I

104TH CONGRESS

2D SESSION H. R. 3559

To amend the Internal Revenue Code of 1986 to provide a deduction for

a portion of the fiscal year 1996 transitional payment under the Agricultural Market Transition Act which is deposited into a reserve against

future farm losses.

IN THE HOUSE OF REPRESENTATIVES

MAY 30, 1996

Mr. NETHERCUTT (for himself and Mr. HASTINGS of Washington) 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 provide

a deduction for a portion of the fiscal year 1996 transitional payment under the Agricultural Market Transition

Act which is deposited into a reserve against future

farm losses.

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

3 SECTION 1. DEDUCTION FOR TRANSITION PAYMENT DE4 POSITED INTO AGRICULTURAL MARKET

5 TRANSITION RESERVE.

6 (a) IN GENERAL.—Subpart C of part II of sub7 chapter E of chapter 1 of the Internal Revenue Code of
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1 1986 (relating to taxable year in which deductions taken)

2 is amended by inserting after section 468B the following

3 new section:

4 ‘‘SEC. 468C. AGRICULTURAL MARKET TRANSITION RE5 SERVE.

6 ‘‘(a) IN GENERAL.—At the election of the taxpayer,

7 there shall be allowed as a deduction for the taxable year

8 in which the taxpayer receives the first-year agricultural

9 market transition payment an amount equal to the

10 amount paid by the taxpayer during such taxable year to

11 the Agricultural Market Transition Reserve (hereinafter

12 referred to as the ‘Reserve’) of the taxpayer.

13 ‘‘(b) LIMITATION ON AMOUNT PAID INTO RE14 SERVE.—

15 ‘‘(1) IN GENERAL.—The amount which a tax16 payer may pay into the Reserve shall not exceed the

17 lesser of—

18 ‘‘(A) $40,000, or

19 ‘‘(B) the amount of the first-year agricul20 tural market transition payment.

21 ‘‘(2) FIRST-YEAR AGRICULTURAL MARKET

22 TRANSITION PAYMENT.—For purposes of this sec23 tion, the first-year agricultural market transition

24 payment is the amount received by the taxpayer

25 under section 1103 of the Agricultural Market Tran-
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1 sition Act for the first fiscal year the taxpayer par2 ticipates in the program under such section.

3 ‘‘(3) SPECIAL RULE FOR PARTNERSHIPS,

4 ETC.—In the case of a partnership, the limitation

5 under this subsection shall be applied at the partner

6 level and not at the partnership level. A similar rule

7 shall apply to S corporations.

8 ‘‘(c) INCLUSION OF AMOUNTS DISTRIBUTED.—There

9 shall be includible in the gross income of the taxpayer for

10 any taxable year—

11 ‘‘(1) any amount distributed from the Reserve

12 during such taxable year, and

13 ‘‘(2) any deemed distribution under subsection

14 (e).

15 ‘‘(d) AGRICULTURAL MARKET TRANSITION RE16 SERVE.—

17 ‘‘(1) IN GENERAL.—For purposes of this sec18 tion, the term ‘Agricultural Market Transition Re19 serve’ means a reserve established by the taxpayer

20 for purposes of this section.

21 ‘‘(2) RESERVE EXEMPT FROM TAXATION.—Any

22 Agricultural Market Transition Reserve is exempt

23 from taxation under this subtitle unless such Re24 serve has ceased to be an Agricultural Market Tran25 sition Reserve by reason of subsection (e). Notwith-
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1 standing the preceding sentence, any such Reserve

2 shall be subject to the taxes imposed by section 511

3 (relating to imposition of tax on unrelated business

4 income of charitable, etc. organizations).

5 ‘‘(3) CONTRIBUTIONS TO RESERVE.—The Re6 serve shall not accept any payments (or other

7 amounts) other than payments with respect to which

8 a deduction is allowable under subsection (a).

9 ‘‘(4) PROHIBITIONS AGAINST SELF-DEALING.—

10 Under regulations prescribed by the Secretary, for

11 purposes of section 4951 (and so much of this title

12 as relates to such section), the Reserve shall be

13 treated in the same manner as a trust described in

14 section 501(c)(21).

15 ‘‘(e) DEEMED DISTRIBUTIONS.—

16 ‘‘(1) DISQUALIFICATION OF RESERVE FOR

17 SELF-DEALING.—In any case in which a Reserve vio18 lates any provision of this section or section 4951,

19 the Secretary may disqualify such Reserve from the

20 application of this section. In any case to which this

21 paragraph applies, the Reserve shall be treated as

22 having distributed all of its funds on the date such

23 determination takes effect.

24 ‘‘(2) TERMINATION.—A Reserve shall be treat25 ed as having distributed all of its funds on the date
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1 which is 10 years after the date such Reserve was

2 established.

3 ‘‘(f) TIME WHEN PAYMENTS DEEMED MADE.—For

4 purposes of this section, a taxpayer shall be deemed to

5 have made a payment to the Reserve on the last day of

6 a taxable year if such payment is made on account of such

taxable year and is made within 21 7 ⁄2 months after the close

8 of such taxable year.’’

9 (b) CLERICAL AMENDMENT.—The table of sections

10 for subpart C of part II of subchapter E of chapter 1 of

11 such Code is amended by inserting after the item relating

12 to section 468B the following new item:

‘‘Sec. 468C. Agricultural Market Transition Reserve.’’

13 (c) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to taxable years beginning after

15 the date of the enactment of this Act.

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