I

103D CONGRESS

1ST SESSION H. R. 428

To amend the Internal Revenue Code of 1986 to exclude from the gross

estate the value of land subject to a qualified conservation easement

if certain conditions are satisfied and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 5, 1993

Mr. WALKER 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 exclude

from the gross estate the value of land subject to a

qualified conservation easement if certain conditions are

satisfied and for other purposes.

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 Act of 1993’’.
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1 SEC. 2. TREATMENT OF LAND SUBJECT TO A QUALIFIED

2 CONSERVATION EASEMENT.

3 (a) GROSS ESTATE TAX WITH RESPECT TO LAND

4 SUBJECT TO A QUALIFIED CONSERVATION EASEMENT.—

5 Section 2031 of the Internal Revenue Code of 1986 (relat6 ing to the definition of gross estate) is amended by redes7 ignating subsection (c) as subsection (d) and by inserting

8 after subsection (b) the following new subsection:

9 ‘‘(c) ESTATE TAX WITH RESPECT TO LAND SUB10 JECT TO A QUALIFIED CONSERVATION EASEMENT.—

11 ‘‘(1) IN GENERAL.—Except as otherwise pro12 vided in this subsection, there shall be excluded from

13 the gross estate the value of land subject to a quali14 fied conservation easement (less the amount of any

15 indebtedness secured by such land). There shall be

16 included in the gross estate the value of each devel17 opment right retained by the donor in the convey18 ance of such qualified conservation easement. For

19 purposes of this subsection, the term ‘land subject to

20 a qualified conservation easement’ shall mean land,

21 which was owned by the decedent or a member of

22 the decedent’s family during the 3-year period end23 ing on the date of the decedent’s death, and with re24 spect to which a qualified conservation contribution

25 of a qualified real property interest (as defined in

26 section 170(h)) has been made by the decedent, the
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1 decedent’s spouse or the decedent’s parent, a lineal

2 ancestor of the decedent, or a lineal descendant of

3 the decedent, the decedent’s spouse or the decedent’s

4 parent, or a spouse of such lineal descendant. For

5 purposes of this subsection, the term ‘qualified real

6 property interest’ shall not include a certified his7 toric structure (as defined in section

8 170(h)(4)(A)(iv)). For purposes of this subsection,

9 the term ‘member of the decedent’s family’ shall

10 have the same meaning as the term ‘member of the

11 family’ in section 2032A.

12 ‘‘(2) PAYMENT OF TAX UPON CERTAIN DISPOSI13 TION OF LAND SUBJECT TO RETAINED DEVELOP14 MENT RIGHT.—The tax attributable to the amount

15 included in the gross estate relating to development

16 rights retained by the donor in the conveyance of a

17 qualified conservation easement shall be due upon

18 the disposition (other than by gift or bequest) of

19 such property.’’

20 (b) CARRYOVER BASIS.—Section 1014(a) of the In21 ternal Revenue Code of 1986 (relating to basis of property

22 acquired from a decedent) is amended by striking the pe23 riod at the end of paragraph (3), inserting ‘‘or,’’ at the

24 end thereof, and inserting the following new paragraph:
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1 ‘‘(4) in the case of the applicability of section

2 2031(c), the basis in the hands of the decedent.’’

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

4 this section shall apply to land on which qualified con5 servation easements were granted after December 31,

6 1992.

7 SEC. 3. GIFT TAX ON LAND SUBJECT TO A QUALIFIED CON8 SERVATION EASEMENT.

9 (a) GIFT TAX WITH RESPECT TO LAND SUBJECT TO

10 A QUALIFIED CONSERVATION EASEMENT.—Section 2503

11 of the Internal Revenue Code of 1986 (relating to taxable

12 gifts) is amended by adding at the end thereof the follow13 ing new subsection:

14 ‘‘(h) GIFT TAX WITH RESPECT TO LAND SUBJECT

15 TO A QUALIFIED CONSERVATION EASEMENT.—The trans16 fer by gift of land subject to a qualified conservation ease17 ment (other than development rights retained by the donor

18 of such easement) shall not be treated as a transfer of

19 property by gift for purposes of this chapter. For purposes

20 of this subsection, the term ‘land subject to a qualified

21 conservation easement’ and ‘qualified real property inter22 est’ shall have the same meaning as in section 2031(c)

23 and the term ‘member of the decedent’s family’ shall have

24 the same meaning as the term ‘member of the family’ in

25 section 2032A.’’
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1 (b) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to land on which qualified con3 servation easements were granted after December 31,

4 1992.

5 SEC. 4. TEMPORARY DEFERRAL OF SCHEDULED REDUC6 TION IN CERTAIN ESTATE TAX RATES.

7 (a) IN GENERAL.—Paragraph (2) of section 2001(c)

8 of the Internal Revenue Code of 1986 (relating to phase9 in of 50 percent maximum rate) is amended by adding

10 at the end thereof the following new subparagraph:

11 ‘‘(E) AFTER 1992 AND BEFORE 1998.—In

12 the case of decedents dying, and gifts made

13 after 1992 and before 1998, the substitution

14 under this paragraph shall be as follows:

‘‘If the amount with respect

to which the tentative tax

to be computed is: The tentative tax is:

Over $2,500,000 ............................ $1,025,800, plus 53 percent of the

excess over $2,500,000.’’

15 (b) TECHNICAL AMENDMENT.—Subparagraph (A) of

16 section 2001(c)(2) of such Code is amended by striking

17 ‘‘1993’’ and inserting ‘‘1998’’.

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

19 this section shall apply in the case of decedents dying, and

20 gifts made, after December 31, 1992.
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1 SEC. 5. EXCLUSION OF GAIN FROM SALE OF CERTAIN

2 FARMLAND.

3 (a) GENERAL RULE.—Part III of subchapter B of

4 chapter 1 of the Internal Revenue Code of 1986 (relating

5 to items specifically excluded from gross income) is

6 amended by redesignating section 137 as section 138 and

7 by inserting after section 136 the following new section:

8 ‘‘SEC. 137. SALES AND EXCHANGES OF FARMLAND THE USE

9 OF WHICH IS RESTRICTED TO FARMING.

10 ‘‘(a) GENERAL RULE.—In the case of an operator of

11 farmland, gross income does not include gain from the sale

12 or exchange of eligible farmland if there is in effect on

13 the date of such sale or exchange a qualified covenant

14 which does not permit any use of such farmland for any

15 purpose other than use as farmland.

16 ‘‘(b) DEFINITIONS.—For purposes of this section—

17 ‘‘(1) ELIGIBLE FARMLAND.—

18 ‘‘(A) IN GENERAL.—The term ‘eligible

19 farmland’ means any farmland with respect to

20 which the land use restrictions imposed by the

21 State, and the land use restrictions imposed by

22 any political subdivision of such State, in which

23 such farmland is located provide that such

24 farmland may be used only as farmland.

25 ‘‘(B) FARMLAND TO WHICH NO LAND USE

26 RESTRICTION APPLIES TREATED AS ELIGIBLE
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1 FARMLAND.—In the case of any farmland with

2 respect to which no land use restriction imposed

3 by a State or political subdivision applies, such

4 farmland shall be treated as eligible farmland.

5 ‘‘(C) DATE FOR DETERMINING WHETHER

6 FARMLAND IS ELIGIBLE FARMLAND.—The de7 termination of whether farmland is eligible

8 farmland shall be made on the date the quali9 fied covenant with respect to such farmland is

10 entered into.

11 ‘‘(2) FARMLAND.—The term ‘farmland’ means

12 any real property—

13 ‘‘(A) which is located in the United States,

14 and

15 ‘‘(B) which is used as a farm for farming

16 purposes (within the meaning of section

17 2032A(e)).

18 ‘‘(3) QUALIFIED COVENANT—The term ‘quali19 fied covenant’ means a covenant—

20 ‘‘(A) which may not be revoked,

21 ‘‘(B) which, with respect to farmland to

22 which such covenant applies, is entered into by

23 all persons having any ownership interest in

24 such farmland, and
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1 ‘‘(C) which binds all future owners of the

2 farmland to which such covenant applies.

3 ‘‘(c) APPLICATION WITH PRINCIPAL RESIDENCES.—

4 For purposes of this section, use as farmland includes use

5 as the principal residence of the operator of such farm6 land.

7 ‘‘(d) VERIFICATION OF COVENANT.—Subsection (a)

8 shall not apply by reason of any covenant unless such per9 son—

10 ‘‘(1) notifies (in such form and manner as the

11 Secretary may by regulations prescribe) both the

12 Secretary and the Secretary of Agriculture of the

13 political subdivision of the State in which such cov14 enant is recorded, and

15 ‘‘(2) submits to the Secretary a copy of such

16 covenant.’’

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

18 for such part is amended by striking out the item relating

19 to section 137 and inserting in lieu thereof the following:

‘‘Sec. 137. Sales and exchanges of farmland the use of which is

restricted to farming.

‘‘Sec. 138. Cross references to other Acts.’’

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

21 this section shall apply to covenants first recorded after

22 the date of the enactment of this Act, in taxable years

23 ending after such date.

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