‘‘(B) ENDOWMENT.—The term ‘endow-
ment’ means a restricted fund held in a seg-
regated account, the income and realized appre-
ciation of which may be expended solely for the
purposes designated under this section, and
which may be invested solely in qualified invest-
ments (as defined in section 501(c)(21)(D)(ii)).
‘‘(C) LIMITATION.—The amount of reserve
funds which may be taken into account under
paragraph (1)(B) for the taxable year shall not
exceed 8 percent of the acquisition costs for
that taxable year.
‘‘(c) QUALIFIED CONSERVATION ORGANIZATION.—
For purposes of this section, the term ‘qualified conserva-
tion organization’ means, with respect to any taxable
year—
‘‘(1) an organization which—
‘‘(A) is described in section 170(h)(3),
‘‘(B) has been in existence for at least 2
calendar years immediately before the taxable
year, and
‘‘(C) was organized to serve primarily con-
servation purposes (as defined in section
170(h)(4)),
‘‘(2) a limited partnership, all the general part-
ners of which are organizations described in para-
graph (1), or
‘‘(3) a limited liability company, all the man-
agers of which are organizations described in para-
graph (1),
with respect to which neither the seller of the qualified
real property interest nor any party related or subordinate
to the seller (within the meaning of section 672(c)) would
be a disqualified person (as defined in section 4946) if
the organization were a private foundation.
‘‘(d) QUALIFIED REAL PROPERTY INTEREST.—For
purposes of this section, the term ‘qualified real property
interest’ has the meaning given such term by section
170(h)(2)(C).
‘‘(e) 
EXCLUSIVELY
FOR
CONSERVATION
PUR-
POSES.—For purposes of this section, the term ‘exclusively
for conservation purposes’ has the meaning given such
term by section 170(h)(5), except that an acquisition shall
not be treated as exclusively for conservation purposes un-
less the instrument conveying the qualified real property
interest expressly provides that the conservation purposes
may be enforced by both the attorney general of the State
in which the real property is located and the qualified con-
servation organization.
‘‘(f) APPRAISED VALUE.—For purposes of this sec-
tion, the term ‘appraised value’ means the fair market
value as determined by a qualified appraisal (as defined
in section 155(a)(4) of the Deficit Reduction Act of 1984).
‘‘(g) LIMITATION BASED ON AMOUNT OF TAX.—The
credit allowed under subsection (a) shall not exceed the
taxpayer’s liability for income tax (including unrelated
business income tax) for the taxable year.
‘‘(h) LIMITATION ON AGGREGATE CREDIT ALLOW-
ABLE WITH RESPECT TO ACQUISITIONS OF QUALIFIED
REAL PROPERTY INTERESTS LOCATED IN A STATE.—
‘‘(1) CREDIT
MAY
NOT
EXCEED
CREDIT
AMOUNT ALLOCATED TO ACQUISITION OF QUALIFIED
REAL PROPERTY INTEREST.—
‘‘(A) IN
GENERAL.—The amount of the
credit determined under subsection (a) for any
taxable year with respect to the acquisition of
any qualified real property interest shall not ex-
ceed the conservation credit dollar amount allo-
cated to such acquisition under this subsection.
‘‘(B) TIME FOR MAKING ALLOCATION.—An
allocation shall be taken into account under
subparagraph (A) only if it is made not later
than the close of the calendar year in which the
qualified real property interest is acquired.
‘‘(C) ALLOCATION
REDUCES
AGGREGATE
AMOUNT
AVAILABLE
TO
AGENCY.—Any con-
servation credit dollar amount allocated to the
acquisition of any qualified real property inter-
est for any calendar year shall reduce the ag-
gregate conservation credit dollar amount of the
allocating conservation credit agency for such
calendar year.
‘‘(2) CONSERVATION CREDIT DOLLAR AMOUNT
FOR AGENCIES.—
‘‘(A) IN
GENERAL.—The aggregate con-
servation credit dollar amount which a con-
servation credit agency may allocate for any
calendar year is the portion of the State con-
servation credit ceiling allocated under this
paragraph for such calendar year to such agen-
cy.
‘‘(B) STATE
CEILING
INITIALLY
ALLO-
CATED TO STATE CONSERVATION CREDIT AGEN-
CIES.—Except as provided in subparagraphs
(F) and (G), the State conservation credit ceil-
ing for each calendar year shall be allocated to
the conservation credit agency of such State. If
there is more than 1 conservation credit agency
of a State, all such agencies shall be treated
as a single agency.
‘‘(C) STATE CONSERVATION CREDIT CEIL-
ING.—The State conservation credit ceiling ap-
plicable to any State for any calendar year shall
be an amount equal to the sum of—
‘‘(i) the lesser of—
‘‘(I) an amount equal to the ag-
gregate annual credit multiplied by a
fraction, the numerator of which is
the amount of land located in such
State that is used for agricultural
purposes and the denominator of
which is the amount of land in all
States that is used for agricultural
purposes, or
‘‘(II) an amount equal to 4 per-
cent of the aggregate annual credit
for that year,
‘‘(ii) the amount (if any) allocated
under subparagraph (D) to such State by
the Secretary,
‘‘(iii) the unused State conservation
credit ceiling (if any) of such State for the
preceding calendar year,
‘‘(iv) the amount of the State con-
servation credit ceiling returned in the cal-
endar year, plus
‘‘(v) the amount (if any) allocated
under subparagraph (E) to such State by
the Secretary.
For purposes of clause (i), the aggregate annual
credit is $4,000,000,000. For purposes of clause
(iii), the unused State conservation credit ceiling for
any calendar year is the excess (if any) of the sum
of the amounts described in clauses (i), (ii), and (iv)
over the aggregate conservation credit dollar amount
allocated for such year. For purposes of clause (iv),
the amount of State conservation credit ceiling
returned in the calendar year equals the conserva-
tion credit dollar amount previously allocated within
the State to any proposed acquisition of a qualified
real property interest which is not acquired within
the period required by the terms of the allocation or
to any proposed acquisition of a qualified real prop-
erty interest with respect to which an allocation is
canceled by mutual consent of the conservation cred-
it agency and the qualified conservation organization
receiving the allocation.
‘‘(D) UNUSED AGGREGATE ANNUAL CRED-
IT.—Any portion of the aggregate annual credit
for a calendar year that is not allocated to a
State’s conservation credit ceiling because of
the 4 percent limitation under subparagraph
(C)(i)(II) shall be allocated by the Secretary
among the remaining States, subject to such 4
percent limitation, in proportion to their respec-
tive land used for agricultural purposes.
‘‘(E) 
UNUSED
CONSERVATION
CREDIT
CARRYOVERS
ALLOCATED
AMONG
CERTAIN
STATES.—
‘‘(i) IN GENERAL.—The unused con-
servation credit carryover of a State for
any calendar year shall be assigned to the
Secretary for allocation among qualified
States for the succeeding calendar year.
‘‘(ii) UNUSED CONSERVATION CREDIT
CARRYOVER.—For purposes of this para-
graph, the unused conservation credit car-
ryover of a State for any calendar year is
the excess (if any) of the unused State
conservation credit ceiling for such year
(as defined in subparagraph (C)(iii)) over
the excess (if any) of—
‘‘(I) the aggregate conservation
credit dollar amount allocated for
such year, over
‘‘(II) the sum of the amounts de-
scribed in clauses (i), (ii), and (iv) of
subparagraph (C).
‘‘(iii) FORMULA FOR ALLOCATION OF
UNUSED
CONSERVATION
CREDIT
CARRYOVERS
AMONG
QUALIFIED
STATES.—The amount allocated under this
subparagraph to a qualified State for any
calendar year shall be the amount deter-
mined by the Secretary to bear the same
ratio to the aggregate unused conservation
credit carryovers of all States for the pre-
ceding calendar year as such State’s land
used for agricultural purposes for the cal-
endar year bears to the land used for agri-
cultural purposes of all qualified States for
the calendar year.
‘‘(iv) QUALIFIED STATE.—For pur-
poses of this subparagraph, the term
‘qualified State’ means, with respect to a
calendar year, any State—
‘‘(I) which allocated its entire
State conservation credit ceiling for
the preceding calendar year, and
‘‘(II) for which a request is made
(not later than May 1 of the calendar
year) to receive an allocation under
clause (iii).
‘‘(F) SPECIAL
RULE
FOR
STATES
WITH
CONSTITUTIONAL
HOME
RULE
CITIES.—For
purposes of this subsection—
‘‘(i) IN
GENERAL.—The aggregate
conservation credit dollar amount for any
constitutional home rule city for any cal-
endar year shall be an amount which bears
the same ratio to the State conservation
credit ceiling for such calendar year as—
‘‘(I) the land used for agricul-
tural purposes within a 25-mile radius
of such city, bears to
‘‘(II) the land used for agricul-
tural purposes in the entire State.
‘‘(ii) COORDINATION WITH OTHER AL-
LOCATIONS.—In the case of any State
which contains 1 or more constitutional
home rule cities, for purposes of applying
this paragraph with respect to conserva-
tion credit agencies in such State other
than constitutional home rule cities, the
State conservation credit ceiling for any
calendar year shall be reduced by the ag-
gregate conservation credit dollar amounts
determined for such year for all constitu-
tional home rule cities in such State.
‘‘(iii) CONSTITUTIONAL
HOME
RULE
CITY.—For purposes of this subparagraph,
the term ‘constitutional home rule city’ has
the meaning given such term by section
146(d)(3)(C).
‘‘(G) STATE
MAY
PROVIDE
FOR
DIF-
FERENT
ALLOCATION.—Rules similar to the
rules of section 146(e) (other than paragraph
(2)(B) thereof) shall apply for purposes of this
paragraph.
‘‘(H) LAND
USED
FOR
AGRICULTURAL
PURPOSES.—For purposes of this paragraph,
the term ‘land used for agricultural purposes’
means the number of acres classified as land in
farms in the 1997 Census of Agriculture con-
ducted by the United States Department of Ag-
riculture.
‘‘(I) SECRETARY.—For purposes of this
paragraph, the term ‘Secretary’ means the Sec-
retary of Agriculture and the Secretary of the
Interior, acting pursuant to jointly established
rules and procedures.
‘‘(3) SPECIAL RULES.—
‘‘(A) INTERESTS MUST BE LOCATED WITH-
IN JURISDICTION OF CREDIT AGENCY.—A con-
servation credit agency may allocate its aggre-
gate conservation credit dollar amount only
with respect to acquisitions of qualified real
property interests located in the jurisdiction of
the governmental unit of which such agency is
a part.
‘‘(B) AGENCY ALLOCATIONS IN EXCESS OF
LIMIT.—If the aggregate conservation credit
dollar amounts allocated by a conservation cred-
it agency for any calendar year exceed the por-
tion of the State conservation credit ceiling allo-
cated to such agency for such calendar year, the
conservation credit dollar amounts so allocated
shall be reduced (to the extent of such excess)
for acquisitions of qualified real property inter-
ests in the reverse order in which the alloca-
tions of such amounts were made.
‘‘(4) CONSERVATION
CREDIT
AGENCY.—For
purposes of this subsection, the term ‘conservation
credit agency’ means any agency authorized to carry
out this subsection.
‘‘(i) REGULATIONS.—Except as provided in sub-
section (h)(2)(I), the Secretary shall prescribe such regu-
lations as may be necessary to carry out the purposes of
this section.
‘‘(j) TERMINATION.—Subparagraph (A) of subsection
(h)(1) shall not apply to any amount allocated after De-
cember 31, 2005.’’.
(b) RECOGNITION OF GAIN.—Section 1001 (relating
to determination of amount of and recognition of gain or
loss) is amended by adding at the end the following new
subsection:
‘‘(f) QUALIFIED REAL PROPERTY INTERESTS.—Gain
shall be recognized on the sale of a qualified real property
interest (as defined in section 30B(d)) to a qualified con-
servation organization (as defined in section 30B(c)) ex-
clusively for conservation purposes (as defined in section
30B(e)) only to the extent that the amount realized on
the sale exceeds the taxpayer’s adjusted basis in the entire
property to which the qualified real property interest re-
lates.’’.
(c) BASIS ADJUSTMENT.—Section 1016 (relating to
adjustments to basis) is amended by redesignating sub-
section (e) as subsection (f) and by inserting after sub-
section (d) the following new subsection:
‘‘(e) ADJUSTMENTS TO BASIS OF CERTAIN REAL
PROPERTY.—If the taxpayer has sold a qualified real
property interest in a transaction to which section 1001(f)
applies, then the taxpayer’s basis in the remaining prop-
erty shall be reduced (but not below zero) by the amount
realized on the sale.’’.
(d) CONFORMING AMENDMENTS.—
(1) PASSIVE LOSS RULES INAPPLICABLE.—Sec-
tion 469(d)(2)(A)(i) is amended to read as follows:
‘‘(i) subpart D (other than section
30B) of part IV of subchapter A, or’’.
(2) UNRELATED BUSINESS INCOME TAX.—Sec-
tion 511(a)(1) is amended by striking ‘‘section 11.’’
and inserting ‘‘section 11, less any credits to which
the organization is entitled under section 30B.’’.
(3) DENIAL
OF
CHARITABLE
CONTRIBUTION
DEDUCTION.—Section 170(e) is amended by adding
at the end the following new paragraph:
‘‘(7) SPECIAL RULE FOR CONTRIBUTIONS OF
INTERESTS IN QUALIFIED CONSERVATION ORGANIZA-
TIONS.—No deduction shall be allowed for the con-
tribution of an interest in a qualified conservation
organization (as defined in section 30B(c)) that has
acquired 1 or more qualified real property interests
in transactions to which section 30B applies.’’.
(4) CLASSIFICATION
AS
PARTNERSHIP.—Sec-
tion 761(a) is amended by adding at the end the fol-
lowing new sentence: ‘‘Such term also includes an
organization described in either section 30B(c)(2) or
section 30B(c)(3).’’.
(5) CLERICAL AMENDMENT.—The table of sec-
tions for subpart B of part IV of subchapter A of
chapter 1 is amended by adding at the end the fol-
lowing new item:
‘‘Sec. 30B. Qualified conservation credit.’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
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