II

107TH CONGRESS

1ST SESSION S. 1047

To amend the Internal Revenue Code of 1986 to provide for nonrecognition

of gain on dispositions of dairy property which is certified by the Secretary of Agriculture as having been the subject of an agreement under

the bovine tuberculosis eradication program, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JUNE 14, 2001

Mr. GRAMM (for himself and Mrs. HUTCHISON) introduced the following bill;

which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to provide

for nonrecognition of gain on dispositions of dairy property which is certified by the Secretary of Agriculture

as having been the subject of an agreement under the

bovine tuberculosis eradication program, 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. QUALIFIED DISPOSITION OF DAIRY PROPERTY

4 TREATED AS INVOLUNTARY CONVERSION.

5 (a) IN GENERAL.—Section 1033 of the Internal Rev6 enue Code of 1986 (relating to involuntary conversions)
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1 is amended by designating subsection (k) as subsection (l)

2 and inserting after subsection (j) the following new sub3 section:

4 ‘‘(k) QUALIFIED DISPOSITION TO IMPLEMENT BO5 VINE TUBERCULOSIS ERADICATION PROGRAM.—

6 ‘‘(1) IN GENERAL.—For purposes of this sub7 title, if a taxpayer elects the application of this sub8 section to a qualified disposition:

9 ‘‘(A) TREATMENT AS INVOLUNTARY CON10 VERSION.—Such disposition shall be treated as

11 an involuntary conversion to which this section

12 applies.

13 ‘‘(B) MODIFICATION OF SIMILAR PROP14 ERTY REQUIREMENT.—Property to be held by

15 the taxpayer either for productive use in a trade

16 or business or for investment shall be treated as

17 property similar or related in service or use to

18 the property disposed of.

19 ‘‘(C) EXTENSION OF PERIOD FOR REPLAC20 ING PROPERTY.—Subsection (a)(2)(B)(i) shall

21 be applied by substituting ‘4 years’ for ‘2

22 years’.

23 ‘‘(D) WAIVER OF UNRELATED PERSON RE24 QUIREMENT.—Subsection (i) (relating to re-
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1 placement property must be acquired from un2 related person in certain cases) shall not apply.

3 ‘‘(E) EXPANDED CAPITAL GAIN FOR CAT4 TLE AND HORSES.—Section 1231(b)(3)(A) shall

5 be applied by substituting ‘1 month’ for ‘24

6 months’.

7 ‘‘(2) QUALIFIED DISPOSITION.—

8 ‘‘(A) IN GENERAL.—For purposes of this

9 subsection, the term ‘qualified disposition’

10 means the disposition of dairy property which is

11 certified by the Secretary of Agriculture as hav12 ing been the subject of an agreement under the

13 bovine tuberculosis eradication program, as im14 plemented pursuant to the Declaration of

15 Emergency Because of Bovine Tuberculosis (65

16 Federal Register 63,227 (2000)).

17 ‘‘(B) PAYMENTS RECEIVED IN CONNEC18 TION WITH THE BOVINE TUBERCULOSIS ERADI19 CATION PROGRAM.—For purposes of this sub20 section, any amount received by a taxpayer in

21 connection with an agreement under such bo22 vine tuberculosis eradication program shall be

23 treated as received in a qualified disposition.

24 ‘‘(C) TRANSMITTAL OF CERTIFICATIONS.—

25 The Secretary of Agriculture shall transmit
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1 copies of certifications under this paragraph to

2 the Secretary.

3 ‘‘(3) ALLOWANCE OF THE ADJUSTED BASIS OF

4 CERTIFIED DAIRY PROPERTY AS A DEPRECIATION

5 DEDUCTION.—The adjusted basis of any property

6 certified under paragraph (2)(A) shall be allowed as

7 a depreciation deduction under section 167 for the

8 taxable year which includes the date of the certifi9 cation described in paragraph (2)(A).

10 ‘‘(4) DAIRY PROPERTY.—For purposes of this

11 subsection, the term ‘dairy property’ means all tan12 gible property used in connection with a dairy busi13 ness or a dairy processing plant.

14 ‘‘(5) SPECIAL RULES FOR CERTAIN BUSINESS

15 ORGANIZATIONS.—

16 ‘‘(A) S CORPORATIONS.—In the case of an

17 S corporation, gain on a qualified disposition

18 shall not be treated as recognized for the pur19 poses of section 1374 (relating to tax imposed

20 on certain built-in gains).

21 ‘‘(B) PARTNERSHIPS.—In the case of a

22 partnership which dissolves in anticipation of a

23 qualified disposition (including in anticipation

24 of receiving the amount described in paragraph

25 (2)(B)), the dairy property owned by the part-
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1 ners of such partnership at the time of such

2 disposition shall be treated, for the purposes of

3 this section and notwithstanding any regulation

4 or rule of law, as owned by such partners at the

5 time of such disposition.

6 ‘‘(6) TERMINATION.—This subsection shall not

7 apply to dispositions made after December 31,

8 2005.’’.

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

10 this section shall apply to dispositions made and amounts

11 received in taxable years ending after May 22, 2001.

12 SEC. 2. DEDUCTION OF QUALIFIED RECLAMATION EXPEND13 ITURES.

14 (a) IN GENERAL.—Part VI of subchapter B of chap15 ter 1 of the Internal Revenue Code of 1986 (relating to

16 itemized deductions for individuals and corporations) is

17 amended by adding at the end the following new section:

18 ‘‘SEC. 199. EXPENSING OF DAIRY PROPERTY RECLAMATION

19 COSTS.

20 ‘‘(a) IN GENERAL.—Notwithstanding section 280B

21 (relating to demolition of structures), a taxpayer may elect

22 to treat any qualified reclamation expenditure which is

23 paid or incurred by the taxpayer as an expense which is

24 not chargeable to capital account. Any expenditure which
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1 is so treated shall be allowed as a deduction for the taxable

2 year in which it is paid or incurred.

3 ‘‘(b) QUALIFIED RECLAMATION EXPENDITURE.—

4 ‘‘(1) IN GENERAL.—For purposes of this sub5 paragraph, the term ‘qualified reclamation expendi6 ture’ means amounts otherwise chargeable to capital

7 account and paid or incurred to convert any real

8 property certified under section 1033(k)(2) (relating

9 to qualified disposition) into unimproved land.

10 ‘‘(2) SPECIAL RULE FOR EXPENDITURES FOR

11 DEPRECIABLE PROPERTY.—A rule similar to the

12 rule of section 198(b)(2) (relating to special rule for

13 expenditures for depreciable property) shall apply for

14 purposes of paragraph (1).

15 ‘‘(c) DEDUCTION RECAPTURED AS ORDINARY IN16 COME.—Rules similar to the rules of section 198(e) (relat17 ing to deduction recaptured as ordinary income on sale,

18 etc.) shall apply with respect to any qualified reclamation

19 expenditure.

20 ‘‘(d) TERMINATION.—This section shall not apply to

21 expenditures paid or incurred after December 31, 2005.’’.

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

23 for part VI of subchapter B of chapter 1 of the Internal

24 Revenue Code of 1986 is amended by adding at the end

25 the following new item:

‘‘Sec. 199. Expensing of dairy property reclamation costs.’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to expenditures paid or incurred

3 in taxable years ending after May 22, 2001.

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