I 
118TH CONGRESS 
1ST SESSION H. R. 3954 
To amend the Internal Revenue Code of 1986 to facilitate water leasing 
and water transfers to promote conservation and efficiency. 
IN THE HOUSE OF REPRESENTATIVES 
JUNE 9, 2023 
Mr. BUCK (for himself, Mr. NEGUSE, Mr. NEWHOUSE, and Mr. CURTIS) in-
troduced the following bill; which was referred to the Committee on Ways 
and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to facilitate 
water leasing and water transfers to promote conserva-
tion and efficiency. 
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 ‘‘Water and Agriculture 
Tax Reform Act of 2023’’. 
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SEC. 2. FACILITATE WATER LEASING AND WATER TRANS-
FERS TO PROMOTE CONSERVATION AND EF-
FICIENCY. 
(a) IN GENERAL.—Paragraph (12) of section 501(c) 
of the Internal Revenue Code of 1986 is amended by add-
ing at the end the following new subparagraph: 
‘‘(K) TREATMENT OF MUTUAL DITCH IRRI-
GATION COMPANIES.— 
‘‘(i) IN GENERAL.—In the case of a 
mutual ditch or irrigation company or of a 
like organization to a mutual ditch or irri-
gation company, subparagraph (A) shall be 
applied without taking into account— 
‘‘(I) any income received or ac-
crued from the sale, lease, or ex-
change of fee or other interests in real 
and personal property, including inter-
ests in water, 
‘‘(II) any income received or ac-
crued from the sale or exchange of 
stock in a mutual ditch or irrigation 
company (or in a like organization to 
a mutual ditch or irrigation company) 
or contract rights for the delivery or 
use of water, or 
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‘‘(III) any income received or ac-
crued from the investment of income 
described in subclause (I) or (II), 
except that any income described in sub-
clause (I), (II), or (III) which is distrib-
uted or expended for expenses (other than 
for operations, maintenance, and capital 
improvements) of the mutual ditch or irri-
gation company or of the like organization 
to a mutual ditch or irrigation company 
(as the case may be) shall be treated as 
nonmember income in the year in which it 
is distributed or expended. For purposes of 
the preceding sentence, expenses (other 
than for operations, maintenance, and cap-
ital improvements) include expenses for the 
construction of conveyances designed to de-
liver water outside of the system of the 
mutual ditch or irrigation company or of 
the like organization. 
‘‘(ii) 
TREATMENT
OF
ORGANIZA-
TIONAL GOVERNANCE.—In the case of a 
mutual ditch or irrigation company or of a 
like organization to a mutual ditch or irri-
gation company, where State law provides 
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that such a company or organization may 
be organized in a manner that permits vot-
ing on a basis which is pro rata to share 
ownership on corporate governance mat-
ters, subparagraph (A) shall be applied 
without taking into account whether its 
member shareholders have one vote on cor-
porate governance matters per share held 
in the corporation. Nothing in this clause 
shall be construed to create any inference 
about the requirements of this subsection 
for companies or organizations not in-
cluded in this clause.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to taxable years beginning after 
the date of the enactment of this Act. 
Æ 
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