II 

112TH CONGRESS 

2D SESSION S. 3650 

To amend the Internal Revenue Code of 1986 to facilitate water leasing 

and water transfers to promote conservation and efficiency. 

IN THE SENATE OF THE UNITED STATES 

NOVEMBER 29, 2012 

Mr. UDALL of Colorado (for himself, Mr. CRAPO, Mr. BENNET, and Mr. BARRASSO) 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 facilitate 

water leasing and water transfers to promote conservation and efficiency. 

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 ‘‘Ditch and Irrigation 

5 Company Tax Reform Act’’. 


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1 SEC. 2. FACILITATE WATER LEASING AND WATER TRANS2 FERS TO PROMOTE CONSERVATION AND EF3 FICIENCY. 

4 (a) IN GENERAL.—Paragraph (12) of section 501(c) 

5 of the Internal Revenue Code of 1986 is amended by add6 ing at the end the following new subparagraph: 

7 ‘‘(I) TREATMENT OF MUTUAL DITCH OR

8 IRRIGATION COMPANIES.— 

9 ‘‘(i) IN GENERAL.—In the case of a 

10 mutual ditch or irrigation company or like 

11 organization, subparagraph (A) shall be 

12 applied without taking into account any in13 come received or accrued— 

14 ‘‘(I) from the sale, lease, or ex15 change of fee or other interests in real 

16 property, including interests in water, 

17 ‘‘(II) from the sale or exchange 

18 of stock in a mutual ditch or irriga19 tion company or like organization or 

20 contract rights for the delivery or use 

21 of water, or 

22 ‘‘(III) from the investment of 

23 proceeds from sales, leases, or ex24 changes under subclauses (I) and (II), 

25 except that any income received under sub26 clause (I), (II), or (III) which is distribVerDate Mar 15 2010 05:42 Nov 30, 2012 Jkt 029200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S3650.IS S3650

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1 uted or expended for expenses other than 

2 operations and maintenance of the mutual 

3 ditch or irrigation company or like organi4 zation shall be treated as non-member in5 come in the year in which it is distributed 

6 or expended. For purposes of the preceding 

7 sentence, expenses other than operations 

8 and maintenance include expenses for the 

9 construction of conveyances designed to de10 liver water outside of the mutual ditch or 

11 irrigation company or like organization 

12 system. 

13 ‘‘(ii) TREATMENT OF ORGANIZA14 TIONAL GOVERNANCE.—In the case of a 

15 mutual ditch or irrigation company or like 

16 organization, where State law provides that 

17 such a company or organization may be or18 ganized in a manner that permits voting 

19 on a basis which is pro-rata to share own20 ership on corporate governance matters, 

21 subparagraph (A) shall be applied without 

22 taking into account whether its member 

23 shareholders have one vote on corporate 

24 governance matters per share held in the 

25 corporation. Nothing in this clause shall be 


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1 construed to create any inference about the 

2 requirements of this subsection for compa3 nies or organizations not included in this 

4 clause.’’. 

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

6 this section shall apply to taxable years beginning after 

7 the date of the enactment of this Act. 

Æ 


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