II

105TH CONGRESS

2D SESSION S. 1907

To amend the Internal Revenue Code of 1986 to allow a refundable tax

credit for wetland restoration and conservation expenses.

IN THE SENATE OF THE UNITED STATES

APRIL 2, 1998

Mr. DASCHLE 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 allow a

refundable tax credit for wetland restoration and conservation expenses.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. REFUNDABLE CREDIT FOR WETLAND RES4 TORATION AND CONSERVATION EXPENSES.

5 (a) IN GENERAL.—Subpart C of part IV of sub6 chapter A of chapter 1 of the Internal Revenue Code of

7 1986 (relating to refundable credits) is amended by redes8 ignating section 35 as section 36 and by inserting after

9 section 34 the following new section:
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1 ‘‘SEC. 35. WETLAND RESTORATION AND CONSERVATION EX2 PENSES.

3 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an eli4 gible taxpayer, there shall be allowed as a credit against

5 the tax imposed by this subtitle for the taxable year in

6 an amount equal to the sum of—

7 ‘‘(1) the wetland restoration credit, plus

8 ‘‘(2) the wetland conservation credit, plus

9 ‘‘(3) the wetland easement credit.

10 ‘‘(b) WETLAND RESTORATION CREDIT.—

11 ‘‘(1) IN GENERAL.—The wetland restoration

12 credit for any taxable year is an amount equal to the

13 wetland restoration expenditures paid or incurred by

14 the eligible taxpayer for such taxable year.

15 ‘‘(2) WETLAND RESTORATION EXPENDI16 TURES.—For purposes of this subsection, the term

17 ‘wetland restoration expenditure’ means an expendi18 ture for the restoration of farmed wetland or prior

19 converted wetland to fully functioning wetland condi20 tion—

21 ‘‘(A) pursuant to a restoration plan ap22 proved by the Natural Resources Conservation

23 Service of the Department of Agriculture, and

24 ‘‘(B) paid or incurred during the first 5

25 years of the qualified conservation agreement or
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1 qualified conservation easement relating to such

2 farmed wetland or prior converted wetland.

3 Such term shall not include any expenditure which

4 is required to be made pursuant to any Federal or

5 State law.

6 ‘‘(c) WETLAND CONSERVATION CREDIT.—

7 ‘‘(1) IN GENERAL.—The wetland conservation

8 credit for any taxable year is an amount equal to the

9 sum of—

10 ‘‘(A) the applicable percentage of the soil11 specific Conservation Reserve Program rental

12 rate applicable to the eligible taxpayer’s quali13 fied wetland for such taxable year under title

14 XII of the Food Security Act of 1985, plus

15 ‘‘(B) any fee for certification of compliance

16 paid or incurred by the eligible taxpayer in such

17 taxable year with respect to the qualified con18 servation agreement relating to such qualified

19 wetland.

20 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

21 of paragraph (1)(A), the applicable percentage is

22 equal to, in the case of an eligible taxpayer who has

23 entered into a qualified conservation agreement with

24 a term of—
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1 ‘‘(A) at least 10 years, but less than 20

2 years, 50 percent,

3 ‘‘(B) at least 20 years, but less than 30

4 years, 60 percent, and

5 ‘‘(C) 30 years, 70 percent.

6 ‘‘(3) DENIAL OF CREDIT IF WETLAND EASE7 MENT CREDIT IS ELECTED.—With respect to any

8 qualified wetland with respect to which the taxpayer

9 makes an election under subsection (d) for any tax10 able year, the wetland conservation credit with re11 spect to such qualified wetland for such taxable year

12 is zero.

13 ‘‘(d) WETLAND EASEMENT CREDIT.—

14 ‘‘(1) IN GENERAL.—At the election of the eligi15 ble taxpayer, the wetland easement credit for any

16 taxable year is an amount equal to the fair market

17 value of any qualified wetland of the taxpayer sub18 ject to a qualified conservation easement.

19 ‘‘(2) DETERMINATION OF VALUE.—For pur20 poses of paragraph (1), the value of such qualified

21 wetland is the fair market value of such qualified

22 wetland in agricultural use (as determined by a cer23 tified appraisal) during the taxable year (determined

24 as of the date of the grant of the easement).
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1 ‘‘(3) ELECTION.—An election under this sub2 section shall apply to the taxable year for which

3 made.

4 ‘‘(e) DEFINITIONS.—For purposes of this section—

5 ‘‘(1) ELIGIBLE TAXPAYER.—The term ‘eligible

6 taxpayer’ means a taxpayer who—

7 ‘‘(A) owns property which consists of—

8 ‘‘(i) wetlands, farmed wetlands, or

9 prior converted wetlands, and

10 ‘‘(ii) the surrounding or immediately

11 adjacent actively farmed cropland, and

12 ‘‘(B) with respect to such property, has en13 tered into a qualified conservation agreement or

14 a qualified conservation easement.

15 ‘‘(2) QUALIFIED WETLAND.—

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

17 wetland’ means—

18 ‘‘(i) wetland, including farmed wet19 land or prior converted wetland, which

20 through the use of wetland restoration ex21 penditures is being converted to fully func22 tioning wetland condition, plus

23 ‘‘(ii) as determined under a qualified

24 conservation agreement or a qualified con25 servation easement, such surrounding or
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1 immediately adjacent nonwetland as is ap2 propriate to buffer the water quality or

3 wildlife habitat values associated with the

4 wetland, but only to the extent the nonwet5 land acreage is not more than 3 times

6 greater than the wetland acreage.

7 ‘‘(B) CERTAIN PROPERTY EXCLUDED.—

8 Such term shall not include any acre of land

9 with respect to which contract or easement pay10 ments are received in the taxable year from the

11 Conservation Reserve Program or the Wetlands

12 Reserve Program under title XII of the Food

13 Security Act of 1985.

14 ‘‘(3) WETLAND, FARMED WETLAND, AND PRIOR

15 CONVERTED WETLAND.—The terms ‘wetland’,

16 ‘farmed wetland’, and ‘prior converted wetland’ shall

17 have the meanings given such terms by title XII of

18 the Food Security Act of 1985.

19 ‘‘(4) QUALIFIED CONSERVATION AGREE20 MENT.—

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

22 conservation agreement’ means an agreement

23 by the eligible taxpayer—

24 ‘‘(i) with a governmental unit referred

25 to in section 170(c)(1),
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1 ‘‘(ii) for a term of not less than 10

2 years and not more than 30 years,

3 ‘‘(iii) under which the taxpayer agrees

4 to comply with the conservation require5 ments of subparagraph (B) with respect to

6 the qualified wetland, and

7 ‘‘(iv) under which the taxpayer agrees

8 to obtain a certification of compliance not

9 less than every 5 years during the period

10 of the agreement.

11 ‘‘(B) CONSERVATION REQUIREMENTS.—An

12 eligible taxpayer complies with the conservation

13 requirements of this subparagraph if—

14 ‘‘(i) the taxpayer does not use the

15 qualified wetland for agricultural produc16 tion, and

17 ‘‘(ii) the taxpayer does not drain,

18 dredge, fill, level, or otherwise manipulate

19 the qualified wetland (including the re20 moval of woody vegetation, or any activity

21 which results in impairing or reducing the

22 flow, circulation, or reach of water) for the

23 purpose, or that has the effect, of making

24 production of an agricultural commodity or
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1 development of built structures on such

2 wetland possible.

3 ‘‘(5) QUALIFIED CONSERVATION EASEMENT.—

4 The term ‘qualified conservation easement’ means

5 an easement granted in perpetuity by the eligible

6 taxpayer restricting the use which may be made of

7 the qualified wetland to a qualified organization ex8 clusively for conservation purposes (as defined in

9 section 170(h)).

10 ‘‘(f) SPECIAL RULES.—

11 ‘‘(1) DENIAL OF DOUBLE BENEFIT.—

12 ‘‘(A) IN GENERAL.—No credit shall be al13 lowed under subsection (a) for any expense for

14 which a deduction or credit is allowed under

15 any other provision of this chapter.

16 ‘‘(B) GRANTS.—No credit shall be allowed

17 under subsection (a) for any expense to the ex18 tent that funds for such expense are received

19 under any Federal, State, or local program.

20 ‘‘(2) MARRIED COUPLES MUST FILE JOINT RE21 TURNS.—If the taxpayer is a married individual

22 (within the meaning of section 7703), this section

23 shall apply only if the taxpayer and the taxpayer’s

24 spouse file a joint return for the taxable year.’’

25 (b) CONFORMING AMENDMENTS.—
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1 (1) Paragraph (2) of section 1324(b) of title

2 31, United States Code, is amended by inserting be3 fore the period ‘‘, or from section 35 of such Code’’.

4 (2) The table of sections for subpart C of part

5 IV of subchapter A of chapter 1 of the Internal Rev6 enue Code of 1986 is amended by striking the last

7 item and inserting the following:

‘‘Sec. 35. Wetland restoration and conservation expenses.

‘‘Sec. 36. Overpayments of tax.’’

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

9 this section shall apply to taxable years beginning after

10 December 31, 1998.

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