II 

109TH CONGRESS 

1ST SESSION S. 1530 

To provide a Federal tax exemption for forest conservation bonds, and for 

other purposes. 

IN THE SENATE OF THE UNITED STATES 

JULY 28, 2005 

Mr. SMITH (for himself and Mrs. MURRAY) introduced the following bill; 

which was read twice and referred to the Committee on Finance 

A BILL 

To provide a Federal tax exemption for forest conservation 

bonds, 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 ‘‘Community Forestry 

5 Conservation Act of 2005’’. 

6 SEC. 2. FOREST CONSERVATION BONDS. 

7 (a) TAX-EXEMPT BOND FINANCING.— 

8 (1) IN GENERAL.—For purposes of the Internal 

9 Revenue Code of 1986, any qualified forest con-
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1 servation bond shall be treated as an exempt facility 

2 bond under section 142 of such Code. 

3 (2) QUALIFIED FOREST CONSERVATION

4 BOND.—For purposes of this section, the term 

5 ‘‘qualified forest conservation bond’’ means any bond 

6 issued as part of an issue if— 

7 (A) 95 percent or more of the net proceeds 

8 (as defined in section 150(a)(3) of such Code) 

9 of such issue are to be used for qualified project 

10 costs, 

11 (B) such bond is issued for a qualified or12 ganization, and 

13 (C) such bond is issued before the date 

14 which is 36 months after the date of the enact15 ment of this Act. 

16 (3) LIMITATION ON AGGREGATE AMOUNT

17 ISSUED.— 

18 (A) IN GENERAL.—The maximum aggre19 gate face amount of bonds which may be issued 

20 under this subsection shall not exceed 

21 $10,000,000,000 for all projects (excluding re22 funding bonds). 

23 (B) ALLOCATION OF LIMITATION.—The 

24 limitation described in subparagraph (A) shall 
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1 be allocated by the Secretary of the Treasury 

2 among qualified organizations as follows: 

3 (i) 40 percent for qualified project 

4 costs with respect to the cost of acquisition 

5 by any qualified organization in the Pacific 

6 Northwest region. 

7 (ii) 25 percent for qualified project 

8 costs with respect to the cost of acquisition 

9 by any qualified organization in the West10 ern region. 

11 (iii) 17.5 percent for qualified project 

12 costs with respect to the cost of acquisition 

13 by any qualified organization in the South14 east region. 

15 (iv) 17.5 percent for qualified project 

16 costs with respect to the cost of acquisition 

17 by any qualified organization in the North18 east region. 

19 (C) PROCEDURE FOR ISSUANCE.—The 

20 amount of the limitation under each of the 

21 clauses of subparagraph (B) shall be allocated 

22 on a first-come, first-served basis. 

23 (D) REGIONS.—For purposes of this para24 graph— 
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1 (i) PACIFIC NORTHWEST REGION.— 

2 The term ‘‘Pacific Northwest region’’ 

3 means Region 6 as defined by the United 

4 States Forest Service of the Department of 

5 Agriculture under section 202.2 of title 36, 

6 Code of Federal Regulations. 

7 (ii) WESTERN REGION.—The term 

8 ‘‘Western region’’ means Regions 1, 2, 3, 

9 4, 5, and 10 (as so defined). 

10 (iii) SOUTHEAST REGION.—The term 

11 ‘‘Southeast region’’ means Region 8 (as so 

12 defined). 

13 (iv) NORTHEAST REGION.—The term 

14 ‘‘Northeast region’’ means Region 9 (as so 

15 defined). 

16 (4) QUALIFIED PROJECT COSTS.—For purposes 

17 of this subsection, the term ‘‘qualified project costs’’ 

18 means the sum of— 

19 (A) the cost of acquisition by the qualified 

20 organization from an unrelated person of for21 ests and forest land which at the time of acqui22 sition or immediately thereafter are subject to 

23 a conservation restriction described in sub24 section (c)(2), 
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1 (B) capitalized interest on the qualified 

2 forest conservation bonds for the 3-year period 

3 beginning on the date of issuance of such 

4 bonds, and 

5 (C) credit enhancement fees which con6 stitute qualified guarantee fees (within the 

7 meaning of section 148 of such Code). 

8 (5) SPECIAL RULES.—In applying the Internal 

9 Revenue Code of 1986 to any qualified forest con10 servation bond, the following modifications shall 

11 apply: 

12 (A) Section 146 of such Code (relating to 

13 volume cap) shall not apply. 

14 (B) For purposes of section 147(b) of such 

15 Code (relating to maturity may not exceed 120 

16 percent of economic life), the land and standing 

17 timber acquired with proceeds of qualified for18 est conservation bonds shall have an economic 

19 life of 35 years. 

20 (C) Subsections (c) and (d) of section 147 

21 of such Code (relating to limitations on acquisi22 tion of land and existing property) shall not 

23 apply. 
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1 (D) Section 57(a)(5) of such Code (relat2 ing to tax-exempt interest) shall not apply to 

3 interest on qualified forest conservation bonds. 

4 (6) TREATMENT OF CURRENT REFUNDING

5 BONDS.—Paragraphs (2)(C) and (3) shall not apply 

6 to any bond (or series of bonds) issued to refund a 

7 qualified forest conservation bond issued before the 

8 date which is 36 months after the date of the enact9 ment of this Act, if— 

10 (A) the average maturity date of the issue 

11 of which the refunding bond is a part is not 

12 later than the average maturity date of the 

13 bonds to be refunded by such issue, 

14 (B) the amount of the refunding bond does 

15 not exceed the outstanding amount of the re16 funded bond, and 

17 (C) the net proceeds of the refunding bond 

18 are used to redeem the refunded bond not later 

19 than 90 days after the date of the issuance of 

20 the refunding bond. 

21 For purposes of subparagraph (A), average maturity 

22 shall be determined in accordance with section 

23 147(b)(2)(A) of such Code. 
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1 (7) EFFECTIVE DATE.—This subsection shall 

2 apply to obligations issued on or after the date 

3 which is 180 days after the enactment of this Act. 

4 (b) ITEMS FROM QUALIFIED HARVESTING ACTIVI5 TIES NOT SUBJECT TO TAX OR TAKEN INTO ACCOUNT.— 

6 (1) IN GENERAL.—Income, gains, deductions, 

7 losses, or credits from a qualified harvesting activity 

8 conducted by a qualified organization shall not be 

9 subject to tax or taken into account under subtitle 

10 A of the Internal Revenue Code of 1986. 

11 (2) LIMITATION.—The amount of income ex12 cluded from gross income under paragraph (1) for 

13 any taxable year shall not exceed the amount used 

14 by the qualified organization to make debt service 

15 payments during such taxable year for qualified for16 est conservation bonds. 

17 (3) QUALIFIED HARVESTING ACTIVITY.—For 

18 purposes of paragraph (1)— 

19 (A) IN GENERAL.—The term ‘‘qualified 

20 harvesting activity’’ means the sale, lease, or 

21 harvesting, of standing timber— 

22 (i) on land owned by a qualified orga23 nization which was acquired with proceeds 

24 of qualified forest conservation bonds, and 
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1 (ii) pursuant to a qualified conserva2 tion plan adopted by the qualified organi3 zation. 

4 (B) EXCEPTIONS.— 

5 (i) CESSATION AS QUALIFIED ORGANI6 ZATION.—The term ‘‘qualified harvesting 

7 activity’’ shall not include any sale, lease, 

8 or harvesting for any period during which 

9 the organization ceases to qualify as a 

10 qualified organization. 

11 (ii) EXCEEDING LIMITS ON HAR12 VESTING.—The term ‘‘qualified harvesting 

13 activity’’ shall not include any sale, lease, 

14 or harvesting of standing timber on land 

15 acquired with proceeds of qualified forest 

16 conservation bonds to the extent that— 

17 (I) the average annual area of 

18 timber harvested from such land ex19 ceeds 2.5 percent of the total area of 

20 such land or, 

21 (II) the quantity of timber re22 moved from such land exceeds the 

23 quantity which can be removed from 

24 such land annually in perpetuity on a 
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1 sustained-yield basis with respect to 

2 such land. 

3 The limitations under subclauses (I) and 

4 (II) shall not apply to post-fire restoration 

5 and rehabilitation or sanitation harvesting 

6 of timber stands which are substantially 

7 damaged by fire, windthrow, or other ca8 tastrophes, or which are in imminent dan9 ger from insect or disease attack. 

10 (4) TERMINATION.—This subsection shall not 

11 apply to any qualified harvesting activity of a quali12 fied organization occurring after the date on which 

13 there is no outstanding qualified forest conservation 

14 bond with respect to such qualified organization or 

15 any such bond ceases to be a tax-exempt bond. 

16 (5) PARTIAL RECAPTURE OF BENEFITS IF HAR17 VESTING LIMIT EXCEEDED.—If, as of the date that 

18 this subsection ceases to apply under paragraph (3), 

19 the average annual area of timber harvested from 

20 the land exceeds the requirement of paragraph 

21 (3)(B)(ii)(I), the tax imposed by chapter 1 of the In22 ternal Revenue Code of 1986 shall be increased, 

23 under rules prescribed by the Secretary of the 

24 Treasury, by the sum of the tax benefits attributable 

25 to such excess and interest at the underpayment 
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1 rate under section 6621 of such Code for the period 

2 of the underpayment. 

3 (c) DEFINITIONS.—For purposes of this section— 

4 (1) QUALIFIED CONSERVATION PLAN.—The 

5 term ‘‘qualified conservation plan’’ means a multiple 

6 land use program or plan which— 

7 (A) is designed and administered primarily 

8 for the purposes of protecting and enhancing 

9 wildlife and fish, timber, scenic attributes, 

10 recreation, and soil and water quality of the 

11 forest and forest land, 

12 (B) mandates that conservation of forest 

13 and forest land is the single-most significant 

14 use of the forest and forest land, and 

15 (C) requires that timber harvesting be con16 sistent with— 

17 (i) restoring and maintaining ref18 erence conditions for the region’s ecotype, 

19 (ii) restoring and maintaining a rep20 resentative sample of young, mid, and late 

21 successional forest age classes, 

22 (iii) maintaining or restoring the re23 sources’ ecological health for purposes of 

24 preventing damage from fire, insect, or dis25 ease, 
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1 (iv) maintaining or enhancing wildlife 

2 or fish habitat, or 

3 (v) enhancing research opportunities 

4 in sustainable renewable resource uses. 

5 (2) CONSERVATION RESTRICTION.—The con6 servation restriction described in this paragraph is a 

7 restriction which— 

8 (A) is granted in perpetuity to an unre9 lated person which is described in section 

10 170(h)(3) of such Code and which, in the case 

11 of a nongovernmental unit, is organized and op12 erated for conservation purposes, 

13 (B) meets the requirements of clause (ii) 

14 or (iii)(II) of section 170(h)(4)(A) of such 

15 Code, 

16 (C) obligates the qualified organization to 

17 pay the costs incurred by the holder of the con18 servation restriction in monitoring compliance 

19 with such restriction, and 

20 (D) requires an increasing level of con21 servation benefits to be provided whenever cir22 cumstances allow it. 

23 (3) QUALIFIED ORGANIZATION.—The term 

24 ‘‘qualified organization’’ means an organization— 
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1 (A) more than half of the value of the 

2 property of which consists of forests and forest 

3 land acquired with the proceeds from qualified 

4 forest conservation bonds, 

5 (B) which periodically conducts educational 

6 programs designed to inform the public of envi7 ronmentally sensitive forestry management and 

8 conservation techniques, 

9 (C) which has at all times a board of direc10 tors— 

11 (i) at least 20 percent of the members 

12 of which represent the holders of the con13 servation restriction described in para14 graph (2), 

15 (ii) at least 20 percent of the mem16 bers of which are public officials, and 

17 (iii) not more than one-third of the 

18 members of which are individuals who are 

19 or were at any time within 5 years before 

20 the beginning of a term of membership on 

21 the board, an employee of, independent 

22 contractor with respect to, officer of, direc23 tor of, or held a material financial interest 

24 in, a commercial forest products enterprise 
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1 with which the qualified organization has a 

2 contractual or other financial arrangement, 

3 (D) the bylaws of which require at least 

4 two-thirds of the members of the board of direc5 tors to vote affirmatively to approve the quali6 fied conservation plan and any change thereto, 

7 and 

8 (E) upon dissolution, is required to dedi9 cate its assets to— 

10 (i) an organization described in sec11 tion 501(c)(3) of such Code which is orga12 nized and operated for conservation pur13 poses, or 

14 (ii) a governmental unit described in 

15 section 170(c)(1) of such Code. 

16 (4) UNRELATED PERSON.—The term ‘‘unre17 lated person’’ means a person who is not a related 

18 person. 

19 (5) RELATED PERSON.—A person shall be 

20 treated as related to another person if— 

21 (A) such person bears a relationship to 

22 such other person described in section 267(b) 

23 (determined without regard to paragraph (9) 

24 thereof), or 707(b)(1), of such Code, deter-
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1 mined by substituting ‘‘25 percent’’ for ‘‘50 

2 percent’’ each place it appears therein, and 

3 (B) in the case such other person is a non4 profit organization, if such person controls di5 rectly or indirectly more than 25 percent of the 

6 governing body of such organization. 

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