I 

109TH CONGRESS 

1ST SESSION H. R. 3522 

To amend the Internal Revenue Code of 1986 to clarify that installment 

sales treatment shall not fail to apply to property acquired for conservation purposes by a State or local government or certain tax-exempt 

organizations merely because purchase funds are held in a sinking or 

similar fund pursuant to State law. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 28, 2005 

Mr. BISHOP of New York (for himself and Mr. KUHL of New York) introduced the following bill; which was referred to the Committee on Ways 

and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to clarify 

that installment sales treatment shall not fail to apply 

to property acquired for conservation purposes by a State 

or local government or certain tax-exempt organizations 

merely because purchase funds are held in a sinking 

or similar fund pursuant to State law. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Open Space Preserva5 tion Promotion Act of 2005’’. 
2 

•HR 3522 IH 

1 SEC. 2. FINDINGS. 

2 The Congress finds as follows: 

3 (1) Land conservation and farmland preserva4 tion is an important national goal that allows farm5 ers to continue to farm on their land, and allows 

6 communities to protect invaluable natural resources 

7 for future generations. 

8 (2) Farmland in metropolitan and frequently 

9 high-cost communities is estimated to account for 

10 one-third of all farms, and 18 percent of this nations 

11 farmland. 

12 (3) In many urban fringe areas farmland is 

13 rapidly disappearing, and the U.S. Department of 

14 Agriculture estimates that approximately 95 million 

15 acres of farmland will be taken over by sprawl and 

16 urban growth in the coming years. 

17 (4) Farmers and landowners generally receive a 

18 significantly reduced payment for the sale of devel19 opment rights and conservation easements than they 

20 would receive by selling the land to the private sec21 tor for development, yet in many instances these 

22 sales are treated the same under the tax code. 

23 (5) In areas where State law requires debt as24 sumed by a municipality to be structured in the 

25 form of a sinking fund, farmers and landowners may 

26 be discouraged from selling the development rights 
3 

•HR 3522 IH 

1 of their land for conservation purposes. Because 

2 sales to State and local governments will be in the 

3 form of a sinking fund, a seller may not be able to 

4 pay capital gains taxes upfront when the seller will 

5 not receive cash payments until a future date. 

6 (6) In urban fringe areas, many communities 

7 have made a concerted effort to purchase develop8 ment rights to land. The land remains private, but 

9 the community gains by preserving open spaces and 

10 enjoying environmental benefits. Communities will 

11 greatly benefit by the federal government taking 

12 steps to assist municipalities in the purchase of de13 velopment rights. 

14 SEC. 3. USE OF SINKING FUND BY STATE OR LOCAL GOV15 ERNMENT NOT TO PREVENT INSTALLMENT 

16 SALES TREATMENT. 

17 (a) IN GENERAL.—Paragraph (3) of section 453(f) 

18 of the Internal Revenue Code of 1986 (relating to pay19 ment) is amended to read as follows: 

20 ‘‘(3) PAYMENT.— 

21 ‘‘(A) IN GENERAL.—Except as provided in 

22 paragraph (4), the term ‘payment’ does not in23 clude the receipt of evidences of indebtedness of 

24 the person acquiring the property (whether or 
4 

•HR 3522 IH 

1 not payment of such indebtedness is guaranteed 

2 by another person). 

3 ‘‘(B) TREATMENT OF SINKING AND SIMI4 LAR FUNDS REQUIRED BY STATE LAW.—Noth5 ing in this section or the regulations thereunder 

6 shall be construed as treating a seller of prop7 erty to a qualified organization (as defined in 

8 section 170(h)(3)) as receiving a payment by 

9 reason of the fact that some or all of the funds 

10 for such purchase are made (as required by 

11 State law) to a sinking or similar fund if the 

12 property is being acquired by such organization 

13 exclusively for conservation purposes (as de14 fined in section 170(h)(4)).’’ 

15 (b) EFFECTIVE DATE.—The amendment made by 

16 this section shall take effect on the date of the enactment 

17 of this Act. 

Æ