I
104TH CONGRESS
2D SESSION
H. R. 3559
To amend the Internal Revenue Code of 1986 to provide a deduction for
a portion of the fiscal year 1996 transitional payment under the Agricul-
tural Market Transition Act which is deposited into a reserve against
future farm losses.
IN THE HOUSE OF REPRESENTATIVES
MAY 30, 1996
Mr. NETHERCUTT (for himself and Mr. HASTINGS of Washington) 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 deduction for a portion of the fiscal year 1996 transi-
tional payment under the Agricultural Market Transition
Act which is deposited into a reserve against future
farm losses.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. DEDUCTION FOR TRANSITION PAYMENT DE-
POSITED 
INTO 
AGRICULTURAL 
MARKET
TRANSITION RESERVE.
(a) IN GENERAL.—Subpart C of part II of sub-
chapter E of chapter 1 of the Internal Revenue Code of
1986 (relating to taxable year in which deductions taken)
is amended by inserting after section 468B the following
new section:
‘‘SEC. 468C. AGRICULTURAL MARKET TRANSITION RE-
SERVE.
‘‘(a) IN GENERAL.—At the election of the taxpayer,
there shall be allowed as a deduction for the taxable year
in which the taxpayer receives the first-year agricultural
market transition payment an amount equal to the
amount paid by the taxpayer during such taxable year to
the Agricultural Market Transition Reserve (hereinafter
referred to as the ‘Reserve’) of the taxpayer.
‘‘(b) LIMITATION
ON
AMOUNT
PAID
INTO
RE-
SERVE.—
‘‘(1) IN GENERAL.—The amount which a tax-
payer may pay into the Reserve shall not exceed the
lesser of—
‘‘(A) $40,000, or
‘‘(B) the amount of the first-year agricul-
tural market transition payment.
‘‘(2) 
FIRST-YEAR
AGRICULTURAL
MARKET
TRANSITION PAYMENT.—For purposes of this sec-
tion, the first-year agricultural market transition
payment is the amount received by the taxpayer
under section 1103 of the Agricultural Market Tran-
sition Act for the first fiscal year the taxpayer par-
ticipates in the program under such section.
‘‘(3) 
SPECIAL
RULE
FOR
PARTNERSHIPS,
ETC.—In the case of a partnership, the limitation
under this subsection shall be applied at the partner
level and not at the partnership level. A similar rule
shall apply to S corporations.
‘‘(c) INCLUSION OF AMOUNTS DISTRIBUTED.—There
shall be includible in the gross income of the taxpayer for
any taxable year—
‘‘(1) any amount distributed from the Reserve
during such taxable year, and
‘‘(2) any deemed distribution under subsection
(e).
‘‘(d) AGRICULTURAL
MARKET
TRANSITION
RE-
SERVE.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘Agricultural Market Transition Re-
serve’ means a reserve established by the taxpayer
for purposes of this section.
‘‘(2) RESERVE EXEMPT FROM TAXATION.—Any
Agricultural Market Transition Reserve is exempt
from taxation under this subtitle unless such Re-
serve has ceased to be an Agricultural Market Tran-
sition Reserve by reason of subsection (e). Notwith-
standing the preceding sentence, any such Reserve
shall be subject to the taxes imposed by section 511
(relating to imposition of tax on unrelated business
income of charitable, etc. organizations).
‘‘(3) CONTRIBUTIONS TO RESERVE.—The Re-
serve shall not accept any payments (or other
amounts) other than payments with respect to which
a deduction is allowable under subsection (a).
‘‘(4) PROHIBITIONS AGAINST SELF-DEALING.—
Under regulations prescribed by the Secretary, for
purposes of section 4951 (and so much of this title
as relates to such section), the Reserve shall be
treated in the same manner as a trust described in
section 501(c)(21).
‘‘(e) DEEMED DISTRIBUTIONS.—
‘‘(1) DISQUALIFICATION
OF
RESERVE
FOR
SELF-DEALING.—In any case in which a Reserve vio-
lates any provision of this section or section 4951,
the Secretary may disqualify such Reserve from the
application of this section. In any case to which this
paragraph applies, the Reserve shall be treated as
having distributed all of its funds on the date such
determination takes effect.
‘‘(2) TERMINATION.—A Reserve shall be treat-
ed as having distributed all of its funds on the date
which is 10 years after the date such Reserve was
established.
‘‘(f) TIME WHEN PAYMENTS DEEMED MADE.—For
purposes of this section, a taxpayer shall be deemed to
have made a payment to the Reserve on the last day of
a taxable year if such payment is made on account of such
taxable year and is made within 21⁄2 months after the close
of such taxable year.’’
(b) CLERICAL AMENDMENT.—The table of sections
for subpart C of part II of subchapter E of chapter 1 of
such Code is amended by inserting after the item relating
to section 468B the following new item:
‘‘Sec. 468C. Agricultural Market Transition Reserve.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
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