IIB 

115TH CONGRESS 

2D SESSION H. R. 519 

IN THE SENATE OF THE UNITED STATES 

JULY 25, 2018 

Received; read twice and referred to the Committee on Finance 

AN ACT 

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, 


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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Water and Agriculture 

3 Tax Reform Act of 2018’’. 

4 SEC. 2. FACILITATE WATER LEASING AND WATER TRANS5 FERS TO PROMOTE CONSERVATION AND EF6 FICIENCY. 

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

8 of the Internal Revenue Code of 1986 is amended by add9 ing at the end the following new subparagraph: 

10 ‘‘(J) TREATMENT OF MUTUAL DITCH IRRI11 GATION COMPANIES.— 

12 ‘‘(i) IN GENERAL.—In the case of a 

13 mutual ditch or irrigation company or of a 

14 like organization to a mutual ditch or irri15 gation company, subparagraph (A) shall be 

16 applied without taking into account— 

17 ‘‘(I) any income received or ac18 crued from the sale, lease, or ex19 change of fee or other interests in real 

20 and personal property, including inter21 ests in water (other than income de22 rived from the sale, lease, or transfer 

23 of water to nonmembers outside the 

24 river basin or basins within which the 

25 mutual ditch or irrigation company 

26 operates), 


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1 ‘‘(II) any income received or ac2 crued from the sale or exchange of 

3 stock in a mutual ditch or irrigation 

4 company (or in a like organization to 

5 a mutual ditch or irrigation company) 

6 or contract rights for the delivery or 

7 use of water, or 

8 ‘‘(III) any income received or ac9 crued from the investment of income 

10 described in subclause (I) or (II), 

11 except that any income described in sub12 clause (I), (II), or (III) which is distrib13 uted or expended for expenses (other than 

14 for operations, maintenance, and capital 

15 improvements) of the mutual ditch or irri16 gation company or of the like organization 

17 to a mutual ditch or irrigation company 

18 (as the case may be) shall be treated as 

19 nonmember income in the year in which it 

20 is distributed or expended. For purposes of 

21 the preceding sentence, expenses (other 

22 than for operations, maintenance, and cap23 ital improvements) include expenses for the 

24 construction of conveyances designed to de25 liver water outside of the system of the 


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1 mutual ditch or irrigation company or of 

2 the like organization. 

3 ‘‘(ii) TREATMENT OF ORGANIZA4 TIONAL GOVERNANCE.—In the case of a 

5 mutual ditch or irrigation company or of a 

6 like organization to a mutual ditch or irri7 gation company, where State law provides 

8 that such a company or organization may 

9 be organized in a manner that permits vot10 ing on a basis which is pro rata to share 

11 ownership on corporate governance mat12 ters, subparagraph (A) shall be applied 

13 without taking into account whether its 

14 member shareholders have one vote on cor15 porate governance matters per share held 

16 in the corporation. Nothing in this clause 

17 shall be construed to create any inference 

18 about the requirements of this subsection 

19 for companies or organizations not in20 cluded in this clause.’’. 


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1 (b) EFFECTIVE DATE.—The amendment made by 

2 subsection (a) shall apply to taxable years beginning after 

3 December 31, 2018. 

Passed the House of Representatives July 24, 2018. 

Attest: KAREN L. HAAS, 

Clerk. 


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