‘‘(i) the property is required (as of the
date of the contribution) to be preserved in
perpetuity in its natural state other than
by reason of the terms of contribution, or
‘‘(ii) the property is required to be re-
stored or preserved as compensatory miti-
gation as a condition of a permit issued
under section 404 of the Federal Water
Pollution Control Act (33 U.S.C. 1344).
‘‘(D) UNUSED DEDUCTION CARRYOVER AL-
LOWED ON TAXPAYER’S LAST RETURN.—In the
case of an individual, if—
‘‘(i) the taxpayer dies before the close
of the last taxable year for which a deduc-
tion for a contribution to which subpara-
graph (A) applies could have been allowed
under subsection (d)(1), and
‘‘(ii) any portion of the deduction for
such contribution has not been allowed for
any taxable year before the taxable year in
which such death occurs,
then such portion shall be allowed as a deduc-
tion under subsection (a) for the taxable year in
which such death occurs without regard to sub-
section (b), or the unused portion may be used
against the estate taxes of the taxpayer.
‘‘(E) DEFINITIONS.—For purposes of this
paragraph—
‘‘(i) Wetlands.—The term ‘wetlands’
means any area that is inundated or satu-
rated by surface or groundwater at a fre-
quency and duration sufficient to support,
and which under normal circumstances
does support, a prevalence of vegetation
typically adapted for life in saturated soil
conditions.
‘‘(ii) 
WETLANDS
STEWARDSHIP
TRUST.—The term ‘Wetlands Stewardship
Trust’ means any entity designated by the
Secretary of the Interior under section 401
of the Wetlands Reform Act of 1993.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to contributions and gifts made
after the date of the enactment of this Act in taxable years
ending after such date.
SEC. 403. EXCLUSION FROM GROSS INCOME FOR AMOUNTS
RECEIVED FROM COMPATIBLE USES OF WET-
LANDS.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
items specifically excluded from gross income) is amended
by redesignating section 137 as section 138 and by insert-
ing after section 136 the following new section:
‘‘SEC. 137. INCOME FROM COMPATIBLE USES OF WET-
LANDS.
‘‘(a) GENERAL RULE.—Gross income shall not in-
clude any amount received by the owner of wetlands for
allowing any person to use such wetlands in a compatible
use.
‘‘(b) DEFINITIONS.—For purposes of this section—
‘‘(1) WETLANDS.—The terms ‘wetlands’ has
the 
meaning 
given 
such 
term 
by 
section
170(e)(6)(E)(i).
‘‘(2) COMPATIBLE USE.—The term ‘compatible
use’ has the meaning given such term in the regula-
tions prescribed under the following sentence. The
Secretary of the Interior, acting through the Direc-
tor of the Fish and Wildlife Service, shall prescribe
regulations identifying those activities which con-
stitute compatible uses for purposes of this section,
including any pertinent restrictions on such activi-
ties. Such activities may include fishing, hunting,
and occasional and prudent managed haying, if
deemed appropriate by the Secretary of the Interior,
but shall not include any activity which degrades the
functions or values of wetlands.’’
(b) CLERICAL AMENDMENT.—The table of sections
for such part III is amended by striking the last item and
inserting the following new items:
‘‘Sec. 137. Income from compatible uses of wetlands.
‘‘Sec. 138. Cross references to other Acts.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts received after the date
of the enactment of this Act in taxable years ending after
such date.
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