I

103D CONGRESS

1ST SESSION H. R. 2031

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

exclude from the gross estate the value of land subject to a qualified

conservation easement if certain conditions are satisfied, to permit a

qualified conservation contribution where the probability of surface mining is remote and to make technical changes to alternative valuation

rules.

IN THE HOUSE OF REPRESENTATIVES

MAY 6, 1993

Mr. PAYNE of Virginia (for himself, Mr. WOLF, Mr. COYNE, Mrs. JOHNSON

of Connecticut, Mr. ANDREWS of Texas, and Mr. SUNDQUIST) 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 the value

of land subject to a qualified conservation easement if

certain conditions are satisfied, to permit a qualified

conservation contribution where the probability of surface

mining is remote 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,
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1 SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

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

3 ‘‘Rural Land Conservation Act of 1993’’.

4 (b) AMENDMENT OF 1986 CODE.—Except as other5 wise provided, whenever in this Act an amendment or re6 peal is expressed in terms of an amendment to, or repeal

7 of, a section or provision, the reference shall be considered

8 to be made to a section or other provision of the Internal

9 Revenue Code of 1986.

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

11 CONSERVATION EASEMENT.

12 (a) ESTATE TAX WITH RESPECT TO LAND SUBJECT

13 TO A QUALIFIED CONSERVATION EASEMENT.—Section

14 2031 of the Internal Revenue Code of 1986 (relating to

15 the definition of gross estate) is amended by redesignating

16 subsection (c) as subsection (d) and by inserting after sub17 section (b) the following new subsection:

18 ‘‘(c) ESTATE TAX WITH RESPECT TO LAND SUB19 JECT TO A QUALIFIED CONSERVATION EASEMENT.—(1)

20 IN GENERAL.—If the executor makes the election de21 scribed in paragraph (3) of this subsection, then, except

22 as otherwise provided in this subsection, there shall be ex23 cluded from the gross estate the value of land subject to

24 a qualified conservation easement (reduced by the amount

25 of any indebtedness to which such land is subject). For

26 purposes of this subsection, the term ‘land subject to a
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1 qualified conservation easement’ shall mean land that is

2 located in or within fifty miles of an area which, on the

3 date of the decedent’s death, is a metropolitan area (as

4 defined by the Office of Management and Budget) or a

5 National Park (unless it is determined by the Secretary

6 that land in or within fifty miles of such a Park is not

7 under significant development pressure), and which was

8 owned by the decedent or a member of the decedent’s fam9 ily at all times during the three-year period ending on the

10 date of the decedent’s death, and with respect to which

11 a qualified conservation contribution of a qualified real

12 property interest (as defined in section 170(h)(1) and

13 (2)(C)) is or has been made by the decedent or a member

14 of the decedent’s family. For purposes of this subsection,

15 the term ‘qualified real property interest’ shall not include

16 any structure or building constituting a ‘certified historic

17 structure’ (as defined in section 170(h)(4)(B)) or within

18 the definition of a ‘historically important land area’ (as

19 defined in section 170(h)(4)(A)(iv)). For purposes of this

20 subsection, the term ‘member of the decedent’s family’

21 shall have the same meaning as the term ‘member of the

22 family’ in section 2032A.

23 ‘‘(2) PAYMENT OF TAX UPON CERTAIN DISPOSITION

24 OF LAND SUBJECT TO RETAINED DEVELOPMENT

25 RIGHT.—The exclusion described in paragraph (1) shall
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1 not apply to the value of any development right retained

2 by the donor in the conveyance of such qualified conserva3 tion easement. The tax imposed by section 2001, if any,

4 attributable to any development right so retained shall be

5 imposed only upon the disposition of such property. For

6 purposes of this paragraph, the term ‘disposition’ shall not

7 include any gift or devise. The tax so imposed shall be

8 due and payable by the person so disposing of such prop9 erty on the fifteenth day of the fourth month following

10 the calendar year in which such disposition occurs. For

11 purposes of this paragraph, the term ‘development right’

12 shall mean the right to establish or use, any structure and

13 the land immediately surrounding it for sale, or for rent

14 or any other commercial purpose which is not subordinate

15 to and directly supportive of the conservation purpose

16 identified in the easement, or the activity of farming, for17 estry, ranching, horticulture, viticulture, or recreation,

18 whether or not for profit, conducted on land subject to

19 the easement in which such right is retained.

20 ‘‘(3) ELECTION WITH RESPECT TO LAND SUBJECT

21 TO QUALIFIED CONSERVATION EASEMENT.—The election

22 under this subsection shall be made on the return of the

23 tax imposed by section 2001 and in such manner as the

24 Secretary shall by regulations prescribe. Such an election,

25 once made, shall be irrevocable.
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1 ‘‘(4) CALCULATION AND NOTICE OF POTENTIAL ES2 TATE TAX DUE.—An executor making the election de3 scribed in paragraph (3) of this subsection shall compute

4 the amount of tax imposed by section 2001 upon any de5 velopment right (as defined in paragraph (2) of this sub6 section) retained by the donor in the conveyance of such

7 qualified conservation easement and include such com8 putation with the return of the tax imposed by section

9 2001. The executor shall also file a ‘Notice of Potential

10 Estate Tax Due’ in the place or places where deeds are

11 put to public record for the locality in which the land sub12 ject to such qualified conservation easement is located.

13 The report of the computation of tax on any retained de14 velopment right and the filing of the notice prescribed in

15 this paragraph shall be done in such manner and on such

16 forms as the Secretary shall prescribe.’’

17 (b) CARRYOVER BASIS.—Section 1014(a) of the In18 ternal Revenue Code of 1986 (relating to basis of property

19 acquired from a decedent) is amended by striking the pe20 riod at the end of paragraph (3), inserting ‘‘, or’’ at the

21 end thereof, and inserting the following new paragraph:

22 ‘‘(4) to the extent of the applicability of the ex23 clusion described in section 2031(c), the basis in the

24 hands of the decedent.’’
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to gross estates including land on

3 which qualified conservation easements were granted after

4 December 31, 1992, in taxable years ending after such

5 date.

6 SEC. 3. GIFT TAX ON LAND SUBJECT TO A QUALIFIED CON7 SERVATION EASEMENT.

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

9 A QUALIFIED CONSERVATION EASEMENT.—Section 2503

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

11 gifts) is amended by adding a new subsection (h) to read

12 as follows:

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

14 TO A QUALIFIED CONSERVATION EASEMENT.—The trans15 fer by gift of land subject to a qualified conservation ease16 ment shall not be treated as a transfer of property by gift

17 for purposes of this chapter. For purposes of this sub18 section, the term ‘land subject to a qualified conservation

19 easement’ shall have the same meaning as in section

20 2031(c), except that references therein to ‘decedent’ shall

21 refer to the donor and references to ‘the date of the dece22 dent’s death’ shall refer to the date of the transfer by the

23 donor.’’

24 (b) EFFECTIVE DATE.—The amendments made by

25 this section shall apply to gifts of land on which qualified
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1 conservation easements were granted after December 31,

2 1992, in taxable years ending after such date.

3 SEC. 4. QUALIFIED CONSERVATION CONTRIBUTION WHERE

4 SURFACE AND MINERAL RIGHTS ARE SEPA5 RATED.

6 (a) IN GENERAL.—Section 170(h)(5)(B)(ii) of the

7 Internal Revenue Code of 1986 (relating to special rule)

8 is amended to read as follows:

9 ‘‘(ii) SPECIAL RULE.—With respect to

10 any contribution of property in which the

11 ownership of the surface estate and min12 eral interests has been and remains sepa13 rated, subparagraph (A) shall be treated as

14 met if the probability of surface mining oc15 curring on such property is so remote as to

16 be negligible.’’

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

18 this section shall apply with respect to contributions made

19 after December 31, 1992, in taxable years ending after

20 such date.

21 SEC. 5. QUALIFIED CONSERVATION CONTRIBUTION IS NOT

22 A DISPOSITION.

23 (a) QUALIFIED CONSERVATION CONTRIBUTION IS

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

25 the Internal Revenue Code of 1986 (relating to alternative
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1 valuation method) is amended by adding at the end there2 of the following paragraph:

3 ‘‘(8) QUALIFIED CONSERVATION CONTRIBUTION

4 IS NOT A DISPOSITION.—A qualified conservation

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

6 otherwise shall not be deemed a disposition under

7 subparagraph (c)(1)(A) of this section. If qualified

8 real property is land subject to a qualified conserva9 tion easement (as defined in section 2031(c)), sub10 sections (c)(1)–(7) of this section shall not apply.’’

11 (b) LAND SUBJECT TO A QUALIFIED CONSERVATION

12 EASEMENT IS NOT DISQUALIFIED.—Subsection (b)(1) of

13 section 2032A of the Internal Revenue Code of 1986 (re14 lating to alternative valuation method) is amended by add15 ing at the end thereof the following paragraph:

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

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

18 qualified conservation easement shall not dis19 qualify it under this section.’’

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