I 
109TH CONGRESS 
2D SESSION 
H. R. 5775 
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 HOUSE OF REPRESENTATIVES 
JULY 12, 2006 
Mr. OSBORNE 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 
a credit to certain concentrated animal feeding oper-
ations for the cost of complying with environmental pro-
tection regulations. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘CAFO Tax Credit 
Act’’. 
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SEC. 2. CREDIT FOR CONCENTRATED ANIMAL FEEDING OP-
ERATIONS. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 (relating to business related credits) is amended by 
adding at the end the following new section: 
‘‘SEC. 45N. CREDIT FOR EPA COMPLIANCE COSTS FOR CON-
CENTRATED ANIMAL FEEDING OPERATIONS. 
‘‘(a) ALLOWANCE OF CREDIT.— 
‘‘(1) IN GENERAL.—For purposes of section 38, 
in the case of an eligible taxpayer, the EPA compli-
ance credit determined under this section for the 
taxable year is an amount equal to the applicable 
percentage of the qualified compliance costs paid or 
incurred by the eligible taxpayer during the taxable 
year. 
‘‘(2) APPLICABLE PERCENTAGE.—For purposes 
of paragraph (1), the applicable percentage shall be 
determined as follows: 
‘‘If the amount of qualified 
The applicable 
compliance costs paid or in-
curred during the taxable year 
is: 
percentage is: 
Not over $100,000 .............................................................................
100
Over $100,000 but not over $200,000 ..............................................
Over $200,000 but not over $400,000 ..............................................
Over $400,000 ...................................................................................
40. 
‘‘(b) LIMITATION.—The amount of credit allowed 
under subsection (a) for any taxable year shall not exceed 
$500,000. 
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‘‘(c) ELIGIBLE TAXPAYER.—For purposes of this sec-
tion, the term ‘eligible taxpayer’ means an owner or oper-
ator of a concentrated animal feeding operation (as de-
fined under section 122.23 of title 40, Code of Federal 
Regulations). 
‘‘(d) QUALIFIED COMPLIANCE COSTS.—For purposes 
of this section— 
‘‘(1) IN GENERAL.—The term ‘qualified compli-
ance costs’ means costs paid or incurred for compli-
ance with a national pollutant discharge elimination 
system permit issued under section 402 of the Fed-
eral Water Pollution Control Act (33 U.S.C. 1342). 
‘‘(2) EXCLUSION
FOR
AMOUNTS
FUNDED
BY 
GRANTS, 
ETC.—The term ‘qualified compliance 
costs’ shall not include any amount to the extent 
such amount is funded by any grant, contract, or 
otherwise by another person (or any governmental 
entity). 
‘‘(e) SPECIAL RULES.— 
‘‘(1) REDUCTION IN BASIS.—For purposes of 
this subtitle, if a credit is determined under this sec-
tion for any expenditure with respect to any prop-
erty, the increase in basis of such property which 
would (but for this subsection) result from such ex-
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penditure shall be reduced by the amount of the 
credit so determined. 
‘‘(2) WHEN COSTS PAID OR INCURRED.—For 
purposes of this section, a cost shall be treated as 
paid or incurred in the year in which the taxpayer 
achieves compliance with the national pollutant dis-
charge elimination system permit issued under sec-
tion 402 of the Federal Water Pollution Control Act 
(33 U.S.C. 1342). 
‘‘(3) DENIAL OF DOUBLE BENEFIT.—No deduc-
tion or other credit shall be allowed under this chap-
ter for any amount taken into account in deter-
mining the credit under this section. 
‘‘(f) TERMINATION.—This section shall not apply to 
expenditures paid or incurred after December 31, 2010.’’. 
(b) CREDIT MADE PART OF GENERAL BUSINESS 
CREDIT.—Section 38(b) of the Internal Revenue Code of 
1986 is amended by striking ‘‘and’’ at the end of para-
graph (29), by striking the period at the end of paragraph 
(30) and inserting ‘‘, plus’’, and by adding at the end the 
following new paragraph: 
‘‘(31) the EPA compliance credit determined 
under section 45N(a).’’. 
(c) CONFORMING AMENDMENTS.— 
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(1) Section 1016(a) of the Internal Revenue 
Code of 1986 is amended by striking ‘‘and’’ at the 
end of paragraph (36), by striking the period at the 
end of paragraph (37) and inserting ‘‘, and’’, and by 
inserting after paragraph (37) the following new 
paragraph: 
‘‘(38) to the extent provided in section 
45N(e)(1).’’. 
(2) The table of sections for subpart D of part 
IV of subchapter A of chapter 1 of such Code is 
amended by adding at the end the following new 
item: 
‘‘Sec. 45N. Credit for compliance costs for concentrated animal feeding oper-
ations.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to expenditures incurred after De-
cember 31, 2002. 
Æ 
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