I
105TH CONGRESS
1ST SESSION
H. R. 195
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
JANUARY 7, 1997
Mr. HOUGHTON (for himself and Mr. CARDIN) 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 ‘‘American Farm and
Ranch Protection 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.
‘‘(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