II

103D CONGRESS

2D SESSION S. 2146

To amend the Internal Revenue Code of 1986 to provide a special valuation

of sensitive environmental areas for estate tax purposes, and for other

purposes.

IN THE SENATE OF THE UNITED STATES

MAY 24 (legislative day, MAY 16), 1994

Mr. JEFFORDS 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

a special valuation of sensitive environmental areas for

estate tax purposes, 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 ‘‘Wetlands and Green

5 Space Preservation Assistance Act of 1993’’.

6 SEC. 2. SPECIAL VALUATION FOR SENSITIVE ENVIRON7 MENTAL AREAS.

8 (a) IN GENERAL.—Part III of subchapter A of chap9 ter 11 of the Internal Revenue Code of 1986 (relating to
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1 gross estate) is amended by adding immediately after sec2 tion 2032A the following new section:

3 ‘‘SEC. 2032B. VALUATION OF SENSITIVE ENVIRONMENTAL

4 AREAS.

5 ‘‘(a) VALUE BASED ON ENVIRONMENTAL USE.—If—

6 ‘‘(1) the decedent was (at the time of his death)

7 a citizen or resident of the United States, and

8 ‘‘(2) the executor elects the application of this

9 section,

10 then, for purposes of this chapter, the value of any interest

11 in any sensitive environmental area in the gross estate of

12 the decedent shall be its environmental use value.

13 ‘‘(b) DEFINITIONS; SPECIAL RULES.—For purposes

14 of this section—

15 ‘‘(1) IN GENERAL.—The term ‘sensitive envi16 ronmental area’ means—

17 ‘‘(A) any wetlands area (as defined by sec18 tion 3(5) of the Emergency Wetlands Revenues

19 Act of 1986 (16 U.S.C. 3902(5)), or

20 ‘‘(B) any other area of undeveloped natu21 ral condition or open space.

22 ‘‘(2) ENVIRONMENTAL USE VALUE.—The term

23 ‘environmental use value’ means the value of the in24 terest in a sensitive environmental area, subject to

25 an environmental preservation easement.
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1 ‘‘(3) ENVIRONMENTAL PRESERVATION EASE2 MENT.—

3 ‘‘(A) IN GENERAL.—The term ‘environ4 mental preservation easement’ means, with re5 spect to any sensitive environmental area in6 cluded in the gross estate of the decedent, a

7 preservation easement granted for a period of

8 10 years beginning on the date of death of the

9 decedent.

10 ‘‘(B) GRANTOR.—Any environmental pres11 ervation easement may be granted by—

12 ‘‘(i) the decedent (including by life13 time transfer), or

14 ‘‘(ii) the executor with the consent of

15 the qualified heirs of the decedent.

16 ‘‘(C) CHARITABLE DEDUCTION LIMITA17 TION.—No deduction shall be allowed under

18 sections 170 or 2055 for a grant of an environ19 mental preservation easement under subpara20 graph (B)(ii) of this paragraph.

21 ‘‘(4) QUALIFIED HEIR.—The term ‘qualified

22 heir’ means, with respect to any interest in any sen23 sitive environmental area—

24 ‘‘(A) the estate of the decedent, or
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1 ‘‘(B) any person who acquires such inter2 est (or to whom such interest passes) from the

3 decedent.

4 ‘‘(c) RECAPTURE OF TAX ON FAILURE TO MAINTAIN

5 EASEMENT.—

6 ‘‘(1) IMPOSITION OF ADDITIONAL ESTATE

7 TAX.—If, after the death of the decedent, a qualified

8 heir of the decedent fails to maintain an environ9 mental preservation easement in a sensitive environ10 mental area, then there is hereby imposed an addi11 tional estate tax.

12 ‘‘(2) AMOUNT OF ADDITIONAL TAX.—

13 ‘‘(A) IN GENERAL.—The amount of the

14 additional tax imposed by paragraph (1) with

15 respect to any interest in any sensitive environ16 mental area shall be the amount equal to the

17 greater of—

18 ‘‘(i) the adjusted tax difference attrib19 utable to such interest, or

20 ‘‘(ii) the excess of the amount realized

21 with respect to the interest (or, in any case

22 other than a sale or exchange at arm’s

23 length, the fair market value of the inter24 est) over the environmental use value of

25 the interest.
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1 ‘‘(B) ADJUSTED TAX DIFFERENCE ATTRIB2 UTABLE TO INTEREST.—For purposes of sub3 paragraph (A), the adjusted tax difference at4 tributable to an interest is the amount which

5 bears the same ratio to the adjusted tax dif6 ference with respect to the estate (determined

7 under subparagraph (C)) as—

8 ‘‘(i) the excess of the value of such in9 terest for purposes of this chapter (deter10 mined without regard to its environmental

11 use value) over the environmental use

12 value of such interest, bears to

13 ‘‘(ii) a similar excess determined for

14 all sensitive environmental areas in such

15 estate.

16 ‘‘(C) ADJUSTED TAX DIFFERENCE WITH

17 RESPECT TO THE ESTATE.—For purposes of

18 subparagraph (B), the term ‘adjusted tax dif19 ference with respect to the estate’ means the

20 excess of what would have been the estate tax

21 liability, but for subsection (a), over the estate

22 tax liability. For purposes of this subparagraph,

23 the term ‘estate tax liability’ means the tax im24 posed by section 2001 reduced by the credits al25 lowable against such tax.
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1 ‘‘(3) DUE DATE.—The additional tax imposed

2 by this subsection shall become due and payable on

3 the day which is 6 months after the date of the fail4 ure referred to in paragraph (1).

5 ‘‘(4) LIABILITY FOR TAX: FURNISHING OF

6 BOND.—The qualified heir receiving an interest for

7 which an election under subsection (a) has been

8 made shall be personally liable for the additional tax

9 imposed by this subsection with respect to his inter10 est unless such heir has furnished bond which meets

11 the requirements of paragraph (5).

12 ‘‘(5) BOND IN LIEU OF PERSONAL LIABILITY.—

13 If a qualified heir makes written application to the

14 Secretary for determination of the maximum amount

15 of the additional tax which may be imposed by this

16 subsection with respect to such heir’s interest, the

17 Secretary (as soon as possible, and in any event

18 within 1 year after the making of such application)

19 shall notify such heir of such maximum amount. The

20 qualified heir, on furnishing a bond in such amount

21 and for such period as may be required, shall be dis22 charged from personal liability for any additional tax

23 imposed by this subsection and shall be entitled to

24 a receipt or writing showing such discharge.
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1 ‘‘(d) ELECTION.—The election under this section

2 shall be made not later than the time prescribed by section

3 607(a) for filing the return of tax imposed by section 2001

4 (including extension thereof), and shall be made in such

5 manner as the Secretary shall by regulations prescribe.

6 Such election once made shall be irrevocable.

7 ‘‘(e) STATUTE OF LIMITATIONS.—If there is a failure

8 to maintain an environmental preservation easement in a

9 sensitive environmental area as described in subsection

10 (c), then—

11 ‘‘(1) the statutory period for the assessment of

12 any additional tax under subsection (c) attributable

13 to such failure shall not expire before the expiration

14 of 3 years from the date the Secretary is notified (in

15 such manner as the Secretary may by regulations

16 prescribe) of such failure, and

17 ‘‘(2) such additional tax may be assessed before

18 the expiration of such 3-year period notwithstanding

19 the provisions of any other law or rule of law which

20 would otherwise prevent such assessment.’’

21 (b) CONFORMING AMENDMENTS.—

22 (1) Subsection (l) of section 170 of such Code

23 (relating to disallowance of charitable deductions in

24 certain cases) is amended by adding at the end

25 thereof the following new paragraph:
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1 ‘‘For disallowance of deductions for certain con2 tributions of environmental preservation easements,

3 see section 2032B(b)(3)(C).’’

4 (2) Paragraph (3) of section 1014(a) of such

5 Code (relating to basis of property acquired from a

6 decedent) is amended by inserting ‘‘or section

7 2032B’’ after ‘‘section 2032A’’.

8 (3) Subsection (c) of section 1016 of such Code

9 (relating to increase in basis of property on which

10 additional estate tax is imposed) is amended—

11 (A) by inserting ‘‘or section 2032B(c)(1)’’

12 after ‘‘section 2032A(c)(1)’’ each place it ap13 pears in paragraphs (1), (3), and (5)(B),

14 (B) by inserting ‘‘or section 2032B’’ after

15 ‘‘2032A’’ in paragraph (1)(A),

16 (C) by striking ‘‘section 2032A(a)’’ in

17 paragraph (1)(B) and inserting ‘‘subsection (a)

18 of the section under which such additional es19 tate tax is imposed’’.

20 (4) Section 1040 of such Code (relating to

21 transfer of certain farm, etc., real property) is

22 amended—

23 (A) by inserting ‘‘or section 2032B(b)(4)’’

24 after ‘‘section 2032A(e)(1)’’ in subsection (a),
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1 (B) by inserting ‘‘or section 2032B’’ after

2 ‘‘under section 2032A’’ each place it appears

3 therein,

4 (C) by striking ‘‘to section 2032A’’ and in5 serting ‘‘to sections 2032A and 2032B’’ in sub6 section (a), and

7 (D) by striking ‘‘FARM, ETC., REAL’’ in

8 the heading and inserting ‘‘SPECIAL VALU9 ATION’’.

10 (5) Subparagraph (C) of section 1223(12) of

11 such Code (relating to holding period of property) is

12 amended by inserting ‘‘or section 2032B(b)(4)’’.

13 (6) Subsection (f) of section 2013 of such Code

14 (relating to treatment of additional estate tax im15 posed) is amended—

16 (A) by inserting ‘‘or section 2032B(c)’’

17 after ‘‘section 2032A(c)’’ each place it appears,

18 (B) by inserting ‘‘or section 2032B’’ after

19 ‘‘If section 2032A’’,

20 (C) by striking ‘‘as if section 2032A’’ in

21 paragraph (2) and inserting ‘‘as if sections

22 2032A and 2032B’’, and

23 (D) by inserting ‘‘or Section 2032B’’ after

24 ‘‘Section 2032A’’ in the caption thereof.
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1 (7) Subsection (e) of section 2055 of such Code

2 (relating to disallowance of deduction for transfers

3 for public, charitable, and religious uses in certain

4 cases) is amended by adding at the end thereof the

5 following new paragraph:

6 ‘‘(5) No deduction shall be allowed under this

7 section for a transfer described under paragraph

8 (3)(B) of section 2032B(b).’’

9 (8) Section 2624(b) of such Code (relating to

10 valuation in generation-skipping transfers) is amend11 ed by striking ‘‘2032 and 2032A’’ and inserting

12 ‘‘2032, 2032A, and 2032B’’.

13 (9) Section 2663(1) of such Code (relating to

14 regulations for generation-skipping transfers) is

15 amended by striking ‘‘section 2032A(c)’’ and insert16 ing ‘‘sections 2032A(c) and 2032B(c)’’.

17 (10) The table of sections for part III of sub18 chapter A of chapter 11 of such Code is amended by

19 inserting immediately after the item relating to sec20 tion 2032A the following:

‘‘Sec. 2032B. Special valuation for sensitive environmental

areas.’’.

21 (11) The table of sections for part III of sub22 chapter O of chapter 1 of such Code is amended by

23 striking ‘‘farm, etc., real’’ in the item relating to

24 section 1040 and inserting ‘‘special valuation’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to estates of decedents dying after

3 the date of the enactment of this Act.

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