II 

110TH CONGRESS 

1ST SESSION S. 50 

To amend the Internal Revenue Code of 1986 to provide economic incentives 

for the preservation of open space and conservation of natural resources, 

and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 4, 2007 

Mr. ISAKSON 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 

economic incentives for the preservation of open space 

and conservation of natural resources, 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; AMENDMENT OF 1986 CODE. 

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

5 ‘‘Paul Coverdell Homestead Open Space Preservation and 

6 Conservation Act of 2006’’. 

7 (b) AMENDMENT OF 1986 CODE.—Except as other8 wise expressly provided, whenever in this Act an amendVerDate Aug 31 2005 23:24 Jan 05, 2007 Jkt 059200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S50.IS S50

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1 ment or repeal is expressed in terms of an amendment 

2 to, or repeal of, a section or other provision, the reference 

3 shall be considered to be made to a section or other provi4 sion of the Internal Revenue Code of 1986. 

5 SEC. 2. FINDINGS AND PURPOSE. 

6 (a) FINDINGS.—Congress finds the following: 

7 (1) Tax and economic policies have for a sus8 tained period of time inadvertently created financial 

9 difficulties for our Nation’s farming and ranching 

10 families that, among other negative impacts, has 

11 forced a significant number of them to liquidate 

12 their land holdings. 

13 (2) This has particularly been the case in areas 

14 surrounding growing urban centers and resort des15 tinations. 

16 (3) This has fragmented many of our Nation’s 

17 large landscapes and disrupted many communities 

18 that historically derived their cultural and economic 

19 identities from the land. 

20 (4) The impact of this has been to deprive 

21 many areas of open green space, which in turn has 

22 not only negatively affected our human settlements 

23 through the resulting sprawl, but has also dramati24 cally reduced the amount of sustaining habitat for 

25 our natural communities of plants and animals. 


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1 (b) PURPOSE.—The purpose of this Act is to provide 

2 an economic mechanism that will restore and conserve our 

3 Nation’s natural estate in the form of forests, farms, 

4 ranches, and wetlands while protecting our waterways and 

5 our forests and open space in a manner that keeps them 

6 subject to private ownership and supportive of our sur7 viving but threatened natural communities of plants and 

8 animals. 

9 SEC. 3. QUALIFIED CONSERVATION CREDIT. 

10 (a) IN GENERAL.—Subpart B of part IV of sub11 chapter A of chapter 1 (relating to other credits) is 

12 amended by adding at the end the following new section: 

13 ‘‘SEC. 30D. QUALIFIED CONSERVATION CREDIT. 

14 ‘‘(a) GENERAL RULE.—There shall be allowed as a 

15 credit against the tax imposed by this chapter, in the case 

16 of a qualified conservation organization, the amount of the 

17 taxpayer’s qualified conservation expenditures for the tax18 able year. 

19 ‘‘(b) QUALIFIED CONSERVATION EXPENDITURES.— 

20 For purposes of this section— 

21 ‘‘(1) IN GENERAL.—The term ‘qualified con22 servation expenditures’ means the sum of the quali23 fied conservation organization’s— 

24 ‘‘(A) acquisition costs, plus 

25 ‘‘(B) reserve funds. 


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1 ‘‘(2) ACQUISITION COSTS.—The term ‘acquisi2 tion costs’ means the sum of— 

3 ‘‘(A) the lesser of— 

4 ‘‘(i) the total of the amounts that a 

5 qualified conservation organization paid 

6 during the taxable year to acquire qualified 

7 real property interests exclusively for con8 servation purposes, or 

9 ‘‘(ii) the aggregate appraised value of 

10 the qualified real property interests re11 ferred to in clause (i), plus 

12 ‘‘(B) so much of the transaction costs rea13 sonably incurred during the taxable year in con14 nection with the acquisition of qualified real 

15 property interests as do not exceed 2 percent of 

16 the amount determined in subparagraph (A). 

17 ‘‘(3) RESERVE FUNDS.— 

18 ‘‘(A) IN GENERAL.—The term ‘reserve 

19 funds’ means amounts permanently set aside by 

20 a qualified conservation organization as an en21 dowment to fund the future costs of enforcing 

22 and maintaining qualified real property inter23 ests acquired by the qualified conservation orga24 nization exclusively for conservation purposes. 


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1 ‘‘(B) ENDOWMENT.—The term ‘endow2 ment’ means a restricted fund held in a seg3 regated account, the income and realized appre4 ciation of which may be expended solely for the 

5 purposes designated under this section, and 

6 which may be invested solely in qualified invest7 ments (as defined in section 501(c)(21)(D)(ii)). 

8 ‘‘(C) LIMITATION.—The amount of reserve 

9 funds which may be taken into account under 

10 paragraph (1)(B) for the taxable year shall not 

11 exceed 8 percent of the acquisition costs for 

12 that taxable year. 

13 ‘‘(c) QUALIFIED CONSERVATION ORGANIZATION.— 

14 For purposes of this section, the term ‘qualified conserva15 tion organization’ means, with respect to any taxable 

16 year— 

17 ‘‘(1) an organization which— 

18 ‘‘(A) is described in section 170(h)(3), 

19 ‘‘(B) has been in existence for at least 2 

20 calendar years immediately before the taxable 

21 year, and 

22 ‘‘(C) was organized to serve primarily con23 servation purposes (as defined in section 

24 170(h)(4)), 


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1 ‘‘(2) a limited partnership, all the general part2 ners of which are organizations described in para3 graph (1), or 

4 ‘‘(3) a limited liability company, all the man5 agers of which are organizations described in para6 graph (1), 

7 with respect to which neither the seller of the qualified 

8 real property interest nor any party related or subordinate 

9 to the seller (within the meaning of section 672(c)) would 

10 be a disqualified person (as defined in section 4946) if 

11 the organization were a private foundation. 

12 ‘‘(d) QUALIFIED REAL PROPERTY INTEREST.—For 

13 purposes of this section, the term ‘qualified real property 

14 interest’ has the meaning given such term by section 

15 170(h)(2)(C). 

16 ‘‘(e) EXCLUSIVELY FOR CONSERVATION PUR17 POSES.—For purposes of this section, the term ‘exclusively 

18 for conservation purposes’ has the meaning given such 

19 term by section 170(h)(5), except that an acquisition shall 

20 not be treated as exclusively for conservation purposes un21 less the instrument conveying the qualified real property 

22 interest expressly provides that the conservation purposes 

23 may be enforced by both the attorney general of the State 

24 in which the real property is located and the qualified con25 servation organization. 


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1 ‘‘(f) APPRAISED VALUE.—For purposes of this sec2 tion, the term ‘appraised value’ means the fair market 

3 value as determined by a qualified appraisal (as defined 

4 in section 155(a)(4) of the Deficit Reduction Act of 1984). 

5 ‘‘(g) LIMITATION BASED ON AMOUNT OF TAX.—The 

6 credit allowed under subsection (a) shall not exceed the 

7 taxpayer’s liability for income tax (including unrelated 

8 business income tax) for the taxable year. 

9 ‘‘(h) LIMITATION ON AGGREGATE CREDIT ALLOW10 ABLE WITH RESPECT TO ACQUISITIONS OF QUALIFIED

11 REAL PROPERTY INTERESTS LOCATED IN A STATE.— 

12 ‘‘(1) CREDIT MAY NOT EXCEED CREDIT

13 AMOUNT ALLOCATED TO ACQUISITION OF QUALIFIED

14 REAL PROPERTY INTEREST.— 

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

16 credit determined under subsection (a) for any 

17 taxable year with respect to the acquisition of 

18 any qualified real property interest shall not ex19 ceed the conservation credit dollar amount allo20 cated to such acquisition under this subsection. 

21 ‘‘(B) TIME FOR MAKING ALLOCATION.—An 

22 allocation shall be taken into account under 

23 subparagraph (A) only if it is made not later 

24 than the close of the calendar year in which the 

25 qualified real property interest is acquired. 


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1 ‘‘(C) ALLOCATION REDUCES AGGREGATE

2 AMOUNT AVAILABLE TO AGENCY.—Any con3 servation credit dollar amount allocated to the 

4 acquisition of any qualified real property inter5 est for any calendar year shall reduce the ag6 gregate conservation credit dollar amount of the 

7 allocating conservation credit agency for such 

8 calendar year. 

9 ‘‘(2) CONSERVATION CREDIT DOLLAR AMOUNT

10 FOR AGENCIES.— 

11 ‘‘(A) IN GENERAL.—The aggregate con12 servation credit dollar amount which a con13 servation credit agency may allocate for any 

14 calendar year is the portion of the State con15 servation credit ceiling allocated under this 

16 paragraph for such calendar year to such agen17 cy. 

18 ‘‘(B) STATE CEILING INITIALLY ALLO19 CATED TO STATE CONSERVATION CREDIT AGEN20 CIES.—Except as provided in subparagraphs 

21 (F) and (G), the State conservation credit ceil22 ing for each calendar year shall be allocated to 

23 the conservation credit agency of such State. If 

24 there is more than 1 conservation credit agency 


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1 of a State, all such agencies shall be treated as 

2 a single agency. 

3 ‘‘(C) STATE CONSERVATION CREDIT CEIL4 ING.—The State conservation credit ceiling ap5 plicable to any State for any calendar year shall 

6 be an amount equal to the sum of— 

7 ‘‘(i) the lesser of— 

8 ‘‘(I) an amount equal to the ag9 gregate annual credit multiplied by a 

10 fraction, the numerator of which is 

11 the amount of land located in such 

12 State that is either used for agricul13 tural purposes or constitutes private 

14 forest land and the denominator of 

15 which is the amount of land in all 

16 States that is either used for agricul17 tural purposes or constitutes private 

18 forest land, or 

19 ‘‘(II) an amount equal to 4 per20 cent of the aggregate annual credit 

21 for that year, 

22 ‘‘(ii) the amount (if any) allocated 

23 under subparagraph (F) to such State by 

24 the Secretary, 


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1 ‘‘(iii) the amount of the State con2 servation credit ceiling returned in the cal3 endar year, plus 

4 ‘‘(iv) the amount (if any) allocated 

5 under subparagraph (G) to such State by 

6 the Secretary. 

7 ‘‘(D) AGGREGATE ANNUAL CREDIT.—For 

8 purposes of subparagraph (C)(i), the aggregate 

9 annual credit is determined in accordance with 

10 the following table: 

‘‘For the calendar The aggregate 

year ending: annual credit is: 

December 31, 2006 ............................................................................ $4,000,000,000 

December 31, 2007 ............................................................................ $4,500,000,000 

December 31, 2008 ............................................................................ $5,000,000,000 

December 31, 2009 ............................................................................ $5,500,000,000 

December 31, 2010 ............................................................................ $6,000,000,000 

11 ‘‘(E) STATE CONSERVATION CREDIT CEIL12 ING RETURNED.—For purposes of clause (iii), 

13 the amount of State conservation credit ceiling 

14 returned in the calendar year equals the con15 servation credit dollar amount previously allo16 cated within the State to any proposed acquisi17 tion of a qualified real property interest which 

18 is not acquired within the period required by 

19 the terms of the allocation or to any proposed 

20 acquisition of a qualified real property interest 

21 with respect to which an allocation is canceled 

22 by mutual consent of the conservation credit 


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1 agency and the qualified conservation organiza2 tion receiving the allocation. 

3 ‘‘(F) UNUSED AGGREGATE ANNUAL CRED4 IT.—Any portion of the aggregate annual credit 

5 for a calendar year that is not allocated to a 

6 State’s conservation credit ceiling because of 

7 the 4 percent limitation under subparagraph 

8 (C)(i)(II) shall be allocated by the Secretary 

9 among the remaining States, subject to such 4 

10 percent limitation, in proportion to their respec11 tive land used for agricultural purposes and pri12 vate forest land. 

13 ‘‘(G) UNUSED CONSERVATION CREDIT

14 CARRYOVERS ALLOCATED AMONG CERTAIN

15 STATES.— 

16 ‘‘(i) IN GENERAL.—The unused con17 servation credit carryover of a State for 

18 any calendar year shall be assigned to the 

19 Secretary for allocation among qualified 

20 States for the succeeding calendar year. 

21 ‘‘(ii) UNUSED CONSERVATION CREDIT

22 CARRYOVER.—For purposes of this para23 graph, the unused conservation credit car24 ryover of a State for any calendar year is 

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1 tion credit ceiling for such year (as defined 

2 in subparagraph (C)) over the aggregate 

3 conservation credit dollar amount allocated 

4 by such State for such year. 

5 ‘‘(iii) FORMULA FOR ALLOCATION OF

6 UNUSED CONSERVATION CREDIT

7 CARRYOVERS AMONG QUALIFIED

8 STATES.—The Secretary shall determine 

9 the formula for allocating the unused con10 servation credit carryovers among the 

11 qualified States for a calendar year. In the 

12 determination of such formula, the Sec13 retary shall assure that each qualified 

14 State in a calendar year shall receive some 

15 allocated amount of the unused conserva16 tion credit carryover for that year but that 

17 such carryovers shall otherwise be allocated 

18 among the qualified States in a manner 

19 that best realizes the purpose of this sec20 tion. 

21 ‘‘(iv) QUALIFIED STATE.—For pur22 poses of this subparagraph, the term 

23 ‘qualified State’ means, with respect to a 

24 calendar year, any State— 


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1 ‘‘(I) which has adopted a state2 wide conservation plan designed to 

3 preserve the natural estate in the 

4 form of forests, farms, ranches, and 

5 wetlands located within the bound6 aries of that State, 

7 ‘‘(II) which allocated its entire 

8 State conservation credit ceiling for 

9 the preceding calendar year, and 

10 ‘‘(III) for which a request is 

11 made (not later than May 1 of the 

12 calendar year) to receive an allocation 

13 under clause (iii). 

14 ‘‘(H) SPECIAL RULE FOR STATES WITH

15 CONSTITUTIONAL HOME RULE CITIES.—For 

16 purposes of this subsection— 

17 ‘‘(i) IN GENERAL.—The aggregate 

18 conservation credit dollar amount for any 

19 constitutional home rule city for any cal20 endar year shall be an amount which bears 

21 the same ratio to the State conservation 

22 credit ceiling for such calendar year as— 

23 ‘‘(I) the land used for agricul24 tural purposes and private forest land 


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1 within a 25-mile radius of such city, 

2 bears to 

3 ‘‘(II) the land used for agricul4 tural purposes and private forest land 

5 in the entire State. 

6 ‘‘(ii) COORDINATION WITH OTHER AL7 LOCATIONS.—In the case of any state 

8 which contains 1 or more constitutional 

9 home rule cities, for purposes of applying 

10 this paragraph with respect to conservation 

11 credit agencies in such State other than 

12 constitutional home rule cities, the State 

13 conservation credit ceiling for any calendar 

14 year shall be reduced by the aggregate con15 servation credit dollar amounts determined 

16 for such year for all constitutional home 

17 rule cities in such State. 

18 ‘‘(iii) CONSTITUTIONAL HOME RULE

19 CITY.—For purposes of this subparagraph, 

20 the term ‘constitutional home rule city’ has 

21 the meaning given such term by section 

22 146(d)(3)(C). 

23 ‘‘(I) STATE MAY PROVIDE FOR DIFFERENT

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1 tion 146(e) (other than paragraph (2)(B) there2 of) shall apply for purposes of this paragraph. 

3 ‘‘(J) LAND USED FOR AGRICULTURAL PUR4 POSES AND PRIVATE FOREST LAND.—For pur5 poses of this paragraph— 

6 ‘‘(i) LAND USED FOR AGRICULTURAL

7 PURPOSES.—The term ‘land used for agri8 cultural purposes’ means the number of 

9 acres classified as land in farms in the 

10 1997 Census of Agriculture conducted by 

11 the United States Department of Agri12 culture. 

13 ‘‘(ii) PRIVATE FOREST LAND.—The 

14 term ‘private forest land’ means the num15 ber of acres classified as private forest 

16 land in the 1997 Forest Inventory and 

17 Analysis conducted by the United States 

18 Forest Service, excluding any acres so clas19 sified therein that are also included as land 

20 in farms in the 1997 Census of Agriculture 

21 described in clause (i). 

22 ‘‘(K) SECRETARY.—For purposes of this 

23 paragraph, the term ‘Secretary’ means the Sec24 retary of Agriculture and the Secretary of the 


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1 Interior, acting pursuant to jointly established 

2 rules and procedures. 

3 ‘‘(3) SPECIAL RULES.— 

4 ‘‘(A) INTERESTS MUST BE LOCATED WITH5 IN JURISDICTION OF CREDIT AGENCY.—A con6 servation credit agency may allocate its aggre7 gate conservation credit dollar amount only 

8 with respect to acquisitions of qualified real 

9 property interests located in the jurisdiction of 

10 the governmental unit of which such agency is 

11 a part. 

12 ‘‘(B) AGENCY ALLOCATIONS IN EXCESS OF

13 LIMIT.—If the aggregate conservation credit 

14 dollar amounts allocated by a conservation cred15 it agency for any calendar year exceed the por16 tion of the State conservation credit ceiling allo17 cated to such agency for such calendar year, the 

18 conservation credit dollar amounts so allocated 

19 shall be reduced (to the extent of such excess) 

20 for acquisitions of qualified real property inter21 ests in the reverse order in which the alloca22 tions of such amounts were made. 

23 ‘‘(4) CONSERVATION CREDIT AGENCY.—For 

24 purposes of this subsection, the term ‘conservation 


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1 credit agency’ means any agency authorized to carry 

2 out this subsection. 

3 ‘‘(i) REGULATIONS.—Except as provided in sub4 section (h)(2)(K), the Secretary shall prescribe such regu5 lations as may be necessary to carry out the purposes of 

6 this section. 

7 ‘‘(j) TERMINATION.—Subparagraph (A) of subsection 

8 (h)(1) shall not apply to any amount allocated after De9 cember 31, 2010.’’. 

10 (b) RECOGNITION OF GAIN.—Section 1001 (relating 

11 to determination of amount of and recognition of gain or 

12 loss) is amended by adding at the end the following new 

13 subsection: 

14 ‘‘(f) QUALIFIED REAL PROPERTY INTERESTS.—Gain 

15 shall be recognized on the sale of a qualified real property 

16 interest (as defined in section 30D(d)) to a qualified con17 servation organization (as defined in section 30D(c)) ex18 clusively for conservation purposes (as defined in section 

19 30D(e)) only to the extent that the amount realized on 

20 the sale exceeds the taxpayer’s adjusted basis in the entire 

21 property to which the qualified real property interest re22 lates.’’. 

23 (c) BASIS ADJUSTMENT.—Section 1016 (relating to 

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1 section (e) as subsection (f) and by inserting after sub2 section (d) the following new subsection: 

3 ‘‘(e) ADJUSTMENTS TO BASIS OF CERTAIN REAL

4 PROPERTY.—If the taxpayer has sold a qualified real 

5 property interest in a transaction to which section 1001(f) 

6 applies, then the taxpayer’s basis in the remaining prop7 erty shall be reduced (but not below zero) by the amount 

8 realized on the sale.’’. 

9 (d) CONFORMING AMENDMENTS.— 

10 (1) PASSIVE LOSS RULES INAPPLICABLE.—Sec11 tion 469(d)(2)(A)(i) is amended to read as follows: 

12 ‘‘(i) subpart D (other than section 

13 30D) of part IV of subchapter A, or’’. 

14 (2) UNRELATED BUSINESS INCOME TAX.—Sec15 tion 511(a)(1) is amended by striking ‘‘section 11.’’ 

16 and inserting ‘‘section 11, less any credits to which 

17 the organization is entitled under section 30D.’’. 

18 (3) DENIAL OF CHARITABLE CONTRIBUTION

19 DEDUCTION.—Section 170(e) is amended by adding 

20 at the end the following new paragraph: 

21 ‘‘(7) SPECIAL RULE FOR CONTRIBUTIONS OF

22 INTERESTS IN QUALIFIED CONSERVATION ORGANIZA23 TIONS.—No deduction shall be allowed for the con24 tribution of an interest in a qualified conservation 

25 organization (as defined in section 30D(c)) that has 


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1 acquired 1 or more qualified real property interests 

2 in transactions to which section 30D applies.’’. 

3 (4) CLASSIFICATION AS PARTNERSHIP.—Sec4 tion 761(a) is amended by adding at the end the fol5 lowing new sentence: ‘‘Such term also includes an 

6 organization described in either section 30D(c)(2) or 

7 section 30D(c)(3).’’. 

8 (5) CLERICAL AMENDMENT.—The table of sec9 tions for subpart B of part IV of subchapter A of 

10 chapter 1 is amended by adding at the end the fol11 lowing new item: 

‘‘Sec. 30D. Qualified conservation credit.’’. 

12 (e) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to taxable years beginning after 

14 December 31, 2005. 

Æ 


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