II

103D CONGRESS

1ST SESSION S. 1013

To amend the Internal Revenue Code of 1986 to provide an election to

exclude from the gross estate the value of land subject to a qualified

conservation easement if certain conditions are satisfied, to permit a

qualified conservation contribution where the probability of surface mining is remote, and to make technical changes to the alternative valuation

rules.

IN THE SENATE OF THE UNITED STATES

MAY 24 (legislative day, APRIL 19), 1993

Mr. CHAFEE (for himself and Mr. THURMOND) 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

an election to exclude from the gross estate the value

of land subject to a qualified conservation easement if

certain conditions are satisfied, to permit a qualified

conservation contribution where the probability of surface

mining is remote, and to make technical changes to

the alternative valuation rules.

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; AMENDMENT OF 1986 CODE.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Rural Land Conservation Act of 1993’’.
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1 (b) AMENDMENT OF 1986 CODE.—Except as other2 wise provided, whenever in this Act an amendment or re3 peal is expressed in terms of an amendment to, or repeal

4 of, a section or provision, the reference shall be considered

5 to be made to a section or other provision of the Internal

6 Revenue Code of 1986.

7 SEC. 2. ESTATE TAX TREATMENT OF LAND SUBJECT TO A

8 QUALIFIED CONSERVATION EASEMENT.

9 (a) ESTATE TAX WITH RESPECT TO LAND SUBJECT

10 TO A QUALIFIED CONSERVATION EASEMENT.—Section

11 2031 of the Internal Revenue Code of 1986 (relating to

12 the definition of gross estate) is amended by redesignating

13 subsection (c) as subsection (d) and by inserting after

14 subsection (b) the following new subsection:

15 ‘‘(c) ESTATE TAX WITH RESPECT TO LAND SUB16 JECT TO A QUALIFIED CONSERVATION EASEMENT.—

17 ‘‘(1) IN GENERAL.—If the executor makes the

18 election described in paragraph (4) of this sub19 section, then, except as otherwise provided in this

20 subsection, there shall be excluded from the gross

21 estate the value of land subject to a qualified con22 servation easement (reduced by the amount of any

23 indebtedness to which such land is subject).
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1 ‘‘(2) LAND SUBJECT TO A QUALIFIED CON2 SERVATION EASEMENT.—For purposes of this sub3 section—

4 ‘‘(A) IN GENERAL.—The term ‘land sub5 ject to a qualified conservation easement’ means

6 land which—

7 ‘‘(i) is located in or within 50 miles of

8 an area which, on the date of the dece9 dent’s death, is—

10 ‘‘(I) a metropolitan area (as de11 fined by the Office of Management

12 and Budget), or

13 ‘‘(II) a national park, unless it is

14 determined by the Secretary that land

15 in or within 50 miles of the park is

16 not under significant development

17 pressure,

18 ‘‘(ii) which was owned by the decedent

19 or a member of the decedent’s family at all

20 times during the 3-year period ending on

21 the date of the decedent’s death, and

22 ‘‘(iii) with respect to which a qualified

23 conservation contribution (as defined in

24 section 170(h)(1)) of a qualified real prop25 erty interest described in section
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1 170(h)(2)(C) is (or has been made) by the

2 decedent or a member of the decedent’s

3 family.

4 ‘‘(B) CERTAIN CONTRIBUTIONS NOT IN5 CLUDED.—For purposes of subparagraph (A),

6 section 170(h)(4)(A) shall be applied without

7 regard to clause (iv) thereof in determining

8 whether there is a qualified conservation con9 tribution.

10 ‘‘(C) FAMILY MEMBER.—For purposes of

11 subparagraph (A), the term ‘member of the de12 cedent’s family’ has the same meaning given

13 such term by section 2032A(e)(2).

14 ‘‘(3) TAX ON DISPOSITION IF LAND SUBJECT

15 TO RETAINED DEVELOPMENT RIGHT.—

16 ‘‘(A) IN GENERAL.—If the donor retained

17 any development right when the qualified con18 servation contribution described in paragraph

19 (2)(A)(iii) was made, there is hereby imposed

20 an additional estate tax on the first person dis21 posing (other than by gift or devise) of the

22 property after the death of the decedent.

23 ‘‘(B) AMOUNT OF ADDITIONAL TAX.—

24 ‘‘(i) IN GENERAL.—The amount of

25 the additional tax imposed by subpara-
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1 graph (A) shall be the amount equal to the

2 increase in estate tax liability which would

3 have occurred if the value of the develop4 ment right had been included in the gross

5 estate of the decedent (as determined

6 under paragraph (4)).

7 ‘‘(ii) PARTIAL DISPOSITION.—If only

8 a portion of the property is disposed of,

9 the person disposing of the property shall

10 pay a pro rata portion of the tax imposed

11 by subparagraph (A) (and such tax shall

12 be reduced with respect to subsequent dis13 positions by the taxes imposed with respect

14 to prior dispositions).

15 ‘‘(iii) TIME FOR PAYMENT OF TAX.—

16 Any tax imposed under subparagraph (A)

17 shall be due and payable by the person dis18 posing of the property no later than April

19 15 of the calendar year following the cal20 endar year in which the disposition occurs.

21 ‘‘(C) DEVELOPMENT RIGHT.—For pur22 poses of this paragraph, the term ‘development

23 right’ means the right—

24 ‘‘(i) to establish or use any structure

25 (and the land immediately surrounding it)
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1 for sale, rent, or other commercial purpose

2 which is not subordinate to and directly

3 supportive of the conservation purpose of

4 the qualified conservation contribution de5 scribed in paragraph (2)(A)(iii), or

6 ‘‘(ii) to conduct the activity of farm7 ing, forestry, ranching, horticulture, viti8 culture, or recreation, whether or not for

9 profit, on the land.

10 ‘‘(4) ELECTION WITH RESPECT TO LAND SUB11 JECT TO QUALIFIED CONSERVATION EASEMENT.—

12 The election under this subsection shall be made on

13 the return of the tax imposed by section 2001 and

14 shall be made in such manner as the Secretary shall

15 by regulations prescribe. Such an election, once

16 made, shall be irrevocable.

17 ‘‘(5) CALCULATION AND NOTICE OF POTENTIAL

18 ESTATE TAX DUE.—

19 ‘‘(A) IN GENERAL.—An executor making

20 the election described in paragraph (4) of this

21 subsection shall compute the amount of the ad22 ditional estate tax described in paragraph

23 (3)(B).

24 ‘‘(B) NOTICE.—The executor shall file a

25 ‘Notice of Potential Estate Tax Due’ in the
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1 place or places where deeds are put to public

2 record for the locality in which the land subject

3 to the qualified conservation easement is lo4 cated.

5 ‘‘(C) FORM AND MANNER.—The computa6 tion and filing required by this paragraph shall

7 be done in such manner and on such forms as

8 the Secretary may prescribe.’’.

9 (b) CARRYOVER BASIS.—Section 1014(a) of the In10 ternal Revenue Code of 1986 (relating to basis of property

11 acquired from a decedent) is amended by striking the pe12 riod at the end of paragraph (3) and inserting ‘‘, or’’ at

13 the end thereof, and by inserting at the end the following

14 new paragraph:

15 ‘‘(4) in the case of property excluded from the

16 gross estate of the decedent under section 2031(c),

17 the basis of the property in the hands of the dece18 dent.’’.

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

20 this section shall apply to estates of decedents dying after

21 December 31, 1992, which includes land subject to quali22 fied conservation easements granted after December 31,

23 1992.
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1 SEC. 3. GIFT TAX ON LAND SUBJECT TO A QUALIFIED CON2 SERVATION EASEMENT.

3 (a) GIFT TAX WITH RESPECT TO LAND SUBJECT

4 TO A QUALIFIED CONSERVATION EASEMENT.—Section

5 2503 of the Internal Revenue Code of 1986 (relating to

6 taxable gifts) is amended by adding at the end the follow7 ing new subsection:

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

9 TO A QUALIFIED CONSERVATION EASEMENT.—

10 ‘‘(1) IN GENERAL.—At the election of the

11 donor, the transfer by gift of land subject to a quali12 fied conservation easement shall not be treated as a

13 transfer of property by gift for purposes of this

14 chapter. For purposes of this subsection, the term

15 ‘land subject to a qualified conservation easement’

16 shall have the same meaning as in section 2031(c),

17 except that any reference to ‘decedent’ or ‘the date

18 of the decedent’s death’ shall refer to the donor and

19 the date of the transfer by the donor, respectively.’’

20 ‘‘(2) LAND SUBJECT TO RETAINED DEVELOP21 MENT RIGHTS.—

22 ‘‘(A) IN GENERAL.—If the donor retains

23 any development right when the gift is made,

24 then there is hereby imposed an additional gift

25 tax on the first person disposing (other than by
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1 gift or device) of the property after the date of

2 the gift to which this subsection applies.

3 ‘‘(B) AMOUNT OF TAX.—The amount of

4 the tax under subparagraph (A) shall be equal

5 to the increase in gift tax liability which would

6 have occurred if the value of the development

7 right had been treated as a gift.

8 ‘‘(C) DEFINITION AND RULES.—For pur9 poses of this paragraph—

10 ‘‘(i) DEVELOPMENT RIGHT.—The

11 term ‘development right’ has the meaning

12 given such term by section 2031(c)(3)(C).

13 ‘‘(ii) OTHER RULES.—The rules of

14 clauses (ii) and (iii) of paragraph (3)(B)

15 and paragraph (5) of section 2031(c) shall

16 apply, except that ‘donor’ shall be sub17 stituted for ‘executor’ each place it ap18 pears.’’.

19 (b) EFFECTIVE DATE.—The amendments made by

20 this section shall apply to gifts of land subject to qualified

21 conservation easements granted after December 31, 1992.
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1 SEC. 4. QUALIFIED CONSERVATION CONTRIBUTION WHERE

2 SURFACE AND MINERAL RIGHTS ARE SEPA3 RATED.

4 (a) IN GENERAL.—Section 170(h)(5)(B)(ii) of the

5 Internal Revenue Code of 1986 (relating to special rule)

6 is amended to read as follows:

7 ‘‘(ii) SPECIAL RULE.—With respect to

8 any contribution of property in which the

9 ownership of the surface estate and min10 eral interests has been and remains sepa11 rated, subparagraph (A) shall be treated

12 as met if the probability of surface mining

13 occurring on such property is so remote as

14 to be negligible.’’.

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

16 this section shall apply with respect to contributions made

17 after December 31, 1992, in taxable years ending after

18 such date.

19 SEC. 5. QUALIFIED CONSERVATION CONTRIBUTION IS NOT

20 A DISPOSITION.

21 (a) QUALIFIED CONSERVATION CONTRIBUTION IS

22 NOT A DISPOSITION.—Subsection (c) of section 2032A of

23 the Internal Revenue Code of 1986 (relating to alternative

24 valuation method) is amended by adding at the end there25 of the following new paragraph:
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1 ‘‘(8) QUALIFIED CONSERVATION CONTRIBUTION

2 IS NOT A DISPOSITION.—A qualified conservation

3 contribution (as defined in section 170(h)) by gift or

4 otherwise shall not be treated as a disposition for

5 purposes of this subsection. If qualified real property

6 is land subject to a qualified conservation easement

7 (as defined in section 2031(c)), this subsection shall

8 not apply to such property.’’.

9 (b) LAND SUBJECT TO A QUALIFIED CONSERVATION

10 EASEMENT IS NOT DISQUALIFIED.—Subsection (b) of

11 section 2032A of the Internal Revenue Code of 1986 (re12 lating to alternative valuation method) is amended by add13 ing at the end the following paragraph:

14 ‘‘(6) QUALIFIED CONSERVATION EASEMENT.—

15 Property shall not fail to be treated as qualified real

16 property solely because it is land subject to a quali17 fied conservation easement (as defined in section

18 2031(c)).’’.

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

20 this section shall apply to estates of decedents dying after

21 December 31, 1992, which include land subject to quali22 fied conservation easements granted after December 31,

23 1992.

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