II 

111TH CONGRESS 

1ST SESSION S. 1501 

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

other purposes. 

IN THE SENATE OF THE UNITED STATES 

JULY 22, 2009 

Mrs. MURRAY (for herself, Mr. CRAPO, and Ms. CANTWELL) 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 2009’’. 

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 conVerDate Nov 24 2008 03:17 Jul 23, 2009 Jkt 079200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1501.IS S1501

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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 48 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 $3,000,000,000 for all projects (excluding re22 funding bonds). 

23 (B) INITIAL ALLOCATION OF LIMITA24 TION.—The limitation described in subpara25 graph (A) shall be allocated by the Secretary of 


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1 the Treasury among qualified organizations as 

2 follows: 

3 (i) 35 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) 30 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 Secretary shall establish a system for allocating 

21 the limitation to qualified forest conservation 

22 bonds within each region, which shall be based 

23 on the chronological order, within each region, 

24 in which applications are made to the Secretary 

25 for an allocation of the limitation. 


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1 (D) SECONDARY ALLOCATION PROCE2 DURE.—If, for the period ending on the last 

3 day of the 24th month after the date of enact4 ment of this Act, the limitation amount for any 

5 region under subparagraph (B) exceeds the 

6 amount of bonds allocated by the Secretary of 

7 the Treasury during such period, the Secretary 

8 of the Treasury may allocate such excess among 

9 qualified organizations in any other region in 

10 such manner as the Secretary of the Treasury 

11 determines appropriate. 

12 (E) REGIONS.—For purposes of this para13 graph— 

14 (i) PACIFIC NORTHWEST REGION.— 

15 The term ‘‘Pacific Northwest region’’ 

16 means Region 6 as defined by the United 

17 States Forest Service of the Department of 

18 Agriculture under section 202.2 of title 36, 

19 Code of Federal Regulations. 

20 (ii) WESTERN REGION.—The term 

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

22 4, 5, and 10 (as so defined). 

23 (iii) SOUTHEAST REGION.—The term 

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

25 defined). 


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1 (iv) NORTHEAST REGION.—The term 

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

3 defined). 

4 (4) QUALIFIED PROJECT COSTS.—For purposes 

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

6 means the sum of— 

7 (A) the cost of acquisition (directly or 

8 through reimbursement or refinancing) by the 

9 qualified organization from an unrelated person 

10 of forests and forest land which at the time of 

11 acquisition or immediately thereafter are sub12 ject to a conservation restriction described in 

13 subsection (c)(2), 

14 (B) interest payments on the qualified for15 est conservation bonds for the 3-year period be16 ginning on the date of issuance of such bonds, 

17 and 

18 (C) credit enhancement fees which con19 stitute qualified guarantee fees (within the 

20 meaning of section 148 of such Code). 

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

22 Revenue Code of 1986 to any qualified forest con23 servation bond, the following modifications shall 

24 apply: 


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

2 volume cap) shall not apply. 

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

4 Code (relating to maturity may not exceed 120 

5 percent of economic life), the land and standing 

6 timber acquired with proceeds of qualified for7 est conservation bonds shall have an economic 

8 life of 35 years. 

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

10 of such Code (relating to limitations on acquisi11 tion of land and existing property) shall not 

12 apply. 

13 (D) Section 57(a)(5) of such Code (relat14 ing to tax-exempt interest) shall not apply to 

15 interest on qualified forest conservation bonds. 

16 (6) TREATMENT OF CURRENT REFUNDING

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

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

19 qualified forest conservation bond issued before the 

20 date which is 48 months after the date of the enact21 ment of this Act, if— 

22 (A) the average maturity date of the issue 

23 of which the refunding bond is a part is not 

24 later than the average maturity date of the 

25 bonds to be refunded by such issue, 


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1 (B) the amount of the refunding bond does 

2 not exceed the outstanding amount of the re3 funded bond, and 

4 (C) the net proceeds of the refunding bond 

5 are used to redeem the refunded bond not later 

6 than 90 days after the date of the issuance of 

7 the refunding bond. 

8 For purposes of subparagraph (A), average maturity 

9 shall be determined in accordance with section 

10 147(b)(2)(A) of such Code. 

11 (7) EFFECTIVE DATE.—This subsection shall 

12 apply to obligations issued on or after the date 

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

14 (b) ITEMS FROM QUALIFIED HARVESTING ACTIVI15 TIES NOT SUBJECT TO TAX OR TAKEN INTO ACCOUNT.— 

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

17 losses, or credits from a qualified harvesting activity 

18 conducted by a qualified organization shall not be 

19 subject to tax or taken into account under subtitle 

20 A of the Internal Revenue Code of 1986. 

21 (2) LIMITATION.—The amount of income ex22 cluded from gross income under paragraph (1) for 

23 any taxable year shall not exceed the amount used 

24 by the qualified organization to make debt service 


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1 payments during such taxable year for qualified for2 est conservation bonds. 

3 (3) QUALIFIED HARVESTING ACTIVITY.—For 

4 purposes of paragraph (1)— 

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

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

7 harvesting, of standing timber— 

8 (i) on land owned by a qualified orga9 nization which was acquired with proceeds 

10 of qualified forest conservation bonds, and 

11 (ii) pursuant to a qualified conserva12 tion plan adopted by the qualified organi13 zation within 2 years of the acquisition. 

14 (B) EXCEPTIONS.— 

15 (i) CESSATION AS QUALIFIED ORGANI16 ZATION.—The term ‘‘qualified harvesting 

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

18 or harvesting for any period during which 

19 the organization ceases to qualify as a 

20 qualified organization. 

21 (ii) EXCEEDING LIMITS ON HAR22 VESTING.—The term ‘‘qualified harvesting 

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

24 or harvesting of standing timber on land 

25 acquired with proceeds of qualified forest 


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1 conservation bonds to the extent that the 

2 average quantity of timber removed from 

3 such land exceeds the quantity which can 

4 be removed from such land annually in 

5 perpetuity on a sustained-yield basis meas6 ured over the harvest rotation with respect 

7 to such land. The limitation described in 

8 the preceding sentence shall not apply to 

9 post-fire restoration and rehabilitation or 

10 sanitation harvesting of timber stands 

11 which are substantially damaged by fire, 

12 windthrow, or other catastrophes, or which 

13 are in imminent danger from insect or dis14 ease attack. 

15 (4) TERMINATION.—This subsection shall not 

16 apply to any qualified harvesting activity of a quali17 fied organization occurring after the date on 

18 which— 

19 (A) there is no outstanding qualified forest 

20 conservation bond with respect to such qualified 

21 organization, or 

22 (B) any such bond ceases to be a tax-ex23 empt bond. 

24 (5) PARTIAL RECAPTURE OF BENEFITS IF HAR25 VESTING LIMIT EXCEEDED.—If, as of the date that 


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1 this subsection ceases to apply under paragraph 

2 (4)(B), the quantity of timber removed from the 

3 land exceeds the requirement of paragraph 

4 (3)(B)(ii), the tax imposed by chapter 1 of the Inter5 nal Revenue Code of 1986 shall be increased, under 

6 rules prescribed by the Secretary of the Treasury, by 

7 the sum of the tax benefits attributable to such ex8 cess and interest at the underpayment rate under 

9 section 6621 of such Code for the period of the un10 derpayment. 

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

12 (1) QUALIFIED CONSERVATION PLAN.—The 

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

14 land use program or plan which— 

15 (A) is designed and administered primarily 

16 for the purposes of protecting and enhancing 

17 wildlife and fish, timber, scenic attributes, 

18 recreation, and soil and water quality of the 

19 forest and forest land, 

20 (B) mandates that conservation of forest 

21 and forest land is the single-most significant 

22 use of the forest and forest land, and 

23 (C) requires that timber harvesting be con24 sistent with— 


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1 (i) restoring and maintaining ref2 erence conditions for the region’s ecotype, 

3 (ii) restoring and maintaining a rep4 resentative sample of young, mid, and late 

5 successional forest age classes, 

6 (iii) maintaining or restoring the re7 sources’ ecological health for purposes of 

8 preventing damage from fire, insect, or dis9 ease, 

10 (iv) maintaining or enhancing wildlife 

11 or fish habitat, or 

12 (v) enhancing research opportunities 

13 in sustainable renewable resource uses. 

14 (2) CONSERVATION RESTRICTION.—The con15 servation restriction described in this paragraph is a 

16 restriction which— 

17 (A) is granted (through sale or donation) 

18 in perpetuity to an unrelated person which is 

19 described in section 170(h)(3) of such Code and 

20 which, in the case of a nongovernmental unit, 

21 is organized and operated for conservation pur22 poses, 

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

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

25 Code, 


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1 (C) obligates the qualified organization to 

2 pay the costs incurred by the holder of the con3 servation restriction in monitoring compliance 

4 with such restriction to the extent the holder of 

5 the conservation restriction does not have a 

6 dedicated source of such funding, and 

7 (D) requires an increasing level of con8 servation benefits to be provided whenever cir9 cumstances allow it. 

10 (3) QUALIFIED ORGANIZATION.—The term 

11 ‘‘qualified organization’’ means, during the time any 

12 qualified forest conversation bond for the organiza13 tion is outstanding, an organization exempt from tax 

14 under section 501(a)— 

15 (A) substantially all the activities of which 

16 are charitable, scientific or educational, includ17 ing acquiring, protecting, restoring, managing, 

18 sustainably harvesting, and developing forest 

19 lands and other renewable resources for the 

20 long-term charitable, educational, scientific, and 

21 public benefit, 

22 (B) which periodically conducts educational 

23 programs designed to inform the public of envi24 ronmentally sensitive forestry management and 

25 conservation techniques, 


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1 (C) which has at all times a board of direc2 tors— 

3 (i) at least 20 percent of the members 

4 of which are representatives of the con5 servation community, 

6 (ii) at least 20 percent of the mem7 bers of which are public officials, and 

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

9 members of which are individuals who are 

10 or were at any time within 5 years before 

11 the beginning of a term of membership on 

12 the board, an employee of, independent 

13 contractor with respect to, officer of, direc14 tor of, or held a material financial interest 

15 in, a commercial forest products enterprise 

16 with which the qualified organization has a 

17 contractual or other financial arrangement, 

18 (D) the bylaws of which require at least 

19 two-thirds of the members of the board of direc20 tors to vote affirmatively to approve the quali21 fied conservation plan and any change thereto, 

22 and 

23 (E) upon dissolution, is required to dedi24 cate its assets to— 


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1 (i) an organization described in sec2 tion 501(c)(3) of such Code which is orga3 nized and operated for conservation pur4 poses, or 

5 (ii) a governmental unit described in 

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

7 (4) UNRELATED PERSON.—The term ‘‘unre8 lated person’’ means a person who is not a related 

9 person. 

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

11 treated as related to another person if— 

12 (A) such person bears a relationship to 

13 such other person described in section 267(b) 

14 (determined without regard to paragraph (9) 

15 thereof), or 707(b)(1), of such Code, deter16 mined by substituting ‘‘25 percent’’ for ‘‘50 

17 percent’’ each place it appears therein, and 

18 (B) in the case such other person is a non19 profit organization, if such person controls di20 rectly or indirectly more than 25 percent of the 

21 governing body of such organization. 

Æ 


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