I
105TH CONGRESS
1ST SESSION
H. R. 461
To amend the Internal Revenue Code of 1986 to allow a credit against
income tax for the purchase and installation of agricultural water con-
servation systems.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 21, 1997
Mr. CONDIT 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 allow a
credit against income tax for the purchase and installa-
tion of agricultural water conservation systems.
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 Water
Conservation Act’’.
SEC. 2. CONGRESSIONAL FINDINGS.
The Congress finds that—
(1) the Federal Government has an historic
commitment to assisting areas of the Nation in need
of developing adequate water supplies,
(2) water is becoming increasingly scarce and
expensive in many parts of the United States, which
is compounded when multiple years of drought
occur,
(3) in most areas of the United States, farms
are overwhelmingly the largest water consumers, and
(4) it is in the national interest for farmers to
implement water conservation measures which ad-
dress water conservation needs and for the Federal
Government to promote such conservation measures.
SEC. 3. CREDIT FOR PURCHASE AND INSTALLATION OF AG-
RICULTURAL WATER CONSERVATION SYS-
TEMS.
(a) IN GENERAL.—Subpart B of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to foreign tax credit, etc.) is amended by
adding at the end the following new section:
‘‘SEC. 30B. PURCHASE AND INSTALLATION OF AGRICUL-
TURAL WATER CONSERVATION SYSTEMS.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an eli-
gible taxpayer, there shall be allowed as a credit against
the tax imposed by this chapter for the taxable year an
amount equal to 30 percent of the water conservation sys-
tem expenses paid or incurred by the taxpayer during such
year.
‘‘(b) MAXIMUM CREDIT.—The credit allowed by sub-
section (a) with respect to any water conservation system
shall not exceed the product of $500 and the number of
acres served by such system.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) ELIGIBLE TAXPAYER.—The term ‘eligible
taxpayer’ means any taxpayer if—
‘‘(A) at least 50 percent of such taxpayer’s
gross income is normally derived from a trade
or business referred to in paragraph (3)(C),
and
‘‘(B) such taxpayer complies with all Fed-
eral, State, and local water rights and environ-
mental laws.
‘‘(2) 
WATER
CONSERVATION
SYSTEM
EX-
PENSES.—
‘‘(A) IN GENERAL.—The term ‘water con-
servation system expenses’ means expenses for
the purchase and installation of a water con-
servation system but only if—
‘‘(i) the land served by the water is
entirely in an area which has been identi-
fied, in the taxable year or in any of the
3 preceding taxable years, as an area of—
‘‘(I) extreme drought severity on
the Palmer Drought Severity Index
published by the National Oceanic
and Atmospheric Administration, or
‘‘(II) water shortage (due to in-
creasing demands, limited supplies, or
limited storage) by the Natural Re-
sources Conservation Service of the
Department of Agriculture or the Bu-
reau of Reclamation of the Depart-
ment of the Interior,
‘‘(ii) the taxpayer has in effect a
water conservation plan which has been re-
viewed and approved by such Service and
Bureau,
‘‘(iii) such expenses are consistent
with such plan, and
‘‘(iv) there is an irrigation water sav-
ings of at least 5 percent which is attrib-
utable to such system.
For purposes of clause (iv), water savings shall
be determined and verified under regulations
prescribed jointly by such Service and Bureau.
‘‘(B) WATER
CONSERVATION
SYSTEM.—
The term ‘water conservation system’ means
materials or equipment which are primarily de-
signed to substantially conserve irrigation water
used or to be used on farm land.
‘‘(C) FARM LAND.—The term ‘farm land’
means land used in a trade or business by the
taxpayer or a tenant of the taxpayer for—
‘‘(i) the production of crops, fruits, or
other agricultural products,
‘‘(ii) the raising, harvesting, or grow-
ing of trees, or
‘‘(iii) the sustenance of livestock.
‘‘(c) LIMITATION BASED ON AMOUNT OF TAX.—
‘‘(1) LIABILITY FOR TAX.—The credit allowable
under subsection (a) for any taxable year shall not
exceed the excess (if any) of—
‘‘(A) the regular tax for the taxable year,
reduced by the sum of the credits allowable
under subpart A and the preceding sections of
this subpart, over
‘‘(B) the tentative minimum tax for the
taxable year.
‘‘(2) CARRYFORWARD OF UNUSED CREDIT.—If
the amount of the credit allowable under subsection
(a) for any taxable year exceeds the limitation under
paragraph (1) for the taxable year, the excess shall
be carried to the succeeding taxable year and added
to the amount allowable as a credit under subsection
(a) for such succeeding taxable year.
‘‘(d) DENIAL OF DOUBLE BENEFIT.—No deduction
shall be allowed under this chapter with respect to any
expense which is taken into account in determining the
credit under this section, and any increase in the basis
of any property which would (but for this subsection) re-
sult from such expense shall be reduced by the amount
of credit allowed under this section for such expense.’’
(b) TECHNICAL AMENDMENT.—Subsection (a) of
section 1016 of such Code is amended by striking ‘‘and’’
at the end of paragraph (25), by striking the period at
the end of paragraph (26) and inserting ‘‘; and’’, and by
adding at the end the following new paragraph:
‘‘(27) to the extent provided in section 30B(d),
in the case of amounts with respect to which a credit
has been allowed under section 30B.’’
(c) CLERICAL AMENDMENT.—The table of sections
for subpart B of part IV of subchapter A of chapter 1
of such Code is amended by adding at the end the follow-
ing new item:
‘‘Sec. 30B. Purchase and installation of agricultural water con-
servation systems.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts paid or incurred after
the date of the enactment of this Act, in taxable years
ending after such date.
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