To amend the Internal Revenue Code of 1986 to provide for Commercial Fishing, Farm, and Ranch Risk Management Accounts, and for other purposes.

Summary: Commercial Fishing, Farm, and Ranch Risk Management Act - Amends the Internal Revenue Code to establish a Commercial Fishing, Farm, and Ranch Risk Management Account (CFFR Account) to provide farmers and commercial fisherman with additional capital for investment and to protect against operating losses. Allows a tax deduction for cash contributions to a CFFR Account, limited to 20% of the taxpayer's taxable income attributable to an active farm or commercial fishing business. Imposes a 10% additional tax on amounts in a CFFR Account which are not distributed within 10 years after the establishment of such Account.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Commercial Fishing, Farm, and Ranch 
Risk Management Act''.

SEC. 2. COMMERCIAL FISHING, FARM, AND RANCH RISK MANAGEMENT ACCOUNTS.

    (a) In General.--Subpart C of part II of subchapter E of chapter 1 
of the Internal Revenue Code of 1986 (relating to taxable year for 
which deductions taken) is amended by inserting after section 468B the 
following:

``SEC. 468C. COMMERCIAL FISHING, FARM, AND RANCH RISK MANAGEMENT 
              ACCOUNTS.

    ``(a) Deduction Allowed.--In the case of an individual engaged in 
an eligible farming business or commercial fishing, there shall be 
allowed as a deduction for any taxable year the amount paid in cash by 
the taxpayer during the taxable year to a Commercial Fishing, Farm, and 
Ranch Risk Management Account (hereinafter in this section referred to 
as the `CFFR Account').
    ``(b) Limitation.--The amount which a taxpayer may pay into the 
CFFR Account for any taxable year shall not exceed 20 percent of so 
much of the taxable income of the taxpayer (determined without regard 
to this section) which is attributable (determined in the manner 
applicable under section 1301) to any eligible farming business or 
commercial fishing.
    ``(c) Eligible Businesses.--For purposes of this section--
            ``(1) Eligible farming business.--The term `eligible 
        farming business' means any farming business (as defined in 
        section 263A(e)(4)) which is not a passive activity (within the 
        meaning of section 469(c)) of the taxpayer.
            ``(2) Commercial fishing.--The term `commercial fishing' 
        has the meaning given such term by section 3(4) of the 
        Magnuson-Stevens Fishery Conservation and Management Act (16 
        U.S.C. 1802(4)) but only if such fishing is not a passive 
        activity (within the meaning of section 469(c)) of the 
        taxpayer.
    ``(d) CFFR Account.--For purposes of this section, the term 
`Commercial Fishing, Farm, and Ranch Risk Management Account' or `CFFR 
Account' means a trust created or organized in the United States for 
the exclusive benefit of the taxpayer, but only if the written 
governing instrument creating the trust meets the following 
requirements:
            ``(1) No contribution will be accepted for any taxable year 
        in excess of the amount allowed as a deduction under subsection 
        (a) for such year.
            ``(2) The trustee is a bank (as defined in section 408(n)) 
        or another person who demonstrates to the satisfaction of the 
        Secretary that the manner in which such person will administer 
        the trust will be consistent with the requirements of this 
        section.
            ``(3) The assets of the trust consist entirely of cash or 
        of obligations which have adequate stated interest (as defined 
        in section 1274(c)(2)) and which pay such interest not less 
        often than annually.
            ``(4) The assets of the trust will not be commingled with 
        other property except in a common trust fund or common 
        investment fund.
    ``(e) Inclusion of Amounts Distributed.--
            ``(1) In general.--Except as provided in paragraph (2), 
        there shall be includible in the gross income of the taxpayer 
        for any taxable year--
                    ``(A) any amount distributed from a CFFR Account of 
                the taxpayer during such taxable year, and
                    ``(B) any deemed distribution under--
                            ``(i) subsection (f)(1) (relating to 
                        deposits not distributed within 10 years),
                            ``(ii) subsection (f)(2) (relating to 
                        cessation in eligible farming business), and
                            ``(iii) subparagraph (B) or (C) of 
                        subsection (f)(3) (relating to prohibited 
                        transactions and pledging account as security).
            ``(2) Exceptions.--Paragraph (1)(A) shall not apply to--
                    ``(A) any distribution to the extent attributable 
                to income of the Account, and
                    ``(B) the distribution of any contribution paid 
                during a taxable year to a CFFR Account to the extent 
                that such contribution exceeds the limitation 
                applicable under subsection (b) if requirements similar 
                to the requirements of section 408(d)(4) are met.
        For purposes of subparagraph (A), distributions shall be 
        treated as first attributable to income and then to other 
        amounts.
    ``(f) Special Rules.--
            ``(1) Tax on deposits in account which are not distributed 
        within 10 years.--
                    ``(A) In general.--If, at the close of any taxable 
                year, there is a nonqualified balance in any CFFR 
                Account--
                            ``(i) there shall be deemed distributed 
                        from such Account during such taxable year an 
                        amount equal to such balance, and
                            ``(ii) the taxpayer's tax imposed by this 
                        chapter for such taxable year shall be 
                        increased by 10 percent of such deemed 
                        distribution.
                The preceding sentence shall not apply if an amount 
                equal to such nonqualified balance is distributed from 
                such Account to the taxpayer before the due date 
                (including extensions) for filing the return of tax 
                imposed by this chapter for such year (or, if earlier, 
                the date the taxpayer files such return for such year).
                    ``(B) Nonqualified balance.--For purposes of 
                subparagraph (A), the term `nonqualified balance' means 
                any balance in the Account on the last day of the 
                taxable year which is attributable to amounts deposited 
                in such Account before the 9th preceding taxable year.
                    ``(C) Ordering rule.--For purposes of this 
                paragraph, distributions from a CFFR Account (other 
                than distributions of current income) shall be treated 
                as made from deposits in the order in which such 
                deposits were made, beginning with the earliest 
                deposits.
            ``(2) Cessation in eligible business.--At the close of the 
        first disqualification period after a period for which the 
        taxpayer was engaged in an eligible farming business or 
        commercial fishing, there shall be deemed distributed from the 
        CFFR Account of the taxpayer an amount equal to the balance in 
        such Account (if any) at the close of such disqualification 
        period. For purposes of the preceding sentence, the term 
        `disqualification period' means any period of 3 consecutive 
        taxable years for which the taxpayer is not engaged in an 
        eligible farming business or commercial fishing.
            ``(3) Certain rules to apply.--Rules similar to the 
        following rules shall apply for purposes of this section:
                    ``(A) Section 220(f)(8) (relating to treatment on 
                death).
                    ``(B) Section 408(e)(2) (relating to loss of 
                exemption of account where individual engages in 
                prohibited transaction).
                    ``(C) Section 408(e)(4) (relating to effect of 
                pledging account as security).
                    ``(D) Section 408(g) (relating to community 
                property laws).
                    ``(E) Section 408(h) (relating to custodial 
                accounts).
            ``(4) Time when payments deemed made.--For purposes of this 
        section, a taxpayer shall be deemed to have made a payment to a 
        CFFR Account on the last day of a taxable year if such payment 
        is made on account of such taxable year and is made on or 
        before the due date (including extensions) for filing the 
        return of tax for such taxable year.
            ``(5) Individual.--For purposes of this section, the term 
        `individual' shall not include an estate or trust.
            ``(6) Deduction not allowed for self-employment tax.--The 
        deduction allowable by reason of subsection (a) shall not be 
        taken into account in determining an individual's net earnings 
        from self-employment (within the meaning of section 1402(a)) 
        for purposes of chapter 2.
    ``(g) Reports.--The trustee of a CFFR Account shall make such 
reports regarding such Account to the Secretary and to the person for 
whose benefit the Account is maintained with respect to contributions, 
distributions, and such other matters as the Secretary may require 
under regulations. The reports required by this subsection shall be 
filed at such time and in such manner and furnished to such persons at 
such time and in such manner as may be required by such regulations.''.
    (b) Tax on Excess Contributions.--
            (1) Subsection (a) of section 4973 of such Code (relating 
        to tax on excess contributions to certain tax-favored accounts 
        and annuities) is amended by striking ``or'' at the end of 
        paragraph (4), by inserting ``or'' at the end of paragraph (5), 
        and by inserting after paragraph (5) the following:
            ``(6) a CFFR Account (within the meaning of section 
        468C(d)), or''.
            (2) Section 4973 of such Code is amended by adding at the 
        end the following:
    ``(g) Excess Contributions to Farm Accounts.--For purposes of this 
section, in the case of a CFFR Account (within the meaning of section 
468C(d)), the term `excess contributions' means the amount by which the 
amount contributed for the taxable year to the Account exceeds the 
amount which may be contributed to the Account under section 468C(b) 
for such taxable year. For purposes of this subsection, any 
contribution which is distributed out of the CFFR Account in a 
distribution to which section 468C(e)(2)(B) applies shall be treated as 
an amount not contributed.''.
            (3) The section heading for section 4973 of such Code is 
        amended to read as follows:

``SEC. 4973. EXCESS CONTRIBUTIONS TO CERTAIN ACCOUNTS, ANNUITIES, 
              ETC.''.

            (4) The table of sections for chapter 43 of such Code is 
        amended by striking the item relating to section 4973 and 
        inserting the following:

``Sec. 4973. Excess contributions to certain accounts, annuities, 
                            etc.''.
    (c) Tax on Prohibited Transactions.--
            (1) Subsection (c) of section 4975 of such Code (relating 
        to tax on prohibited transactions) is amended by adding at the 
        end the following:
            ``(7) Special rule for farm accounts.--A person for whose 
        benefit a CFFR Account (within the meaning of section 468C(d)) 
        is established shall be exempt from the tax imposed by this 
        section with respect to any transaction concerning such account 
        (which would otherwise be taxable under this section) if, with 
        respect to such transaction, the account ceases to be a CFFR 
        Account by reason of the application of section 468C(f)(3)(B) 
        to such account.''.
            (2) Paragraph (1) of section 4975(e) of such Code is 
        amended by redesignating subparagraphs (F) and (G) as 
        subparagraphs (G) and (H), respectively, and by inserting after 
        subparagraph (E) the following:
                    ``(F) a CFFR Account described in section 
                468C(d),''.
    (d) Failure To Provide Reports on Farm Accounts.--Paragraph (2) of 
section 6693(a) of such Code (relating to failure to provide reports on 
certain tax-favored accounts or annuities) is amended by redesignating 
subparagraphs (D) and (E) as subparagraphs (E) and (F), respectively, 
and by inserting after subparagraph (C) the following:
                    ``(D) section 468C(g) (relating to CFFR 
                Accounts),''.
    (e) Clerical Amendment.--The table of sections for subpart C of 
part II of subchapter E of chapter 1 of such Code is amended by 
inserting after the item relating to section 468B the following:

``Sec. 468C. Commercial fishing, farm, and ranch risk management 
                            accounts.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.