I

104TH CONGRESS

1ST SESSION H. R. 864

To amend the Internal Revenue Code of 1986 to provide an election to

exclude from the gross estate of a decedent the value of certain land

subject to a qualified conservation easement, and to make technical

changes to alternative valuation rules.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 8, 1995

Mr. HOUGHTON (for himself, Mr. PAYNE of Virginia, Mrs. JOHNSON of Connecticut, Mr. MCCRERY, Mr. COYNE, Mr. BREWSTER, Mr. WELDON of

Pennsylvania, and Mr. ENGLISH of Pennsylvania) introduced the following bill; which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to provide

an election to exclude from the gross estate of a decedent

the value of certain land subject to a qualified conservation easement, and to make technical changes to alternative valuation rules.

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 ‘‘American Farm Pro5 tection Act of 1995’’.
2

•HR 864 IH

1 SEC. 2. TREATMENT OF LAND SUBJECT TO A QUALIFIED

2 CONSERVATION EASEMENT.

3 (a) ESTATE TAX WITH RESPECT TO LAND SUBJECT

4 TO A QUALIFIED CONSERVATION EASEMENT.—Section

5 2031 of the Internal Revenue Code of 1986 (relating to

6 the definition of gross estate) is amended by redesignating

7 subsection (c) as subsection (d) and by inserting after sub8 section (b) the following new subsection:

9 ‘‘(c) ESTATE TAX WITH RESPECT TO LAND SUB10 JECT TO A QUALIFIED CONSERVATION EASEMENT.—

11 ‘‘(1) IN GENERAL.—If the executor makes the

12 election described in paragraph (3), then, except as

13 otherwise provided in this subsection, there shall be

14 excluded from the gross estate the value of land sub15 ject to a qualified conservation easement (reduced by

16 the amount of any indebtedness to which such land

17 is subject).

18 ‘‘(2) TREATMENT OF RETAINED DEVELOP19 MENT RIGHT.—

20 ‘‘(A) IN GENERAL.—Paragraph (1) shall

21 not apply to the value of any development right

22 retained by the donor in the conveyance of a

23 qualified conservation easement. The tax im24 posed by section 2001 (if any) attributable to

25 any development right so retained shall be im26 posed only upon the disposition of such prop-
3

•HR 864 IH

1 erty. The tax so imposed shall be due and pay2 able by the person so disposing of such property

3 on the 15th day of the 4th month following the

4 calendar year in which such disposition occurs.

5 ‘‘(B) DEFINITIONS.—For purposes of this

6 paragraph—

7 ‘‘(i) DISPOSITION.—The term ‘disposi8 tion’ shall not include any gift or devise.

9 ‘‘(ii) DEVELOPMENT RIGHT.—The

10 term ‘development right’ means the right

11 to establish or use any structure and the

12 land immediately surrounding it for sale,

13 rent, or any other commercial purpose

14 which is not subordinate to and directly

15 supportive of—

16 ‘‘(I) the conservation purpose

17 identified in the easement, or

18 ‘‘(II) the activity of farming, for19 estry, ranching, horticulture, viticul20 ture, or recreation (whether or not for

21 profit) conducted on land subject to

22 the easement in which such right is

23 retained.

24 ‘‘(3) ELECTION.—The election under this sub25 section shall be made on the return of the tax im-
4

•HR 864 IH

1 posed by section 2001. Such an election, once made,

2 shall be irrevocable.

3 ‘‘(4) CALCULATION AND NOTICE OF POTENTIAL

4 ESTATE TAX DUE.—An executor making the election

5 described in paragraph (3) shall compute the

6 amount of tax imposed by section 2001 upon any de7 velopment right (as defined in paragraph (2)) re8 tained by the donor in the conveyance of such quali9 fied conservation easement and include such com10 putation with the return of the tax imposed by sec11 tion 2001. The executor shall also file a ‘Notice of

12 Potential Estate Tax Due’ in the place or places

13 where deeds are put to public record for the locality

14 in which the land subject to such qualified conserva15 tion easement is located. The report of the computa16 tion of tax on any retained development right and

17 the filing of the notice prescribed in this paragraph

18 shall be done in such manner and on such forms as

19 the Secretary shall prescribe.

20 ‘‘(5) DEFINITIONS.—For purposes of this sub21 section—

22 ‘‘(A) LAND SUBJECT TO A QUALIFIED

23 CONSERVATION EASEMENT.—The term ‘land

24 subject to a qualified conservation easement’

25 means land—
5

•HR 864 IH

1 ‘‘(i) which is located in or within 50

2 miles of an area which, on the date of the

3 decedent’s death, is—

4 ‘‘(I) a metropolitan area (as de5 fined by the Office of Management

6 and Budget), or

7 ‘‘(II) a National Park (unless it

8 is determined by the Secretary that

9 land in or within 50 miles of such a

10 Park is not under significant develop11 ment pressure),

12 ‘‘(ii) which was owned by the decedent

13 or a member of the decedent’s family at all

14 times during the 3-year period ending on

15 the date of the decedent’s death, and

16 ‘‘(iii) with respect to which a qualified

17 conservation easement is or has been made

18 by the decedent or a member of the dece19 dent’s family.

20 ‘‘(B) QUALIFIED CONSERVATION EASE21 MENT.—The term ‘qualified conservation ease22 ment’ means a qualified conservation contribu23 tion (as defined in section 170(h)(1)) of a quali24 fied real property interest (as defined in section

25 170(h)(2)(C)). Clause (iv) of section
6

•HR 864 IH

1 170(h)(4)(A) shall not apply for purposes of the

2 preceding sentence.

3 ‘‘(C) MEMBER OF FAMILY.—The term

4 ‘member of the decedent’s family’ means any

5 member of the family (as defined in section

6 2032A(e)(2)) of the decedent.’’

7 (b) CARRYOVER BASIS.—Section 1014(a) of such

8 Code (relating to basis of property acquired from a dece9 dent) is amended by striking the period at the end of para10 graph (3) and inserting ‘‘, or’’ and by adding after para11 graph (3) the following new paragraph:

12 ‘‘(4) to the extent of the applicability of the ex13 clusion described in section 2031(c), the basis in the

14 hands of the decedent.’’

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

16 this section shall apply to estates of decedents dying after

17 December 31, 1994.

18 SEC. 3. GIFT TAX ON LAND SUBJECT TO A QUALIFIED CON19 SERVATION EASEMENT.

20 (a) GIFT TAX WITH RESPECT TO LAND SUBJECT TO

21 A QUALIFIED CONSERVATION EASEMENT.—Section 2503

22 of the Internal Revenue Code of 1986 (relating to taxable

23 gifts) is amended by adding at the end the following new

24 subsection:
7

•HR 864 IH

1 ‘‘(h) GIFT TAX WITH RESPECT TO LAND SUBJECT

2 TO A QUALIFIED CONSERVATION EASEMENT.—The trans3 fer by gift of land subject to a qualified conservation ease4 ment shall not be treated as a transfer of property by gift

5 for purposes of this chapter. For purposes of this sub6 section, the term ‘land subject to a qualified conservation

7 easement’ has the meaning given to such term by section

8 2031(c); except that references to the decedent shall be

9 treated as references to the donor and references to the

10 date of the decedent’s death shall be treated as references

11 to the date of the transfer by the donor.’’

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

13 this section shall apply to gifts made after December 31,

14 1994.

15 SEC. 4. QUALIFIED CONSERVATION CONTRIBUTION IS NOT

16 A DISPOSITION.

17 (a) QUALIFIED CONSERVATION CONTRIBUTION IS

18 NOT A DISPOSITION.—Subsection (c) of section 2032A of

19 the Internal Revenue Code of 1986 (relating to alternative

20 valuation method) is amended by adding at the end the

21 following new paragraphs:

22 ‘‘(8) QUALIFIED CONSERVATION CONTRIBUTION

23 IS NOT A DISPOSITION.—A qualified conservation

24 contribution (as defined in section 170(h)) by gift or
8

•HR 864 IH

1 otherwise shall not be deemed a disposition under

2 subsection (c)(1)(A).

3 ‘‘(9) EXCEPTION FOR REAL PROPERTY IS LAND

4 SUBJECT TO A QUALIFIED CONSERVATION EASE5 MENT.—If qualified real property is land subject to

6 a qualified conservation easement (as defined in sec7 tion 2031(c)), the preceding paragraphs of this sub8 section shall not apply.’’

9 (b) LAND SUBJECT TO A QUALIFIED CONSERVATION

10 EASEMENT IS NOT DISQUALIFIED.—Subsection (b) of

11 section 2032A of such Code (relating to alternative valu12 ation method) is amended by adding at the end the follow13 ing paragraph:

14 ‘‘(E) If property is otherwise qualified real

15 property, the fact that it is land subject to a

16 qualified conservation easement (as defined in

17 section 2031(c)) shall not disqualify it under

18 this section.’’

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

20 this section shall apply with respect to contributions made,

21 and easements granted, after December 31, 1994.

Æ