Act,
is carried out under an exemption for such new animal drug under section 512(j) of such Act (or regulations issued under such section),
occurs—
after the date on which the application for designation of such new animal drug under section 573 of such Act is filed, and
before the date on which such application is approved under section 512(c) of such Act, and
which is conducted by or on behalf of an eligible taxpayer.
Minor animal species
In general
The term minor animal species means animals, other than humans, which are not major animal species.
Major animal species
The term major animal species means cattle, horses, swine, chickens, turkeys, dogs, cats, and any other species as determined by the Secretary, after consultation with the Secretary of Agriculture.
Treatment of qualified safety and effectiveness testing expenses
In general
Except as provided in paragraph (2), any qualified safety and effectiveness testing expenses for a taxable year to which an election under this section applies shall not be taken into account for purposes of determining the credit allowable under section 41 for such taxable year.
Treated as base period research expenses
Any qualified safe and effectiveness testing expenses for any taxable year which are qualified research expenses (within the meaning of section 41(b)) shall be taken into account in determining base period research expenses for purposes of applying section 41 to subsequent taxable years.
Special rules
Limitation
No credit shall be allowed under this section with respect to any safety and effectiveness testing conducted by a corporation to which an election under section 936 applies.
Aggregation of expenditures and allocations of credit
Rules similar to the rules of paragraphs (1) and (2) of section 41(f) and section 41(g) shall apply for purposes of this section.
.
Credit allowed as part of general business credit
Section 38(b), as amended by
this Act, is amended by striking plus
at the end of paragraph
(31), by striking the period at the end of paragraph (32) and inserting
, plus
, and by adding at the end the following new
paragraph:
the drug safety and effectiveness testing for minor animal species credit determined under section 45P(a).
.
Denial of double benefit
Section 280C, as amended by this Act, is amended by adding at the end the following new subsection:
Drug safety and effectiveness testing for minor animal species credit
In general
No deduction shall be allowed for that portion of the qualified safety and effectiveness testing expenses (as defined in section 45P(c)(1)) otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under section 45P(a).
Similar rule where taxpayer capitalizes rather than deducts expenses
If—
the amount of the credit determined for the taxable year under section 45P(a), exceeds
the amount allowable as a deduction for such taxable year for qualified safety and effectiveness testing expenses (determined without regard to paragraph (1)),
Controlled groups
Paragraph (3) of subsection (b) shall apply for purposes of this subsection.
.
Clerical amendment
The table of sections for subpart D of part IV of subchapter A of chapter 1, as amended by this Act, is amended by adding at the end the following new item:
Sec. 45P. Drug safety and effectiveness testing for minor animal species.
.
Effective Date
The amendments made by this section shall apply to amounts paid or incurred after the date of the enactment of this Act.
Certain farming business machinery and equipment treated as 5-year property
In general
Section 168(e)(3)(B) (defining 5-year property) is
amended by striking and
at the end of clause (v), by striking
the period at the end of clause (vi)(III) and inserting , and
,
and by inserting after clause (vi) the following new clause:
any machinery or equipment (other than any grain bin, cotton ginning asset, fence, or other land improvement) which is used in a farming business (as defined in section 263A(e)(4)), the original use of which commences with the taxpayer after the date of the enactment of this clause, and which is placed in service before January 1, 2010.
.
Alternative system
The table contained in section 168(g)(3)(B) (relating to special rule for certain property assigned to classes) is amended by inserting after the item relating to subparagraph (B)(iii) the following:
| (B)(vii) | 10 |
.
Effective date
The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act.
Expensing of broadband Internet access expenditures
In General
Part VI of subchapter B of chapter 1 (relating to itemized deductions for individuals and corporations) is amended by inserting after section 190 the following new section:
Broadband expenditures
Treatment of Expenditures
In general
A taxpayer may elect to treat any qualified broadband expenditure which is paid or incurred by the taxpayer as an expense which is not chargeable to a capital account. Any expenditure which is so treated shall be allowed as a deduction.
Election
An election under paragraph (1) shall be made at such time and in such manner as the Secretary may prescribe by regulation.
Qualified Broadband Expenditures
For purposes of this section—
In general
The term qualified broadband expenditure means, with respect to any taxable year, any direct or indirect costs incurred after the date of the enactment of this section, and on or before the first December 31 which is 3 years after such date, and properly taken into account with respect to—
the purchase or installation of qualified equipment (including any upgrades thereto), and
the connection of such qualified equipment to any qualified subscriber.
Certain satellite expenditures excluded
Such term shall not include any costs incurred with respect to the launching of any satellite equipment.
Leased equipment
Such term shall include so much of the purchase price paid by the lessor of qualified equipment subject to a lease described in subsection (c)(2)(B) as is attributable to expenditures incurred by the lessee which would otherwise be described in paragraph (1).
Limitation with regard to current generation broadband services
Only 50 percent of the amounts taken into account under paragraph (1) with respect to qualified equipment through which current generation broadband services are provided shall be treated as qualified broadband expenditures.
When Expenditures Taken Into Account
For purposes of this section—
In general
Qualified broadband expenditures with respect to qualified equipment shall be taken into account with respect to the first taxable year in which—
current generation broadband services are provided through such equipment to qualified subscribers, or
next generation broadband services are provided through such equipment to qualified subscribers.
Limitation
In general
Qualified expenditures shall be taken into account under paragraph (1) only with respect to qualified equipment—
the original use of which commences with the taxpayer, and
which is placed in service after the date of the enactment of this Act.
Sale-leasebacks
For purposes of subparagraph (A), if property—
is originally placed in service after the date of the enactment of this Act by any person, and
sold and leased back by such person within 3 months after the date such property was originally placed in service,
Special Allocation Rules
Current generation broadband services
For purposes of determining the amount of qualified broadband expenditures under subsection (a)(1) with respect to qualified equipment through which current generation broadband services are provided, if the qualified equipment is capable of serving both qualified subscribers and other subscribers, the qualified broadband expenditures shall be multiplied by a fraction—
the numerator of which is the sum of the number of potential qualified subscribers within the rural areas and the underserved areas which the equipment is capable of serving with current generation broadband services, and
the denominator of which is the total potential subscriber population of the area which the equipment is capable of serving with current generation broadband services.
Next generation broadband services
For purposes of determining the amount of qualified broadband expenditures under subsection (a)(1) with respect to qualified equipment through which next generation broadband services are provided, if the qualified equipment is capable of serving both qualified subscribers and other subscribers, the qualified broadband expenditures shall be multiplied by a fraction—
the numerator of which is the sum of—
the number of potential qualified subscribers within the rural areas and underserved areas, plus
the number of potential qualified subscribers within the area consisting only of residential subscribers not described in clause (i),
the denominator of which is the total potential subscriber population of the area which the equipment is capable of serving with next generation broadband services.
Definitions
For purposes of this section—
Antenna
The term antenna means any device used to transmit or receive signals through the electromagnetic spectrum, including satellite equipment.
Cable operator
The term cable operator has the meaning given such term by section 602(5) of the Communications Act of 1934 (47 U.S.C. 522(5)).
Commercial mobile service carrier
The term commercial mobile service carrier means any person authorized to provide commercial mobile radio service as defined in section 20.3 of title 47, Code of Federal Regulations.
Current generation broadband service
The term current generation broadband service means the transmission of signals at a rate of at least 5,000,000 bits per second to the subscriber and at least 1,000,000 bits per second from the subscriber.
Multiplexing or demultiplexing
The term multiplexing means the transmission of 2 or more signals over a single channel, and the term demultiplexing means the separation of 2 or more signals previously combined by compatible multiplexing equipment.
Next generation broadband service
The term next generation broadband service means the transmission of signals at a rate of at least 100,000,000 bits per second to the subscriber and at least 20,000,000 bits per second from the subscriber.
Nonresidential subscriber
The term nonresidential subscriber means any person who purchases broadband services which are delivered to the permanent place of business of such person.
Open video system operator
The term open video system operator means any person authorized to provide service under section 653 of the Communications Act of 1934 (47 U.S.C. 573).
Other wireless carrier
The term other wireless carrier means any person (other than a telecommunications carrier, commercial mobile service carrier, cable operator, open video system operator, or satellite carrier) providing current generation broadband services or next generation broadband service to subscribers through the radio transmission of energy.
Packet switching
The term packet switching means controlling or routing the path of any digitized transmission signal which is assembled into packets or cells.
Provider
The term provider means, with respect to any qualified equipment—
a cable operator,
a commercial mobile service carrier,
an open video system operator,
a satellite carrier,
a telecommunications carrier, or
any other wireless carrier,
Provision of services
A provider shall be treated as providing services to 1 or more subscribers if—
such a subscriber has been passed by the provider’s equipment and can be connected to such equipment for a standard connection fee,
the provider is physically able to deliver current generation broadband services or next generation broadband services, as applicable, to such a subscriber without making more than an insignificant investment with respect to such subscriber,
the provider has made reasonable efforts to make such subscribers aware of the availability of such services,
such services have been purchased by 1 or more such subscribers, and
such services are made available to such subscribers at average prices comparable to those at which the provider makes available similar services in any areas in which the provider makes available such services.
Qualified equipment
In general
The term qualified equipment means equipment which provides current generation broadband services or next generation broadband services—
at least a majority of the time during periods of maximum demand to each subscriber who is utilizing such services, and
in a manner substantially the same as such services are provided by the provider to subscribers through equipment with respect to which no deduction is allowed under subsection (a)(1).
Only certain investment taken into account
Except as provided in subparagraph (C) or (D), equipment shall be taken into account under subparagraph (A) only to the extent it—
extends from the last point of switching to the outside of the unit, building, dwelling, or office owned or leased by a subscriber in the case of a telecommunications carrier or broadband-over-powerline operator,
extends from the customer side of the mobile telephone switching office to a transmission/receive antenna (including such antenna) owned or leased by a subscriber in the case of a commercial mobile service carrier,
extends from the customer side of the headend to the outside of the unit, building, dwelling, or office owned or leased by a subscriber in the case of a cable operator or open video system operator, or
extends from a transmission/receive antenna (including such antenna) which transmits and receives signals to or from multiple subscribers, to a transmission/receive antenna (including such antenna) on the outside of the unit, building, dwelling, or office owned or leased by a subscriber in the case of a satellite carrier or other wireless carrier, unless such other wireless carrier is also a telecommunications carrier.
Packet switching equipment
Packet switching equipment, regardless of location, shall be taken into account under subparagraph (A) only if it is deployed in connection with equipment described in subparagraph (B) and is uniquely designed to perform the function of packet switching for current generation broadband services or next generation broadband services, but only if such packet switching is the last in a series of such functions performed in the transmission of a signal to a subscriber or the first in a series of such functions performed in the transmission of a signal from a subscriber.
Multiplexing and demultiplexing equipment
Multiplexing and demultiplexing equipment shall be taken into account under subparagraph (A) only to the extent it is deployed in connection with equipment described in subparagraph (B) and is uniquely designed to perform the function of multiplexing and demultiplexing packets or cells of data and making associated application adaptions, but only if such multiplexing or demultiplexing equipment is located between packet switching equipment described in subparagraph (C) and the subscriber’s premises.
Qualified subscriber
The term qualified subscriber means—
with respect to the provision of current generation broadband services—
any nonresidential subscriber maintaining a permanent place of business in a rural area or underserved area, or
any residential subscriber residing in a dwelling located in a rural area or underserved area which is not a saturated market, and
with respect to the provision of next generation broadband services—
any nonresidential subscriber maintaining a permanent place of business in a rural area or underserved area, or
any residential subscriber.
Residential subscriber
The term residential subscriber means any individual who purchases broadband services which are delivered to such individual’s dwelling.
Rural area
The term rural area means any census tract which—
is not within 10 miles of any incorporated or census designated place containing more than 25,000 people, and
is not within a county or county equivalent which has an overall population density of more than 500 people per square mile of land.
Rural subscriber
The term rural subscriber means any residential subscriber residing in a dwelling located in a rural area or nonresidential subscriber maintaining a permanent place of business located in a rural area.
Satellite carrier
The term satellite carrier means any person using the facilities of a satellite or satellite service licensed by the Federal Communications Commission and operating in the Fixed-Satellite Service under part 25 of title 47 of the Code of Federal Regulations or the Direct Broadcast Satellite Service under part 100 of title 47 of such Code to establish and operate a channel of communications for distribution of signals, and owning or leasing a capacity or service on a satellite in order to provide such point-to-multipoint distribution.
Saturated market
The term saturated market means any census tract in which, as of the date of the enactment of this section—
current generation broadband services have been provided by a single provider to 85 percent or more of the total number of potential residential subscribers residing in dwellings located within such census tract, and
such services can be utilized—
at least a majority of the time during periods of maximum demand by each such subscriber who is utilizing such services, and
in a manner substantially the same as such services are provided by the provider to subscribers through equipment with respect to which no deduction is allowed under subsection (a)(1).
Subscriber
The term subscriber means any person who purchases current generation broadband services or next generation broadband services.
Telecommunications carrier
The term telecommunications carrier has the meaning given such term by section 3(44) of the Communications Act of 1934 (47 U.S.C. 153(44)), but—
includes all members of an affiliated group of which a telecommunications carrier is a member, and
does not include a commercial mobile service carrier.
Total potential subscriber population
The term total potential subscriber population means, with respect to any area and based on the most recent census data, the total number of potential residential subscribers residing in dwellings located in such area and potential nonresidential subscribers maintaining permanent places of business located in such area.
Underserved area
The term underserved area means—
any census tract which is located in—
an empowerment zone or enterprise community designated under section 1391, or
the District of Columbia Enterprise Zone established under section 1400, or
any census tract—
the poverty level of which is at least 30 percent (based on the most recent census data), and
the median family income of which does not exceed—
in the case of a census tract located in a metropolitan statistical area, 70 percent of the greater of the metropolitan area median family income or the statewide median family income, and
in the case of a census tract located in a nonmetropolitan statistical area, 70 percent of the nonmetropolitan statewide median family income.
Underserved subscriber
The term underserved subscriber means any residential subscriber residing in a dwelling located in an underserved area or nonresidential subscriber maintaining a permanent place of business located in an underserved area.
Special Rules
Property used outside the united states, etc., not qualified
No expenditures shall be taken into account under subsection (a)(1) with respect to the portion of the cost of any property referred to in section 50(b) or with respect to the portion of the cost of any property specified in an election under section 179.
Basis reduction
In general
For purposes of this title, the basis of any property shall be reduced by the portion of the cost of such property taken into account under subsection (a)(1).
Ordinary income recapture
For purposes of section 1245, the amount of the deduction allowable under subsection (a)(1) with respect to any property which is of a character subject to the allowance for depreciation shall be treated as a deduction allowed for depreciation under section 167.
Coordination with section 38
No credit shall be allowed under section 38 with respect to any amount for which a deduction is allowed under subsection (a)(1).
.
Special Rule for Mutual or Cooperative Telephone Companies
Section 512(b) (relating to modifications) is amended by adding at the end the following new paragraph:
Special rule for mutual or cooperative telephone companies
A mutual or cooperative telephone company which for the taxable year satisfies the requirements of section 501(c)(12)(A) may elect to reduce its unrelated business taxable income for such year, if any, by an amount that does not exceed the qualified broadband expenditures which would be taken into account under section 191 for such year by such company if such company was not exempt from taxation. Any amount which is allowed as a deduction under this paragraph shall not be allowed as a deduction under section 191 and the basis of any property to which this paragraph applies shall be reduced under section 1016(a)(40).
.
Conforming Amendments
Section 263(a)(1)
(relating to capital expenditures) is amended by striking or
at
the end of subparagraph (J), by striking the period at the end of subparagraph
(K) and inserting , or
, and by adding at the end the following
new subparagraph:
expenditures for which a deduction is allowed under section 191.
.
Section 1016(a),
as amended by this Act, is amended by striking and
at the end of
paragraph (38), by striking the period at the end of paragraph (39) and
inserting , and
, and by adding at the end the following new
paragraph:
to the extent provided in section 191(f)(2).
.
The table of sections for part VI of subchapter A of chapter 1 is amended by inserting after the item relating to section 190 the following new item:
Sec. 191. Broadband expenditures.
.
Designation of Census Tracts
In general
The Secretary of the Treasury shall, not later than 90 days after the date of the enactment of this Act, designate and publish those census tracts meeting the criteria described in paragraphs (16), (22), and (23) of section 191(e) of the Internal Revenue Code of 1986 (as added by this section). In making such designations, the Secretary of the Treasury shall consult with such other departments and agencies as the Secretary determines appropriate.
Saturated market
In general
For purposes of designating and publishing those census tracts meeting the criteria described in subsection (e)(19) of such section 191—
the Secretary of the Treasury shall prescribe not later than 30 days after the date of the enactment of this Act the form upon which any provider which takes the position that it meets such criteria with respect to any census tract shall submit a list of such census tracts (and any other information required by the Secretary) not later than 60 days after the date of the publication of such form, and
the Secretary of the Treasury shall publish an aggregate list of such census tracts and the applicable providers not later than 30 days after the last date such submissions are allowed under clause (i).
No subsequent lists required
The Secretary of the Treasury shall not be required to publish any list of census tracts meeting such criteria subsequent to the list described in subparagraph (A)(ii).
Other Regulatory Matters
Prohibition
No Federal or State agency or instrumentality shall adopt regulations or ratemaking procedures that would have the effect of eliminating or reducing any deduction or portion thereof allowed under section 191 of the Internal Revenue Code of 1986 (as added by this section) or otherwise subverting the purpose of this section.
Treasury regulatory authority
It is the intent of Congress in providing the election to deduct qualified broadband expenditures under section 191 of the Internal Revenue Code of 1986 (as added by this section) to provide incentives for the purchase, installation, and connection of equipment and facilities offering expanded broadband access to the Internet for users in certain low income and rural areas of the United States, as well as to residential users nationwide, in a manner that maintains competitive neutrality among the various classes of providers of broadband services. Accordingly, the Secretary of the Treasury shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of section 191 of such Code, including—
regulations to determine how and when a taxpayer that incurs qualified broadband expenditures satisfies the requirements of section 191 of such Code to provide broadband services, and
regulations describing the information, records, and data taxpayers are required to provide the Secretary to substantiate compliance with the requirements of section 191 of such Code.
Credit for energy efficient motors
In general
Subpart D of part IV of subchapter A of chapter 1 (relating to business related credits), as amended by this Act, is amended by inserting at the end the following new section:
Credit for energy efficient motors
In general
For purposes of section 38, the energy efficient motors credit determined under this section for any taxable year is an amount equal to the lesser of —
$15 per horsepower generated by qualified energy efficient motors the original use of which begins with the taxpayer during such taxable year, or
$1,250,000.
Qualified energy efficient motor
The term qualified energy efficient motor means a general- or definite-purpose electric motor of 500 horsepower or less which meets or exceeds the efficiency levels specified in Tables 12–12 or 12–13 of the National Electrical Manufacturers Association MG–1 (2006).
Special rules
Basis reduction
The basis of any property for which a credit is allowable under subsection (a) shall be reduced by the amount of such credit.
Recapture
The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any property which ceases to be property eligible for such credit.
Property used outside United States, etc., certain depreciable property not qualified
No credit shall be allowed under subsection (a) with respect to any property referred to in section 50(b) or with respect to the portion of the cost of any property taken into account under section 179.
Termination
This section shall not apply to any property placed in service after the date which is 3 years after the date of the enactment of this section.
.
Credit allowed as part of general business credit
Section 38(b), as amended by
this Act, is amended by striking plus
at the end of paragraph
(32), by striking the period at the end of paragraph (33) and inserting
, plus
, and by adding at the end the following new
paragraph:
the credit for energy efficient motors determined under section 45Q(a).
.
Conforming amendments
Section 1016(a),
as amended by this Act, is amended by striking and
at the end of
paragraph (39), by striking the period at the end of paragraph (40) and
inserting , and
, and by adding at the end the following new
paragraph:
to the extent provided in section 45Q(c)(1).
.
The table of sections for subpart D of part IV of subchapter A of chapter 1, as amended by this Act, is amended by adding at the end the following new item:
Sec. 45Q. Credit for energy efficient motors.
.
Effective date
The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act.
Revenue raising provisions
Miscellaneous revenue provisions
Limitation on farming losses of certain taxpayers
In general
Section 461 (relating to general rule for taxable year of deduction) is amended by adding at the end the following new subsection:
Limitation on farming losses of certain taxpayers
In general
If an applicable taxpayer has a farming loss for the taxable year, such loss shall be allowed for such taxable year only to the extent such loss does not exceed $200,000.
Farming loss
For purposes of this subsection, the term farming loss means the excess of the deductions of the taxpayer for the taxable year which are attributable to farming businesses (as defined in section 263A(e)(4)) of such taxpayer over income or gain of such taxpayer for the taxable year which is attributable to such deductions.
Disallowed loss carried to next year
Any loss which is disallowed under paragraph (1) shall be treated as a deduction of the taxpayer attributable to farming businesses in the next taxable year.
Applicable taxpayer
For purposes of this subsection, the term applicable taxpayer means, with respect to any taxable year, any individual, partnership, estate, or trust which receives agriculture program payments or Commodity Credit Corporation loans in such taxable year.
.
Effective date
The amendment made by this section shall apply to taxable years beginning after December 31, 2007.
Modification to optional method of computing net earnings from self-employment
Amendments to the Internal Revenue Code of 1986
In general
The matter following paragraph (17) of section 1402(a) is amended—
by striking $2,400
each
place it appears and inserting the upper limit
, and
by striking $1,600
each
place it appears and inserting the lower limit
.
Definitions
Section 1402 is amended by adding at the end the following new subsection:
Upper and lower limits
For purposes of subsection (a)—
Lower limit
The lower limit for any taxable year is the sum of the amounts required under section 213(d) of the Social Security Act for a quarter of coverage in effect with respect to each calendar quarter ending with or within such taxable year.
Upper limit
The upper limit for any taxable year is the amount equal to 150 percent of the lower limit for such taxable year.
.
Amendments to the Social Security Act
In general
The matter following paragraph (16) of section 211(a) of the Social Security Act is amended—
by striking $2,400
each
place it appears and inserting the upper limit
, and
by striking $1,600
each
place it appears and inserting the lower limit
.
Definitions
Section 211 of such Act is amended by adding at the end the following new subsection:
Upper and lower limits
For purposes of subsection (a)—
The lower limit for any taxable year is the sum of the amounts required under section 213(d) for a quarter of coverage in effect with respect to each calendar quarter ending with or within such taxable year.
The upper limit for any taxable year is the amount equal to 150 percent of the lower limit for such taxable year.
.
Conforming amendment
Section 212 of such Act is amended—
in subsection (b), by striking
For
and inserting Except as provided in subsection (c),
for
; and
by adding at the end the following new subsection:
For the purpose of determining average indexed monthly earnings, average monthly wage, and quarters of coverage in the case of any individual who elects the option described in clause (ii) or (iv) in the matter following section 211(a)(16) for any taxable year that does not begin with or during a particular calendar year and end with or during such year, the self-employment income of such individual deemed to be derived during such taxable year shall be allocated to the two calendar years, portions of which are included within such taxable year, in the same proportion to the total of such deemed self-employment income as the sum of the amounts applicable under section 213(d) for the calendar quarters ending with or within each such calendar year bears to the lower limit for such taxable year specified in section 211(k)(1).
.
Effective date
The amendments made by this section shall apply to taxable years beginning after December 31, 2007.
Information reporting for Commodity Credit Corporation transactions
In general
Subpart A of part III of subchapter A of chapter 61 (relating to information concerning persons subject to special provisions) is amended by inserting after section 6039I the following new section:
Information reporting with respect to Commodity Credit Corporation transactions
Requirement of reporting
The Commodity Credit Corporation, through the Secretary of Agriculture, shall make a return, according to the forms and regulations prescribed by the Secretary of the Treasury, setting forth any market gain realized by a taxpayer during the taxable year in relation to the repayment of a loan issued by the Commodity Credit Corporation, without regard to the manner in which such loan was repaid.
Statements To be furnished to persons with respect to whom information is required
The Secretary of Agriculture shall furnish to each person whose name is required to be set forth in a return required under subsection (a) a written statement showing the amount of market gain reported in such return.
.
Clerical amendment
The table of sections for subpart A of part III of subchapter A of chapter 61 is amended by inserting after the item relating to section 6039I the following new item:
Sec. 6039J. Information reporting with respect to Commodity Credit Corporation transactions.
.
Effective date
The amendments made by this section shall apply to loans repaid on or after January 1, 2007.
Modification of section 1031 treatment for certain real estate
In general
Section 1031 (relating to exchange of property held for productive use or investment), as amended by this Act, is amended by adding at the end the following new subsection:
Special rule for agricultural real property
In general
Unimproved agricultural real property and improved real property are not property of a like kind.
Unimproved agricultural real property
For purposes of this subsection, the term unimproved agricultural real property means real property—
which is unimproved;
which is used for farming purposes (within the meaning of section 2032A(e)(5)); and
with respect to which a taxpayer receives, in the taxable year in which an exchange of such property is made, any agriculture program payments or Commodity Credit Corporation loans.
Exception
Paragraph (1) shall not apply with respect to any unimproved agricultural real property which, not later than the date of the exchange, is permanently retired from any program under which any payment, loan, or benefit described in paragraph (2)(C) is made.
.
Effective date
The amendments made by this section shall apply to exchanges completed after the date of the enactment of this Act.
Modification of effective date of leasing provisions of the American Jobs Creation Act of 2004
Leases to Foreign Entities
Section 849(b) of the American Jobs Creation Act of 2004 is amended by adding at the end the following new paragraph:
Leases to foreign entities
In the case of tax-exempt use property leased to a tax-exempt entity which is a foreign person or entity, the amendments made by this part shall apply to taxable years beginning after December 31, 2006, with respect to leases entered into on or before March 12, 2004.
.
Effective Date
The amendment made by this section shall take effect as if included in the enactment of the American Jobs Creation Act of 2004.
Time for payment of corporate estimated taxes
The percentage under subparagraph (B) of section 401(1) of the Tax Increase Prevention and Reconciliation Act of 2005 in effect on the date of the enactment of this Act is increased by 7.00 percentage points.
Ineligibility of collectibles for nontaxable like kind exchange treatment
In general
Section 1031(a)(2) (relating to exception) is amended by
striking or
at the end of subparagraph (E), by striking the
period at the end of subparagraph (F) and inserting , or
, and by
inserting after subparagraph (F) the following new subparagraph:
collectibles (as defined in section 408(m)(2)).
.
Effective date
The amendments made by this section shall apply to exchanges completed after the date of the enactment of this Act.
Denial of deduction for certain fines, penalties, and other amounts
In General
Subsection (f) of section 162 (relating to trade or business expenses) is amended to read as follows:
Fines, Penalties, and Other Amounts
In general
Except as provided in paragraph (2), no deduction otherwise allowable shall be allowed under this chapter for any amount paid or incurred (whether by suit, agreement, or otherwise) to, or at the direction of, a government or entity described in paragraph (4) in relation to—
the violation of any law, or
an investigation or inquiry into the potential violation of any law which is initiated by such government or entity.
Exception for amounts constituting restitution or paid to come into compliance with law
Paragraph (1) shall not apply to any amount which—
the taxpayer establishes—
constitutes restitution (or remediation of property) for damage or harm caused by, or which may be caused by, the violation of any law or the potential violation of any law, or
is paid to come into compliance with any law which was violated or involved in the investigation or inquiry, and
is identified as an amount described in clause (i) or (ii) of subparagraph (A), as the case may be, in the court order or settlement agreement, except that the requirement of this subparagraph shall not apply in the case of any settlement agreement which requires the taxpayer to pay or incur an amount not greater than $1,000,000.
Exception for amounts paid or incurred as the result of certain court orders
Paragraph (1) shall not apply to any amount paid or incurred by order of a court in a suit in which no government or entity described in paragraph (4) is a party.
Certain nongovernmental regulatory entities
An entity is described in this paragraph if it is—
a nongovernmental entity which exercises self-regulatory powers (including imposing sanctions) in connection with a qualified board or exchange (as defined in section 1256(g)(7)), or
to the extent provided in regulations, a nongovernmental entity which exercises self-regulatory powers (including imposing sanctions) as part of performing an essential governmental function.
Exception for taxes due
Paragraph (1) shall not apply to any amount paid or incurred as taxes due.
.
Reporting of Deductible Amounts
In general
Subpart B of part III of subchapter A of chapter 61 is amended by inserting after section 6050V the following new section:
Information With respect to certain fines, penalties, and other amounts
Requirement of Reporting
In general
The appropriate official of any government or entity which is described in section 162(f)(4) which is involved in a suit or agreement described in paragraph (2) shall make a return in such form as determined by the Secretary setting forth—
the amount required to be paid as a result of the suit or agreement to which paragraph (1) of section 162(f) applies,
any amount required to be paid as a result of the suit or agreement which constitutes restitution or remediation of property, and
any amount required to be paid as a result of the suit or agreement for the purpose of coming into compliance with any law which was violated or involved in the investigation or inquiry.
Suit or agreement described
In general
A suit or agreement is described in this paragraph if—
it is—
a suit with respect to a violation of any law over which the government or entity has authority and with respect to which there has been a court order, or
an agreement which is entered into with respect to a violation of any law over which the government or entity has authority, or with respect to an investigation or inquiry by the government or entity into the potential violation of any law over which such government or entity has authority, and
the aggregate amount involved in all court orders and agreements with respect to the violation, investigation, or inquiry is $600 or more.
Adjustment of reporting threshold
The Secretary may adjust the $600 amount in subparagraph (A)(ii) as necessary in order to ensure the efficient administration of the internal revenue laws.
Time of filing
The return required under this subsection shall be filed not later than—
30 days after the date on which a court order is issued with respect to the suit or the date the agreement is entered into, as the case may be, or
the date specified by the Secretary.
Statements To Be Furnished to Individuals Involved in the Settlement
Every person required to make a return under subsection (a) shall furnish to each person who is a party to the suit or agreement a written statement showing—
the name of the government or entity, and
the information supplied to the Secretary under subsection (a)(1).
Appropriate Official Defined
For purposes of this section, the term appropriate official means the officer or employee having control of the suit, investigation, or inquiry or the person appropriately designated for purposes of this section.
.
Conforming amendment
The table of sections for subpart B of part III of subchapter A of chapter 61 is amended by inserting after the item relating to section 6050V the following new item:
Sec. 6050W. Information with respect to certain fines, penalties, and other amounts.
.
Effective Date
The amendments made by this section shall apply to amounts paid or incurred on or after the date of the enactment of this Act, except that such amendments shall not apply to amounts paid or incurred under any binding order or agreement entered into before such date. Such exception shall not apply to an order or agreement requiring court approval unless the approval was obtained before such date.
Increase in information return penalties
Failure To File Correct Information Returns
In general
Section 6721(a)(1) is amended—
by striking
$50
and inserting $250
, and
by striking
$250,000
and inserting $3,000,000
.
Reduction where correction in specified period
Correction within 30 days
Section 6721(b)(1) is amended—
by
striking $15
and inserting $50
,
by
striking $50
and inserting $250
, and
by striking
$75,000
and inserting $500,000
.
Failures corrected on or before August 1
Section 6721(b)(2) is amended—
by
striking $30
and inserting $100
,
by
striking $50
and inserting $250
, and
by striking
$150,000
and inserting $1,500,000
.
Lower limitation for persons with gross receipts of not more than $5,000,000
Section 6721(d)(1) is amended—
in subparagraph (A)—
by
striking $100,000
and inserting $1,000,000
,
and
by
striking $250,000
and inserting
$3,000,000
,
in subparagraph (B)—
by
striking $25,000
and inserting $175,000
,
and
by
striking $75,000
and inserting $500,000
,
and
in subparagraph (C)—
by
striking $50,000
and inserting $500,000
,
and
by
striking $150,000
and inserting
$1,500,000
.
Penalty in case of intentional disregard
Section 6721(e) is amended—
by striking
$100
in paragraph (2) and inserting $500
,
and
by striking
$250,000
in paragraph (3)(A) and inserting
$3,000,000
.
Failure to Furnish Correct Payee Statements
In general
Section 6722(a) is amended—
by striking
$50
and inserting $250
, and
by striking
$100,000
and inserting $1,000,000
.
Penalty in case of intentional disregard
Section 6722(c) is amended—
by striking
$100
in paragraph (1) and inserting $500
,
and
by striking
$100,000
in paragraph (2)(A) and inserting
$1,000,000
.
Failure To Comply With Other Information Reporting Requirements
Section 6723 is amended—
by striking
$50
and inserting $250
, and
by striking
$100,000
and inserting $1,000,000
.
Effective Date
The amendments made by this section shall apply with respect to information returns required to be filed on or after January 1, 2008.
Economic substance doctrine
Clarification of economic substance doctrine
In General
Section 7701 is amended by redesignating subsection (p) as subsection (q) and by inserting after subsection (o) the following new subsection:
Clarification of Economic Substance Doctrine; Etc
General rules
In general
In any case in which a court determines that the economic substance doctrine is relevant for purposes of this title to a transaction (or series of transactions), such transaction (or series of transactions) shall have economic substance only if the requirements of this paragraph are met.
Definition of economic substance
For purposes of subparagraph (A)—
In general
A transaction has economic substance only if—
the transaction changes in a meaningful way (apart from Federal tax effects) the taxpayer’s economic position, and
subject to clause (iii), the taxpayer has a substantial purpose (other than a Federal tax purpose) for entering into such transaction.
Special rule where taxpayer relies on profit potential
A transaction shall not be treated as having economic substance solely by reason of having a potential for profit unless the present value of the reasonably expected pre-Federal tax profit from the transaction is substantial in relation to the present value of the expected net Federal tax benefits that would be allowed if the transaction were respected. In determining pre-Federal tax profit, there shall be taken into account fees and other transaction expenses and to the extent provided by the Secretary, foreign taxes.
Special rules for determining whether non-Federal tax purpose
For purposes of clause (i)(II)—
a purpose of achieving a financial accounting benefit shall not be taken into account in determining whether a transaction has a substantial purpose (other than a Federal tax purpose) if the origin of such financial accounting benefit is a reduction of Federal tax, and
the taxpayer shall not be treated as having a substantial purpose (other than a Federal tax purpose) with respect to a transaction if the only such purpose is the reduction of non-Federal taxes and the transaction will result in a reduction of Federal taxes substantially equal to, or greater than, the reduction in non-Federal taxes because of similarities between the laws imposing the taxes.
Definitions and special rules
For purposes of this subsection—
Economic substance doctrine
The term economic substance doctrine means the common law doctrine under which tax benefits under subtitle A with respect to a transaction are not allowable if the transaction does not have economic substance or lacks a business purpose.
Exception for personal transactions of individuals
In the case of an individual, this subsection shall apply only to transactions entered into in connection with a trade or business or an activity engaged in for the production of income.
Other provisions not affected
Except as specifically provided in this subsection, the provisions of this subsection shall not be construed as altering or supplanting any other rule of law or provision of this title, and the requirements of this subsection shall be construed as being in addition to any such other rule of law or provision of this title.
Regulations
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection. Such regulations may include exemptions from the application of this subsection.
.
Effective Date
The amendments made by this section shall apply to transactions entered into after the date of the enactment of this Act.
Penalty for understatements attributable to transactions lacking economic substance, etc
In General
Subchapter A of chapter 68 is amended by inserting after section 6662A the following new section:
Penalty for understatements attributable to transactions lacking economic substance, etc
Imposition of Penalty
If a taxpayer has an noneconomic substance transaction understatement for any taxable year, there shall be added to the tax an amount equal to 30 percent of the amount of such understatement.
Reduction of Penalty for Disclosed Transactions
Subsection (a) shall be
applied by substituting 20 percent
for 30 percent
with respect to the portion of any noneconomic substance transaction
understatement with respect to which the relevant facts affecting the tax
treatment of the item are adequately disclosed in the return or a statement
attached to the return.
Noneconomic Substance Transaction Understatement
For purposes of this section—
In general
The term noneconomic substance transaction understatement means any amount which would be an understatement under section 6662A(b)(1) if section 6662A were applied by taking into account items attributable to noneconomic substance transactions rather than items to which section 6662A would apply without regard to this paragraph.
Noneconomic substance transaction
The term noneconomic substance transaction means any transaction if there is a lack of economic substance (within the meaning of section 7701(p)(1)(B)) for the transaction giving rise to the claimed benefit.
Rules Applicable to Assertion, Compromise, and Collection of Penalty
In general
Only the Chief Counsel for the Internal Revenue Service may assert a penalty imposed under this section or may compromise all or any portion of such penalty. The Chief Counsel may delegate the authority under this paragraph only to an individual holding the position of chief of a branch within the Office of the Chief Counsel for the Internal Revenue Service.
Specific requirements
Assertion of penalty
The Chief Counsel for the Internal Revenue Service (or the Chief Counsel's delegate under paragraph (1)) shall not assert a penalty imposed under this section unless, before the assertion of the penalty, the taxpayer is provided—
a notice of intent to assert the penalty, and
an opportunity to provide to the Commissioner (or the Chief Counsel's delegate under paragraph (1)) a written response to the proposed penalty within a reasonable period of time after such notice.
Compromise of penalty
A compromise shall not result in a reduction in the penalty imposed by this section in an amount greater than the amount which bears the same ratio to the amount of the penalty determined without regard to the compromise as—
the reduction under the compromise in the noneconomic substance transaction understatement to which the penalty relates, bears to
the amount of the noneconomic substance transaction understatement determined without regard to the compromise.
Rules relating to relevancy requirement
Determination of relevance by Chief Counsel
The Chief Counsel for the Internal Revenue Service (or the Chief Counsel's delegate under paragraph (1)) may assert, compromise, or collect a penalty imposed by this section with respect to a noneconomic substance transaction even if there has not been a court determination that the economic substance doctrine was relevant for purposes of this title to the transaction if the Chief Counsel (or delegate) determines that either was so relevant.
Final order of court
If there is a final order of a court that determines that the economic substance doctrine was not relevant for purposes of this title to a transaction (or series of transactions), any penalty imposed under this section with respect to the transaction (or series of transactions) shall be rescinded.
Applicable rules
The rules of paragraphs (2) and (3) of section 6707A(d) shall apply to a compromise under paragraph (1).
Coordination With Other Penalties
Except as otherwise provided in this part, the penalty imposed by this section shall be in addition to any other penalty imposed by this title.
Cross References
(1) For coordination of penalty with understatements under section 6662 and other special rules, see section 6662A(e).
(2) For reporting of penalty imposed under this section to the Securities and Exchange Commission, see section 6707A(e).
.
Coordination With Other Understatements and Penalties
The second
sentence of section 6662(d)(2)(A) is amended by inserting and without
regard to items with respect to which a penalty is imposed by section
6662B
before the period at the end.
Subsection (e) of section 6662A is amended—
in paragraph (1),
by inserting and noneconomic substance transaction
understatements
after reportable transaction
understatements
both places it appears,
in paragraph (2)(A)—
by
inserting 6662B or
before 6663
in the text,
and
by
striking penalty
in the heading and inserting
and economic substance
penalties
,
in paragraph (2)(B)—
by
inserting and section 6662B
after This section
,
and
by
striking penalty
in the heading and inserting
and economic substance
penalties
,
in paragraph (3),
by inserting or noneconomic substance transaction understatement
after reportable transaction understatement
, and
by adding at the end the following new paragraph:
Noneconomic substance transaction understatement
For purposes of this subsection, the term noneconomic substance transaction understatement has the meaning given such term by section 6662B(c).
.
Subsection (e) of section 6707A is amended—
by striking
or
at the end of subparagraph (B), and
by striking subparagraph (C) and inserting the following new subparagraphs:
is required to pay a penalty under section 6662B with respect to any noneconomic substance transaction, or
is required to pay a penalty under section 6662(h) with respect to any transaction and would (but for section 6662A(e)(2)(B)) have been subject to penalty under section 6662A at a rate prescribed under section 6662A(c) or to penalty under section 6662B,
.
Clerical Amendment
The table of sections for part II of subchapter A of chapter 68 is amended by inserting after the item relating to section 6662A the following new item:
Sec. 6662B. Penalty for understatements attributable to transactions lacking economic substance, etc.
.
Effective Date
The amendments made by this section shall apply to transactions entered into after the date of the enactment of this Act.
Denial of deduction for interest on underpayments attributable to noneconomic substance transactions
In General
Section 163(m) (relating to interest on unpaid taxes attributable to nondisclosed reportable transactions) is amended—
by striking “attributable” and all that follows and inserting the following: “attributable to—
the portion of any reportable transaction understatement (as defined in section 6662A(b)) with respect to which the requirement of section 6664(d)(2)(A) is not met, or
any noneconomic substance transaction understatement (as defined in section 6662B(c)).
, and
by inserting
and Noneconomic Substance
Transactions
in the heading thereof after
Transactions
.
Effective Date
The amendments made by this section shall apply to transactions after the date of the enactment of this Act in taxable years ending after such date.
October 25, 2007
Read twice and placed on the calendar