A bill to provide a Federal tax exemption for forest conservation bonds, and for other purposes.

Summary: Community Forestry Conservation Act of 2005 - Provides for the treatment of qualified forest conservation bonds as tax-exempt facility bonds under the Internal Revenue Code. Defines "qualified forest conservation bonds" as bonds issued for certain forestry organizations within 36 months after the enactment of this Act. Requires 95 percent or more of the net proceeds of such bonds to be used for specified forestry project costs, including the acquisition of forest lands subject to a conservation restriction.

Exempts from income tax income, gains, and other tax incidents generated by certain harvesting activity on forest lands purchased with qualified forest conservation bonds.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Community Forestry Conservation Act 
of 2005''.

SEC. 2. FOREST CONSERVATION BONDS.

    (a) Tax-Exempt Bond Financing.--
            (1) 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.
            (2) 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--
                    (A) 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,
                    (B) such bond is issued for a qualified 
                organization, and
                    (C) such bond is issued before the date which is 36 
                months after the date of the enactment of this Act.
            (3) Limitation on aggregate amount issued.--
                    (A) In general.--The maximum aggregate face amount 
                of bonds which may be issued under this subsection 
                shall not exceed $10,000,000,000 for all projects 
                (excluding refunding bonds).
                    (B) Allocation of limitation.--The limitation 
                described in subparagraph (A) shall be allocated by the 
                Secretary of the Treasury among qualified organizations 
                as follows:
                            (i) 40 percent for qualified project costs 
                        with respect to the cost of acquisition by any 
                        qualified organization in the Pacific Northwest 
                        region.
                            (ii) 25 percent for qualified project costs 
                        with respect to the cost of acquisition by any 
                        qualified organization in the Western region.
                            (iii) 17.5 percent for qualified project 
                        costs with respect to the cost of acquisition 
                        by any qualified organization in the Southeast 
                        region.
                            (iv) 17.5 percent for qualified project 
                        costs with respect to the cost of acquisition 
                        by any qualified organization in the Northeast 
                        region.
                    (C) Procedure for issuance.--The amount of the 
                limitation under each of the clauses of subparagraph 
                (B) shall be allocated on a first-come, first-served 
                basis.
                    (D) Regions.--For purposes of this paragraph--
                            (i) 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 
                        202.2 of title 36, Code of Federal Regulations.
                            (ii) Western region.--The term ``Western 
                        region'' means Regions 1, 2, 3, 4, 5, and 10 
                        (as so defined).
                            (iii) Southeast region.--The term 
                        ``Southeast region'' means Region 8 (as so 
                        defined).
                            (iv) Northeast region.--The term 
                        ``Northeast region'' means Region 9 (as so 
                        defined).
            (4) Qualified project costs.--For purposes of this 
        subsection, the term ``qualified project costs'' means the sum 
        of--
                    (A) the cost of acquisition by the 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),
                    (B) capitalized interest on the qualified forest 
                conservation bonds for the 3-year period beginning on 
                the date of issuance of such bonds, and
                    (C) credit enhancement fees which constitute 
                qualified guarantee fees (within the meaning of section 
                148 of such Code).
            (5) Special rules.--In applying the Internal Revenue Code 
        of 1986 to any qualified forest conservation bond, the 
        following modifications shall apply:
                    (A) Section 146 of such Code (relating to volume 
                cap) shall not apply.
                    (B) 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.
                    (C) Subsections (c) and (d) of section 147 of such 
                Code (relating to limitations on acquisition of land 
                and existing property) shall not apply.
                    (D) Section 57(a)(5) of such Code (relating to tax-
                exempt interest) shall not apply to interest on 
                qualified forest conservation bonds.
            (6) Treatment of current refunding bonds.--Paragraphs 
        (2)(C) 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--
                    (A) 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,
                    (B) the amount of the refunding bond does not 
                exceed the outstanding amount of the refunded bond, and
                    (C) 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.
        For purposes of subparagraph (A), average maturity shall be 
        determined in accordance with section 147(b)(2)(A) of such 
        Code.
            (7) Effective date.--This subsection shall apply to 
        obligations issued on or after the date which is 180 days after 
        the enactment of this Act.
    (b) Items From Qualified Harvesting Activities Not Subject to Tax 
or Taken Into Account.--
            (1) 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.
            (2) 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.
            (3) Qualified harvesting activity.--For purposes of 
        paragraph (1)--
                    (A) In general.--The term ``qualified harvesting 
                activity'' means the sale, lease, or harvesting, of 
                standing timber--
                            (i) on land owned by a qualified 
                        organization which was acquired with proceeds 
                        of qualified forest conservation bonds, and
                            (ii) pursuant to a qualified conservation 
                        plan adopted by the qualified organization.
                    (B) Exceptions.--
                            (i) 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.
                            (ii) 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--
                                    (I) the average annual area of 
                                timber harvested from such land exceeds 
                                2.5 percent of the total area of such 
                                land or,
                                    (II) 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.
                        The limitations under subclauses (I) and (II) 
                        shall not apply to post-fire restoration and 
                        rehabilitation or sanitation harvesting of 
                        timber stands which are substantially damaged 
                        by fire, windthrow, or other catastrophes, or 
                        which are in imminent danger from insect or 
                        disease attack.
            (4) 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.
            (5) Partial recapture of benefits if harvesting limit 
        exceeded.--If, as of the date that this subsection ceases to 
        apply under paragraph (3), the average annual area of timber 
        harvested from the land exceeds the requirement of paragraph 
        (3)(B)(ii)(I), 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.
    (c) Definitions.--For purposes of this section--
            (1) Qualified conservation plan.--The term ``qualified 
        conservation plan'' means a multiple land use program or plan 
        which--
                    (A) 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,
                    (B) mandates that conservation of forest and forest 
                land is the single-most significant use of the forest 
                and forest land, and
                    (C) requires that timber harvesting be consistent 
                with--
                            (i) restoring and maintaining reference 
                        conditions for the region's ecotype,
                            (ii) restoring and maintaining a 
                        representative sample of young, mid, and late 
                        successional forest age classes,
                            (iii) maintaining or restoring the 
                        resources' ecological health for purposes of 
                        preventing damage from fire, insect, or 
                        disease,
                            (iv) maintaining or enhancing wildlife or 
                        fish habitat, or
                            (v) enhancing research opportunities in 
                        sustainable renewable resource uses.
            (2) Conservation restriction.--The conservation restriction 
        described in this paragraph is a restriction which--
                    (A) 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,
                    (B) meets the requirements of clause (ii) or 
                (iii)(II) of section 170(h)(4)(A) of such Code,
                    (C) obligates the qualified organization to pay the 
                costs incurred by the holder of the conservation 
                restriction in monitoring compliance with such 
                restriction, and
                    (D) requires an increasing level of conservation 
                benefits to be provided whenever circumstances allow 
                it.
            (3) Qualified organization.--The term ``qualified 
        organization'' means an organization--
                    (A) more than half of the value of the property of 
                which consists of forests and forest land acquired with 
                the proceeds from qualified forest conservation bonds,
                    (B) which periodically conducts educational 
                programs designed to inform the public of 
                environmentally sensitive forestry management and 
                conservation techniques,
                    (C) which has at all times a board of directors--
                            (i) at least 20 percent of the members of 
                        which represent the holders of the conservation 
                        restriction described in paragraph (2),
                            (ii) at least 20 percent of the members of 
                        which are public officials, and
                            (iii) 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,
                    (D) 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
                    (E) upon dissolution, is required to dedicate its 
                assets to--
                            (i) an organization described in section 
                        501(c)(3) of such Code which is organized and 
                        operated for conservation purposes, or
                            (ii) a governmental unit described in 
                        section 170(c)(1) of such Code.
            (4) Unrelated person.--The term ``unrelated person'' means 
        a person who is not a related person.
            (5) Related person.--A person shall be treated as related 
        to another person if--
                    (A) 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
                    (B) 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.