Water and Agriculture Tax Reform Act of 2018

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I rise in support of H.R. 519, which would provide tax- exempt mutual irrigation companies with more flexibility in respect to funding their operations, maintenance, and improvement of their water infrastructure, especially in drought-stricken areas.

Tax-exempt mutual ditch or irrigation companies are important to rural communities and to agriculture. These companies allow farmers, ranchers, and others, including water users and even some urban water users, to collaborate and pool resources to install and maintain vital infrastructure for the delivery of water.

To maintain their tax-exempt status, however, mutual ditch or irrigation companies must satisfy Tax Code requirements that the bulk of their income, which is used to fund operations and capital improvements, must be from the shareholders of these irrigation and water delivery districts.

H.R. 519 allows these companies to receive other sources of income and still maintain their tax-exempt status. The bill provides that, for the income from other sources to receive this preferential tax treatment, it generally must be used for operations and maintenance to ensure that these funds will be reinvested in irrigation infrastructure systems.

This bill would provide mutual irrigation companies with more flexibility with respect to funding their operations and maintaining improvements to their water infrastructure, especially in the drought- stricken areas, and it will facilitate more efficient water allocation in support of these rural economies.

This bill also clarifies that governance matters in regard to these mutual ditch or irrigation companies may be arranged as permitted under the State laws.

This bill supports local economies, promotes more efficient use of water, helps farmers and ranchers in many arid areas, and actually is just much fairer in how these resources are maintained and the ability to maintain these districts under the understanding of the current Tax Code.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, just sort of a quick commentary.

I want to thank the gentleman from California for his input, his observations. He has been incredibly constructive and paid a lot of attention to protecting his constituents. Those of us from arid areas, we care a lot about this.

Mr. Speaker, I yield 4 minutes to the gentleman from Colorado (Mr. Buck).

Mr. Speaker, I have no other speakers, and I reserve the balance of my time.

Mr. Speaker, I yield myself such time as I may consume for a very quick closing.

In a previous life, I was the treasurer of Maricopa County. We had 3,300 taxing districts in this county. A substantial number of those taxing districts were actually just these, irrigation and water delivery. Many of them were in the rural parts of my county, but a lot of them, you would be surprised, were actually in the suburban and even some in downtown Phoenix.

I have actually had a conversation with a couple of them, one asking if they had an excess water allocation that year, could they actually sell it to the local pond, the little conservation reserve in our riverbed, and those things; and if they did so, if that amount of money exceeded 15 percent of their revenues, would they blow up their tax status.

In this case, this legislation would prevent that, but they still have to use that money to constantly improve their infrastructure, therefore, I believe, being more water economical.

So this is a good thing for our communities, particularly rural, particularly the uniqueness of those of us in the desert Southwest.

Mr. Speaker, I urge my colleagues to vote ``yes,'' and I yield back the balance of my time.

Mr. Speaker, I thank the gentleman from Arizona (Mr. Schweikert) for giving me this opportunity to speak on behalf of H.R. 519, the Water and Agriculture Tax Reform Act of 2018.

Mr. Speaker, I want to thank Mr. Thompson for his work on this and making sure that this is, in fact, a bipartisan effort and a much better bill than it started out as.

I also want to thank Chairman Brady in the Ways and Means Committee for working with me to bring this bill to the floor. I introduced this bill last year, and Chairman Brady has been a good partner in assisting with its passage from the committee.

Mr. Speaker, farmers, ranchers, and families, businesses, sportsmen, everyone in my district relies on water for their livelihood, but in the arid prairies of the Great Plains, water is running short. Under the blistering Colorado Sun, poorly watered crops quickly become less productive and may die altogether.

Farmers around my district tell me they are moving operations elsewhere because they don't have access to water or they simply can't afford it. Agricultural communities around the Nation will face economic crisis if farmers and ranchers cannot afford water.

H.R. 519 is a key step towards solving this problem. It offers farmers and ranchers an affordable water supply; and in doing so, it supports not only our agricultural communities, but everyone in America who relies on farms and ranches for food.

My bill seeks to help farmers by empowering them to support each other. Many farmers rely on nonprofit, member-owned cooperatives to supply their water. These mutual irrigation and ditch companies give farmers ownership in their water supply. However, current IRS regulations prohibit these nonprofits from generating more than 15 percent of their revenue from nonmember sources. If they exceed this 15 percent threshold, they lose their tax-exempt status.

H.R. 519 responds by removing caps on how much revenue these water companies can raise from nonmember sources, allowing them, for example, to sell water access for recreational use or raise funds through crossing fees. The only requirement is that this revenue must be reinvested in maintenance, operations, and infrastructure improvements, keeping water prices affordable for the members and upholding the nonprofit ideals of the cooperative. With this financial freedom, mutual irrigation and ditch companies can continue to play a vital role in supporting our Nation's farmers.

The bill also reforms the IRS treatment of member voting eligibility for cooperatives, protecting mutual associations that have complied with State law for years. By empowering nonprofit mutual irrigation ditch companies to raise revenue from nonmember sources, H.R. 519 will reduce the cost of water for cash-strapped farmers.

Mr. Speaker, I urge the House to help our rural communities and, frankly, all of America by passing the Water and Agriculture Tax Reform Act.

Mr. Speaker, I yield myself as much time as I may consume.

Mr. Speaker, the bill before us will allow certain entities to retain their tax exemption so long as they are generally reinvesting that revenue in operations and maintenance, including capital projects.

As a farmer from California, I know well how critical water infrastructure improvements are to small irrigation districts. This change will help irrigation districts continue to invest in drought- resilient projects instead of relying on rate increases.

In States like mine, both drought-stricken and reliant on irrigation districts for water deliveries, infrastructure investment is a critical tool to help us prepare for future droughts. But we must also ensure that Federal policy changes do not create unintended consequences for water users.

Mr. Speaker, I want to thank Representative Buck and Chairman Brady for working with me to include guardrails in this bill that will eliminate financial incentives to transfer water among regions in a way that disadvantages agricultural enterprise, impairs water quality, or causes environmental harm. This protection against potential for abuse resulting from the policy changes in H.R. 519 should prevent undue harm to my northern California constituents.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I am prepared to close, and I yield myself the balance of my time.

Mr. Speaker, I thank the sponsors of this bill, in particular Congressman Buck for his good work working with me to ensure that we were able to take care of some concerns that we had in the original drafting of the bill.

Mr. Speaker, I urge my colleagues on both sides of the aisle to vote for this piece of legislation, and I yield back the balance of my time.

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 519) to amend the Internal Revenue Code of 1986 to facilitate water leasing and water transfers to promote conservation and efficiency, as amended.

Mr. Speaker, I ask unanimous consent that all Members have 5 legislative days within which to revise and extend their remarks and include extraneous material on H.R. 519, currently under consideration.

Mr. Speaker, I yield the balance of my time to the gentleman from Arizona (Mr. Schweikert), and I ask unanimous consent that he be allowed to control that time.