I 
110TH CONGRESS 
1ST SESSION H. R. 2658 
To amend the Internal Revenue Code of 1986 to provide a tax credit for 
farmers’ investments in value-added agriculture. 
IN THE HOUSE OF REPRESENTATIVES 
JUNE 11, 2007 
Mr. MCHUGH 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 tax credit for farmers’ investments in value-added agri-
culture. 
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 Producers 
Value-Added Investment Tax Credit Act of 2007’’. 
SEC. 2. CREDIT FOR FARMER INVESTMENT IN VALUE- 
ADDED AGRICULTURAL PROPERTY. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
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1986 (relating to business related credits) is amended by 
adding at the end the following new section: 
‘‘SEC. 45N. VALUE-ADDED AGRICULTURAL PROPERTY IN-
VESTMENT CREDIT. 
‘‘(a) GENERAL RULE.—For purposes of section 38, 
in the case of a taxpayer who is— 
‘‘(1) an eligible person, or 
‘‘(2) a farmer-owned entity, 
the value-added agricultural property investment credit 
determined under this section for any taxable year is 50 
percent of the basis of any qualified value-added agricul-
tural property placed in service during the taxable year. 
In the case of a farmer-owned entity, such credit shall be 
allocated on a pro rata basis among eligible persons hold-
ing qualified investments in such entity as of the last day 
of such taxable year. 
‘‘(b) MAXIMUM CREDIT.—For purposes of subsection 
(a)— 
‘‘(1) PROPERTY PLACED IN SERVICE BY ELIGI-
BLE PERSON.—In the case of property placed in 
service during a taxable year by an eligible person, 
the credit determined under this section for such 
year shall not exceed $30,000, reduced by the 
amount of the creditable investments allowed for the 
taxable year under paragraph (2). 
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‘‘(2) PROPERTY PLACED IN SERVICE BY FARM-
ER-OWNED ENTITY.— 
‘‘(A) IN GENERAL.—In the case of prop-
erty placed in service by a farmer-owned entity, 
the credit determined under this section shall 
not exceed the sum of the eligible person’s cred-
itable investments in such entity as of the date 
such property is placed in service. 
‘‘(B) 
CREDITABLE
INVESTMENTS.—For 
purposes of subparagraph (A), the term ‘cred-
itable investments’ means, with respect to any 
property placed in service by a farmer-owned 
entity, the aggregate qualified investments 
made by the eligible person in such entity, re-
duced (but not below zero) by the sum of— 
‘‘(i) the amount of the aggregate 
qualified investments made by such person 
in such entity which were taken into ac-
count under this section with respect to 
property previously placed in service by 
such entity, and 
‘‘(ii) the amount of the aggregate 
qualified investments made by such person 
in all other farmer-owned entities which 
were taken into account under this section 
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with respect to property previously placed 
in service by such other entities. 
‘‘(C) LIMITATION.—For purposes of this 
paragraph, the aggregate qualified investments 
made by the eligible person which may be taken 
into account for any taxable year shall not ex-
ceed $30,000. 
‘‘(c) DEFINITIONS.—For purposes of this section— 
‘‘(1) QUALIFIED VALUE-ADDED AGRICULTURAL 
PROPERTY.—The term ‘qualified value-added agri-
cultural property’ means property— 
‘‘(A) which is used to add value to a good 
or product, suitable for food or nonfood use, de-
rived in whole or in part from organic matter 
which is available on a renewable basis, includ-
ing agricultural crops and agricultural wastes 
and residues, wood wastes and residues, and 
domesticated animal wastes, 
‘‘(B)(i) to which section 168 applies with-
out regard to any useful life, or 
‘‘(ii) with respect to which depreciation (or 
amortization in lieu of depreciation) is allowable 
and having a useful life (determined as of the 
time such property is placed in service) of 3 
years or more, and 
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‘‘(C) which is owned and operated by an 
eligible person or a farmer-owned entity. 
‘‘(2) ELIGIBLE PERSON.— 
‘‘(A) IN GENERAL.—The term ‘eligible per-
son’ means a person who materially participates 
during the taxable year in an eligible farming 
business. 
‘‘(B) 
MATERIAL
PARTICIPATION.—For 
purposes of subparagraph (A), the determina-
tion of whether a person materially participates 
in the trade or business of farming shall be 
made in a manner similar to the manner in 
which such determination is made under section 
2032A(e)(6). In the case that the person is a 
corporation, cooperative, partnership, estate, or 
trust, such determination shall be made at the 
shareholder, partner, or beneficial interests level 
(as the case may be). 
‘‘(C) ELIGIBLE FARMING BUSINESS.—For 
purposes of subparagraph (A), the term ‘eligible 
farming business’ means a farming business (as 
defined in section 263A(e)(4)) which is not a 
passive activity (within the meaning of section 
469(c)). 
‘‘(3) FARMER-OWNED ENTITY.— 
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‘‘(A) IN
GENERAL.—The term ‘farmer- 
owned entity’ means— 
‘‘(i) a corporation (including an S cor-
poration) in which eligible persons own 50 
percent or more of the total voting power 
of the stock and 50 percent or more (in 
value) of the stock, 
‘‘(ii) a partnership in which eligible 
persons own 50 percent or more of the 
total voting power of the profits interest 
and 50 percent or more (in value) of the 
profits interest, and 
‘‘(iii) a cooperative in which eligible 
persons own 50 percent or more of the 
total voting power of the member patron-
age interests and 50 percent or more (in 
value) of the member patronage interests. 
‘‘(B) 
CONSTRUCTIVE
OWNERSHIP 
RULES.—For purposes of subparagraph (A), 
rules 
similar 
to 
the 
rules 
of 
section 
263A(e)(2)(B) shall apply; except that, in ap-
plying such rules, the members of an individ-
ual’s family shall be the individuals described in 
subparagraph (C). 
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