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104TH CONGRESS

1ST SESSION H. R. 1820

To amend the Internal Revenue Code of 1986 to allow a credit against

income tax for the purchase and installation of agricultural water conservation systems.

IN THE HOUSE OF REPRESENTATIVES

JUNE 13, 1995

Mr. CONDIT 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 allow a

credit against income tax for the purchase and installation of agricultural water conservation systems.

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 ‘‘Agricultural Water

5 Conservation Act’’.

6 SEC. 2. CONGRESSIONAL FINDINGS.

7 The Congress finds that—
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1 (1) the Federal Government has an historic

2 commitment to assisting areas of the Nation in need

3 of developing adequate water supplies,

4 (2) water is becoming increasingly scarce and

5 expensive in many parts of the United States, which

6 is compounded when multiple years of drought

7 occur,

8 (3) in most areas of the United States, farms

9 are overwhelmingly the largest water consumers, and

10 (4) it is in the national interest for farmers to

11 implement water conservation measures which ad12 dress water conservation needs and for the Federal

13 Government to promote such conservation measures.

14 SEC. 3. CREDIT FOR PURCHASE AND INSTALLATION OF AG15 RICULTURAL WATER CONSERVATION SYS16 TEMS.

17 (a) IN GENERAL.—Subpart B of part IV of sub18 chapter A of chapter 1 of the Internal Revenue Code of

19 1986 (relating to foreign tax credit, etc.) is amended by

20 adding at the end the following new section:

21 ‘‘SEC. 30A. PURCHASE AND INSTALLATION OF AGRICUL22 TURAL WATER CONSERVATION SYSTEMS.

23 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an eli24 gible taxpayer, there shall be allowed as a credit against

25 the tax imposed by this chapter for the taxable year an
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1 amount equal to 30 percent of the water conservation sys2 tem expenses paid or incurred by the taxpayer during such

3 year.

4 ‘‘(b) MAXIMUM CREDIT.—The credit allowed by sub5 section (a) with respect to any water conservation system

6 shall not exceed the product of $500 and the number of

7 acres served by such system.

8 ‘‘(c) DEFINITIONS.—For purposes of this section—

9 ‘‘(1) ELIGIBLE TAXPAYER.—The term ‘eligible

10 taxpayer’ means any taxpayer if—

11 ‘‘(A) at least 50 percent of such taxpayer’s

12 gross income is normally derived from a trade

13 or business referred to in paragraph (3)(C),

14 and

15 ‘‘(B) such taxpayer complies with all Fed16 eral, State, and local water rights and environ17 mental laws.

18 ‘‘(2) WATER CONSERVATION SYSTEM EX19 PENSES.—

20 ‘‘(A) IN GENERAL.—The term ‘water con21 servation system expenses’ means expenses for

22 the purchase and installation of a water con23 servation system but only if—

24 ‘‘(i) the land served by the water is

25 entirely in an area which has been identi-
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1 fied, in the taxable year or in any of the

2 3 preceding taxable years, as an area of—

3 ‘‘(I) extreme drought severity on

4 the Palmer Drought Severity Index

5 published by the National Oceanic

6 and Atmospheric Administration, or

7 ‘‘(II) water shortage (due to in8 creasing demands, limited supplies, or

9 limited storage) by the Natural Re10 sources Conservation Service of the

11 Department of Agriculture or the Bu12 reau of Reclamation of the Depart13 ment of the Interior,

14 ‘‘(ii) the taxpayer has in effect a

15 water conservation plan which has been re16 viewed and approved by such Service and

17 Bureau,

18 ‘‘(iii) such expenses are consistent

19 with such plan, and

20 ‘‘(iv) there is an irrigation water sav21 ings of at least 5 percent which is attrib22 utable to such system.

23 For purposes of clause (iv), water savings shall

24 be determined and verified under regulations

25 prescribed jointly by such Service and Bureau.
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1 ‘‘(B) WATER CONSERVATION SYSTEM.—

2 The term ‘water conservation system’ means

3 materials or equipment which are primarily de4 signed to substantially conserve irrigation water

5 used or to be used on farm land.

6 ‘‘(C) FARM LAND.—The term ‘farm land’

7 means land used in a trade or business by the

8 taxpayer or a tenant of the taxpayer for—

9 ‘‘(i) the production of crops, fruits, or

10 other agricultural products,

11 ‘‘(ii) the raising, harvesting, or grow12 ing of trees, or

13 ‘‘(iii) the sustenance of livestock.

14 ‘‘(c) LIMITATION BASED ON AMOUNT OF TAX.—

15 ‘‘(1) LIABILITY FOR TAX.—The credit allowable

16 under subsection (a) for any taxable year shall not

17 exceed the excess (if any) of—

18 ‘‘(A) the regular tax for the taxable year,

19 reduced by the sum of the credits allowable

20 under subpart A and the preceding sections of

21 this subpart, over

22 ‘‘(B) the tentative minimum tax for the

23 taxable year.

24 ‘‘(2) CARRYFORWARD OF UNUSED CREDIT.—If

25 the amount of the credit allowable under subsection
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1 (a) for any taxable year exceeds the limitation under

2 paragraph (1) for the taxable year, the excess shall

3 be carried to the succeeding taxable year and added

4 to the amount allowable as a credit under subsection

5 (a) for such succeeding taxable year.

6 ‘‘(d) DENIAL OF DOUBLE BENEFIT.—No deduction

7 shall be allowed under this chapter with respect to any

8 expense which is taken into account in determining the

9 credit under this section, and any increase in the basis

10 of any property which would (but for this subsection) re11 sult from such expense shall be reduced by the amount

12 of credit allowed under this section for such expense.’’

13 (b) TECHNICAL AMENDMENT.—Subsection (a) of

14 section 1016 of such Code is amended by striking ‘‘and’’

15 at the end of paragraph (24), by striking the period at

16 the end of paragraph (25) and inserting ‘‘; and’’, and by

17 adding at the end thereof the following new paragraph:

18 ‘‘(26) to the extent provided in section 30A(d),

19 in the case of amounts with respect to which a credit

20 has been allowed under section 30A.’’

21 (c) CLERICAL AMENDMENT.—The table of sections

22 for subpart B of part IV of subchapter A of chapter 1

23 of such Code is amended by adding at the end the follow24 ing new item:

‘‘Sec. 30A. Purchase and installation of agricultural water conservation systems.’’
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1 (d) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to amounts paid or incurred after

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

4 ending after such date.

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