I

107TH CONGRESS

1ST SESSION H. R. 1933

To amend the Internal Revenue Code of 1986 to provide for nonrecognition

of gain on dispositions of dairy property which is certified by the Secretary of Agriculture as having been the subject of an agreement under

the bovine tuberculosis eradication program, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MAY 22, 2001

Mr. BONILLA (for himself, Mr. COMBEST, Mr. STENHOLM, Mr. REYES, Mr.

SKEEN, Mr. THORNBERRY, and Mr. UDALL of New Mexico) 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

for nonrecognition of gain on dispositions of dairy property which is certified by the Secretary of Agriculture

as having been the subject of an agreement under the

bovine tuberculosis eradication program, 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,
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1 SECTION 1. QUALIFIED DISPOSITION OF DAIRY PROPERTY

2 TREATED AS INVOLUNTARY CONVERSION.

3 (a) IN GENERAL.—Section 1033 of the Internal Rev4 enue Code of 1986 (relating to involuntary conversions)

5 is amended by designating subsection (k) as subsection (l)

6 and inserting after subsection (j) the following new sub7 section:

8 ‘‘(k) QUALIFIED DISPOSITION TO IMPLEMENT BO9 VINE TUBERCULOSIS ERADICATION PROGRAM.—

10 ‘‘(1) IN GENERAL.—For purposes of this sub11 title, if a taxpayer elects the application of this sub12 section to a qualified disposition:

13 ‘‘(A) TREATMENT AS INVOLUNTARY CON14 VERSION.—Such disposition shall be treated as

15 an involuntary conversion to which this section

16 applies.

17 ‘‘(B) MODIFICATION OF SIMILAR PROP18 ERTY REQUIREMENT.—Property to be held by

19 the taxpayer either for productive use in a trade

20 or business or for investment shall be treated as

21 property similar or related in service or use to

22 the property disposed of.

23 ‘‘(C) EXTENSION OF PERIOD FOR REPLAC24 ING PROPERTY.—Subsection (a)(2)(B)(i) shall

25 be applied by substituting ‘4 years’ for ‘2

26 years’.
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1 ‘‘(D) WAIVER OF UNRELATED PERSON RE2 QUIREMENT.—Subsection (i) (relating to re3 placement property must be acquired from un4 related person in certain cases) shall not apply.

5 ‘‘(E) EXPANDED CAPITAL GAIN FOR CAT6 TLE AND HORSES.—Section 1231(b)(3)(A) shall

7 be applied by substituting ‘1 month’ for ‘24

8 months’.

9 ‘‘(2) QUALIFIED DISPOSITION.—

10 ‘‘(A) IN GENERAL.—For purposes of this

11 subsection, the term ‘qualified disposition’

12 means the disposition of dairy property which is

13 certified by the Secretary of Agriculture as hav14 ing been the subject of an agreement under the

15 bovine tuberculosis eradication program, as im16 plemented pursuant to the Declaration of

17 Emergency Because of Bovine Tuberculosis (65

18 Federal Register 63,227 (2000)).

19 ‘‘(B) PAYMENTS RECEIVED IN CONNEC20 TION WITH THE BOVINE TUBERCULOSIS ERADI21 CATION PROGRAM.—For purposes of this sub22 section, any amount received by a taxpayer in

23 connection with an agreement under such bo24 vine tuberculosis eradication program shall be

25 treated as received in a qualified disposition.
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1 ‘‘(C) TRANSMITTAL OF CERTIFICATIONS.—

2 The Secretary of Agriculture shall transmit

3 copies of certifications under this paragraph to

4 the Secretary.

5 ‘‘(3) ALLOWANCE OF THE ADJUSTED BASIS OF

6 CERTIFIED DAIRY PROPERTY AS A DEPRECIATION

7 DEDUCTION.—The adjusted basis of any property

8 certified under paragraph (2)(A) shall be allowed as

9 a depreciation deduction under section 167 for the

10 taxable year which includes the date of the certifi11 cation described in paragraph (2)(A).

12 ‘‘(4) DAIRY PROPERTY.—For purposes of this

13 subsection, the term ‘dairy property’ means all tan14 gible property used in connection with a dairy busi15 ness or a dairy processing plant.

16 ‘‘(5) SPECIAL RULES FOR CERTAIN BUSINESS

17 ORGANIZATIONS.—

18 ‘‘(A) S CORPORATIONS.—In the case of an

19 S corporation, gain on a qualified disposition

20 shall not be treated as recognized for the pur21 poses of section 1374 (relating to tax imposed

22 on certain built-in gains).

23 ‘‘(B) PARTNERSHIPS.—In the case of a

24 partnership which dissolves in anticipation of a

25 qualified disposition (including in anticipation
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1 of receiving the amount described in paragraph

2 (2)(B)), the dairy property owned by the part3 ners of such partnership at the time of such

4 disposition shall be treated, for the purposes of

5 this section and notwithstanding any regulation

6 or rule of law, as owned by such partners at the

7 time of such disposition.

8 ‘‘(6) TERMINATION.—This subsection shall not

9 apply to dispositions made after December 31,

10 2005.’’.

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

12 this section shall apply to dispositions made and amounts

13 received in taxable years ending after May 22, 2001.

14 SEC. 2. DEDUCTION OF QUALIFIED RECLAMATION EXPEND15 ITURES.

16 (a) IN GENERAL.—Part VI of subchapter B of chap17 ter 1 of the Internal Revenue Code of 1986 (relating to

18 itemized deductions for individuals and corporations) is

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

20 ‘‘SEC. 199. EXPENSING OF DAIRY PROPERTY RECLAMATION

21 COSTS.

22 ‘‘(a) IN GENERAL.—Notwithstanding section 280B

23 (relating to demolition of structures), a taxpayer may elect

24 to treat any qualified reclamation expenditure which is

25 paid or incurred by the taxpayer as an expense which is
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1 not chargeable to capital account. Any expenditure which

2 is so treated shall be allowed as a deduction for the taxable

3 year in which it is paid or incurred.

4 ‘‘(b) QUALIFIED RECLAMATION EXPENDITURE.—

5 ‘‘(1) IN GENERAL.—For purposes of this sub6 paragraph, the term ‘qualified reclamation expendi7 ture’ means amounts otherwise chargeable to capital

8 account and paid or incurred to convert any real

9 property certified under section 1033(k)(2) (relating

10 to qualified disposition) into unimproved land.

11 ‘‘(2) SPECIAL RULE FOR EXPENDITURES FOR

12 DEPRECIABLE PROPERTY.—A rule similar to the

13 rule of section 198(b)(2) (relating to special rule for

14 expenditures for depreciable property) shall apply for

15 purposes of paragraph (1).

16 ‘‘(c) DEDUCTION RECAPTURED AS ORDINARY IN17 COME.—Rules similar to the rules of section 198(e) (relat18 ing to deduction recaptured as ordinary income on sale,

19 etc.) shall apply with respect to any qualified reclamation

20 expenditure.

21 ‘‘(d) TERMINATION.—This section shall not apply to

22 expenditures paid or incurred after December 31, 2005.’’.

23 (b) CLERICAL AMENDMENT.—The table of sections

24 for part VI of subchapter B of chapter 1 of the Internal
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1 Revenue Code of 1986 is amended by adding at the end

2 the following new item:

‘‘Sec. 199. Expensing of dairy property reclamation costs.’’.

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

4 this section shall apply to expenditures paid or incurred

5 in taxable years ending after May 22, 2001.

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