I
105TH CONGRESS
1ST SESSION
H. R. 1763
To amend the Internal Revenue Code of 1986 to provide an election to
exclude from the gross estate of a decedent the value of certain land
subject to a qualified conservation easement, and to make technical
changes to alternative valuation rules.
IN THE HOUSE OF REPRESENTATIVES
JUNE 3, 1997
Mr. GILCHREST (for himself, Mr. FARR of California, Mrs. MORELLA, Mr.
CASTLE, Mr. TOWNS, Mr. BOEHLERT, Mr. FAZIO of California, Mr.
EHLERS, Mr. GORDON, Ms. WOOLSEY, Mr. MARTINEZ, Mr. TAYLOR of
Mississippi, and Mr. ROMERO-BARCELO), 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 of a decedent
the value of certain land subject to a qualified conserva-
tion easement, and to make technical changes to alter-
native valuation rules.
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 ‘‘Agricultural Land
Preservation Act of 1997’’.
SEC. 2. TREATMENT OF LAND SUBJECT TO A QUALIFIED
CONSERVATION EASEMENT.
(a) ESTATE TAX WITH RESPECT TO LAND SUBJECT
TO
A QUALIFIED CONSERVATION EASEMENT.—Section
2031 of the Internal Revenue Code of 1986 (relating to
the definition of gross estate) is amended by redesignating
subsection (c) as subsection (d) and by inserting after sub-
section (b) the following new subsection:
‘‘(c) ESTATE TAX WITH RESPECT TO LAND SUB-
JECT TO A QUALIFIED CONSERVATION EASEMENT.—
‘‘(1) IN GENERAL.—If the executor makes the
election described in paragraph (4), then, except as
otherwise provided in this subsection, there shall be
excluded from the gross estate the value of land sub-
ject to a qualified conservation easement, reduced by
the amount of any deduction under section 2055(f)
with respect to such land.
‘‘(2) TREATMENT
OF
CERTAIN
INDEBTED-
NESS.—
‘‘(A) IN
GENERAL.—The exclusion pro-
vided in paragraph (1) shall not apply to the
extent that the land is debt-financed property.
‘‘(B) DEFINITIONS.—For purposes of this
paragraph—
‘‘(i) DEBT-FINANCED
PROPERTY.—
The term ‘debt-financed property’ means
any property with respect to which there is
an acquisition indebtedness (as defined in
clause (ii)) on the date of the decedent’s
death.
‘‘(ii) ACQUISITION INDEBTEDNESS.—
The term ‘acquisition indebtedness’ means,
with respect to debt-financed property, the
unpaid amount of—
‘‘(I) the indebtedness incurred by
the donor in acquiring such property,
‘‘(II) the indebtedness incurred
before the acquisition of such property
if such indebtedness would not have
been incurred but for such acquisition.
‘‘(III) the indebtedness incurred
after the acquisition of such property
if such indebtedness would not have
been incurred but for such acquisition
and the incurrence of such indebted-
ness was reasonably foreseeable at the
time of such acquisition, except that
indebtedness incurred after the acqui-
sition of such property is not acquisi-
tion indebtedness if incurred to carry
on activities directly related to farm-
ing, ranching, forestry, horticulture,
or viticulture, and
‘‘(IV) the extension, renewal, or
refinancing of an acquisition indebted-
ness.
‘‘(3) TREATMENT OF RETAINED DEVELOPMENT
RIGHT.—
‘‘(A) IN
GENERAL.—Paragraph (1) shall
not apply to the value of any development right
retained by the donor in the conveyance of a
qualified conservation easement.
‘‘(B) TERMINATION OF RETAINED DEVEL-
OPMENT RIGHT.—If every person in being who
has an interest (whether or not in possession)
in such land shall execute an agreement to ex-
tinguish permanently some or all of any devel-
opment rights (as defined in subparagraph (D))
retained by the donor on or before the date for
filing the return of the tax imposed by section
2001, then any tax imposed by section 2001
shall be reduced accordingly. Such agreement
shall be filed with the return of the tax imposed
by section 2001. The agreement shall be in
such form as the Secretary shall prescribe.
‘‘(C) ADDITIONAL TAX.—Failure to imple-
ment the agreement described in subparagraph
(B) within 2 years of the decedent’s death shall
result in the imposition of an additional tax in
the amount of tax which would have been due
on the retained development rights subject to
such agreement. Such additional tax shall be
due and payable on the last day of the 6th
month following the end of the 2-year period.
‘‘(D) DEVELOPMENT
RIGHT
DEFINED.—
For purposes of this paragraph, the term ‘de-
velopment right’ means the right to establish or
use any structure and the land immediately sur-
rounding it for sale (other than the sale of the
structure as part of a sale of the entire tract of
land subject to the qualified conservation ease-
ment), or other commercial purpose which is
not subordinate to and directly supportive of
the activity of farming, forestry, ranching, hor-
ticulture, or viticulture conducted on land sub-
ject to the qualified conservation easement in
which such right is retained.
‘‘(4) ELECTION.—The election under this sub-
section shall be made on the return of the tax im-
posed by section 2001. Such an election, once made,
shall be irrevocable.
‘‘(5) CALCULATION OF ESTATE TAX DUE.—An
executor making the election described in paragraph
(4) shall, for purposes of calculating the amount of
tax imposed by section 2001, include the value of
any development right (as defined in paragraph (3))
retained by the donor in the conveyance of such
qualified conservation easement. The computation of
tax on any retained development right prescribed in
this paragraph shall be done in such manner and on
such forms as the Secretary shall prescribe.
‘‘(6) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) LAND
SUBJECT
TO
A
QUALIFIED
CONSERVATION
EASEMENT.—The term ‘land
subject to a qualified conservation easement’
means land—
‘‘(i) which is located in or within 50
miles of an area which, on the date of the
decedent’s death, is—
‘‘(I) a metropolitan area (as de-
fined by the Office of Management
and Budget), or
‘‘(II) a National Park, National
Seashore, or wilderness area des-
ignated as part of the National Wil-
derness Preservation System,
‘‘(ii) which was owned by the decedent
or a member of the decedent’s family at all
times during the 3-year period ending on
the date of the decedent’s death, and
‘‘(iii) with respect to which a qualified
conservation easement is or has been made
by the decedent or a member of the dece-
dent’s family.
‘‘(B) QUALIFIED
CONSERVATION
EASE-
MENT.—
‘‘(i) IN GENERAL.—The term ‘quali-
fied conservation easement’ means a quali-
fied conservation contribution (as defined
in section 170(h)(1)) of a qualified real
property interest (as defined in section
170(h)(2)(C)), except that in applying sec-
tion 170(h) for purposes of this sub-
section—
‘‘(I) the term ‘qualified real prop-
erty interest’ shall not include any
structure or building constituting a
certified historic structure (as defined
in section 170(h)(4)(B)), and
‘‘(II) the restriction on the use of
such interest described in section
170(h)(2)(C) shall include a prohibi-
tion on commercial recreational activ-
ity, except that the leasing of fishing
and hunting rights shall not be con-
sidered commercial recreational activ-
ity when such leasing is subordinate
to the activities of farming, ranching,
forestry, horticulture or viticulture.
‘‘(ii) SALES OF QUALIFIED CONSERVA-
TION
EASEMENTS
TO
QUALIFY.—In the
case of an easement which would be a
qualified conservation easement but for the
fact that the easement was sold to the
qualified organization—
‘‘(I) such easement shall be treat-
ed as a qualified easement for pur-
poses of this subsection, and
‘‘(II) references in this subsection
to the donor shall be treated as ref-
erences to the owner of the land to
which the easement relates.
‘‘(C) MEMBER
OF
FAMILY.—The term
‘member of the decedent’s family’ means any
member of the family (as defined in section
2032A(e)(2)) of the decedent.’’
‘‘(7) APPLICATION OF THIS SECTION TO INTER-
ESTS
IN
PARTNERSHIPS, 
CORPORATIONS, 
AND
TRUSTS.—The Secretary shall prescribe regulations
applying this section to an interest in a partnership,
corporation, or trust which, with respect to the dece-
dent, is an interest in a closely held business (within
the meaning of paragraph (1) of section 6166(b)).’’
(b) CARRYOVER BASIS.—Section 1014(a) of such
Code (relating to basis of property acquired from a dece-
dent) is amended by striking the period at the end of para-
graph (3) and inserting ‘‘, or’’ and by adding after para-
graph (3) the following new paragraph:
‘‘(4) to the extent of the applicability of the ex-
clusion described in section 2031(c), the basis in the
hands of the decedent.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to estates of decedents dying after
December 31, 1996.