II 

109TH CONGRESS 

2D SESSION S. 3596 

To amend the Internal Revenue Code of 1986 to provide a credit to certain 

concentrated animal feeding operations for the cost of complying with 

environmental protection regulations. 

IN THE SENATE OF THE UNITED STATES 

JUNE 29, 2006 

Mr. HAGEL 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 

a credit to certain concentrated animal feeding operations for the cost of complying with environmental protection regulations. 

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 ‘‘CAFO Tax Credit 

5 Act’’. 


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1 SEC. 2. CREDIT FOR CONCENTRATED ANIMAL FEEDING OP2 ERATIONS. 

3 (a) IN GENERAL.—Subpart D of part IV of sub4 chapter A of chapter 1 of the Internal Revenue Code of 

5 1986 (relating to business related credits) is amended by 

6 adding at the end the following new section: 

7 ‘‘SEC. 45N. CREDIT FOR EPA COMPLIANCE COSTS FOR CON8 CENTRATED ANIMAL FEEDING OPERATIONS. 

9 ‘‘(a) ALLOWANCE OF CREDIT.— 

10 ‘‘(1) IN GENERAL.—For purposes of section 38, 

11 in the case of an eligible taxpayer, the EPA compli12 ance credit determined under this section for the 

13 taxable year is an amount equal to the applicable 

14 percentage of the qualified compliance costs paid or 

15 incurred by the eligible taxpayer during the taxable 

16 year. 

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

18 of paragraph (1), the applicable percentage shall be 

19 determined as follows: 

‘‘If the amount of qualified 

compliance costs paid or 

incurred during the taxable The applicable 

year is: percentage is: 

Not over $100,000 ............................................................................. 100

Over $100,000 but not over $200,000 .............................................. 80

Over $200,000 but not over $400,000 .............................................. 60

Over $400,000 ................................................................................... 40. 

20 ‘‘(b) LIMITATION.—The amount of credit allowed 

21 under subsection (a) for any taxable year shall not exceed 

22 $500,000. 


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1 ‘‘(b) LIMITATION.—The amount of credit allowed 

2 under subsection (a) for any taxable year shall not exceed 

3 $500,000. 

4 ‘‘(c) ELIGIBLE TAXPAYER.—For purposes of this sec5 tion, the term ‘eligible taxpayer’ means an owner or oper6 ator of a concentrated animal feeding operation (as de7 fined under section 122.23 of title 40, Code of Federal 

8 Regulations). 

9 ‘‘(d) QUALIFIED COMPLIANCE COSTS.—For purposes 

10 of this section— 

11 ‘‘(1) IN GENERAL.—The term ‘qualified compli12 ance costs’ means costs paid or incurred for compli13 ance with a national pollutant discharge elimination 

14 system permit issued under section 402 of the Fed15 eral Water Pollution Control Act (33 U.S.C. 1342). 

16 ‘‘(2) EXCLUSION FOR AMOUNTS FUNDED BY

17 GRANTS, ETC.—The term ‘qualified compliance 

18 costs’ shall not include any amount to the extent 

19 such amount is funded by any grant, contract, or 

20 otherwise by another person (or any governmental 

21 entity). 

22 ‘‘(e) SPECIAL RULES.— 

23 ‘‘(1) REDUCTION IN BASIS.—For purposes of 

24 this subtitle, if a credit is determined under this sec25 tion for any expenditure with respect to any propVerDate Aug 31 2005 23:45 Jul 03, 2006 Jkt 049200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S3596.IS S3596

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1 erty, the increase in basis of such property which 

2 would (but for this subsection) result from such ex3 penditure shall be reduced by the amount of the 

4 credit so determined. 

5 ‘‘(2) WHEN COSTS PAID OR INCURRED.—For 

6 purposes of this section, a cost shall be treated as 

7 paid or incurred in the year in which the taxpayer 

8 achieves compliance with the national pollutant dis9 charge elimination system permit issued under sec10 tion 402 of the Federal Water Pollution Control Act 

11 (33 U.S.C. 1342). 

12 ‘‘(3) DENIAL OF DOUBLE BENEFIT.—No deduc13 tion or other credit shall be allowed under this chap14 ter for any amount taken into account in deter15 mining the credit under this section. 

16 ‘‘(f) TERMINATION.—This section shall not apply to 

17 expenditures paid or incurred after December 31, 2010.’’. 

18 (b) CREDIT MADE PART OF GENERAL BUSINESS

19 CREDIT.—Section 38(b) of the Internal Revenue Code of 

20 1986 is amended by striking ‘‘and’’ at the end of para21 graph (29), by striking the period at the end of paragraph 

22 (30) and inserting ‘‘, plus’’, and by adding at the end the 

23 following new paragraph: 

24 ‘‘(31) the EPA compliance credit determined 

25 under section 45N(a).’’. 


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1 (c) CONFORMING AMENDMENTS.— 

2 (1) Section 1016(a) of the Internal Revenue 

3 Code of 1986 is amended by striking ‘‘and’’ at the 

4 end of paragraph (36), by striking the period at the 

5 end of paragraph (37) and inserting ‘‘, and’’, and by 

6 inserting after paragraph (37) the following new 

7 paragraph: 

8 ‘‘(38) to the extent provided in section 

9 45N(e)(1).’’. 

10 (2) The table of sections for subpart D of part 

11 IV of subchapter A of chapter 1 of such Code is 

12 amended by adding at the end the following new 

13 item: 

‘‘Sec. 45N. Credit for compliance costs for concentrated animal feeding operations.’’. 

14 (d) EFFECTIVE DATE.—The amendments made by 

15 this section shall apply to expenditures incurred after De16 cember 31, 2002. 

Æ 


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