SEC. 2. FINDINGS. 
The Congress finds as follows: 
(1) Land conservation and farmland preserva-
tion is an important national goal that allows farm-
ers to continue to farm on their land, and allows 
communities to protect invaluable natural resources 
for future generations. 
(2) Farmland in metropolitan and frequently 
high-cost communities is estimated to account for 
one-third of all farms, and 18 percent of this Na-
tion’s farmland. 
(3) In many urban fringe areas farmland is 
rapidly disappearing, and the U.S. Department of 
Agriculture estimates that approximately 95 million 
acres of farmland will be taken over by sprawl and 
urban growth in the coming years. 
(4) Farmers and landowners generally receive a 
significantly reduced payment for the sale of devel-
opment rights and conservation easements than they 
would receive by selling the land to the private sec-
tor for development. In many instances, however, 
these sales are treated the same under the tax code. 
(5) In areas where State law requires debt as-
sumed by a municipality to be structured in the 
form of a sinking fund, farmers and landowners may 
be discouraged from selling the development rights 
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of their land for conservation purposes. Since sales 
to State and local governments will be in the form 
of a sinking fund, a seller may not be able to pay 
capital gains taxes in full when the seller will not re-
ceive cash payments until a future date. 
(6) In urban fringe areas, many communities 
have made a concerted effort to purchase develop-
ment rights to land. The land remains private, but 
the community gains by preserving open spaces and 
enjoying environmental benefits. Communities will 
greatly benefit by the Federal Government taking 
steps to assist municipalities in the purchase of de-
velopment rights. 
SEC. 3. USE OF SINKING FUND BY STATE OR LOCAL GOV-
ERNMENT NOT TO PREVENT INSTALLMENT 
SALES TREATMENT. 
(a) IN GENERAL.—Paragraph (3) of section 453(f) 
of the Internal Revenue Code of 1986 (relating to pay-
ment) is amended to read as follows: 
‘‘(3) PAYMENT.— 
‘‘(A) IN GENERAL.—Except as provided in 
paragraph (4), the term ‘payment’ does not in-
clude the receipt of evidences of indebtedness of 
the person acquiring the property (whether or 
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not payment of such indebtedness is guaranteed 
by another person). 
‘‘(B) TREATMENT OF SINKING AND SIMI-
LAR FUNDS REQUIRED BY STATE LAW.—Noth-
ing in this section or the regulations thereunder 
shall be construed as treating a seller of prop-
erty to a qualified organization (as defined in 
section 170(h)(3)) as receiving a payment by 
reason of the fact that some or all of the funds 
for such purchase are made (as required by 
State law) to a sinking or similar fund if the 
property is being acquired by such organization 
exclusively for conservation purposes (as de-
fined in section 170(h)(4)).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect on the date of the enactment 
of this Act. 
Æ 
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