I
106TH CONGRESS
1ST SESSION
H. R. 2497
To amend the Internal Revenue Code of 1986 to exclude from gross income
gain on the sale or exchange of farmland which by covenant is restricted
to use as farmland and to exclude the value of such farmland from
estate taxes.
IN THE HOUSE OF REPRESENTATIVES
JULY 13, 1999
Mr. PITTS (for himself, Mr. ENGLISH, Mr. BOEHLERT, Mr. WELDON of Penn-
sylvania, Mr. HOEFFEL, Mr. PETERSON of Pennsylvania, Mr. GREEN-
WOOD, Mr. SAM JOHNSON of Texas, Mr. MCINTOSH, Mr. LARGENT, Mr.
BARR of Georgia, Mr. BARTLETT of Maryland, Mr. TANCREDO, Mrs.
MORELLA, Mr. JONES of North Carolina, Mr. HOSTETTLER, Mr.
DEMINT, Mr. GILMAN, and Mr. GOODE) 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 exclude
from gross income gain on the sale or exchange of farm-
land which by covenant is restricted to use as farmland
and to exclude the value of such farmland from estate
taxes.
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 ‘‘Open Space Preserva-
tion Act of 1999’’.
SEC. 2. EXCLUSION OF GAIN FROM SALE OF CERTAIN
FARMLAND.
(a) GENERAL RULE.—Part III of subchapter B of
chapter 1 of the Internal Revenue Code of 1986 (relating
to items specifically excluded from gross income) is
amended by redesignating section 139 as section 139A
and by inserting after section 138 the following new sec-
tion:
‘‘SEC. 139. SALES AND EXCHANGES OF FARMLAND THE USE
OF WHICH IS RESTRICTED TO FARMING.
‘‘(a) GENERAL RULE.—In the case of an operator of
farmland, gross income does not include gain from the sale
or exchange of farmland if there is in effect on the date
of such sale or exchange a qualified covenant which does
not permit any use of such farmland for any purpose other
than use as farmland.
‘‘(b) DEFINITIONS.—For purposes of this section—
‘‘(1) FARMLAND.—The term ‘farmland’ means
any real property—
‘‘(A) which is located in the United States,
and
‘‘(B) which is used as a farm for farming
purposes (within the meaning of section
2032A(e)).
‘‘(2) QUALIFIED COVENANT—The term ‘quali-
fied covenant’ means a covenant—
‘‘(A) which may not be revoked,
‘‘(B) which, with respect to farmland to
which such covenant applies, is entered into by
all persons having any ownership interest in
such farmland, and
‘‘(C) which binds all future owners of the
farmland to which such covenant applies.
‘‘(c) VERIFICATION OF COVENANT.—Subsection (a)
shall not apply by reason of any covenant unless such
person—
‘‘(1) notifies (in such form and manner as the
Secretary may by regulations prescribe) both the
Secretary and the Secretary of Agriculture of the
political subdivision of the State in which such cov-
enant is recorded, and
‘‘(2) submits to the Secretary a copy of such
covenant.’’
(b) CLERICAL AMENDMENT.—The table of sections
for such part is amended by striking the last item and
inserting the following new items:
‘‘Sec. 139. Sales and exchanges of farmland the use of which is
restricted to farming.
‘‘Sec. 139A. Cross references to other Acts.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to covenants first recorded after
December 31, 1999, and to sales and exchanges after such
date.
SEC. 3. EXCLUSION FROM GROSS ESTATE OF FARMLAND
WHICH BY COVENANT IS RESTRICTED TO USE
AS FARMLAND.
(a) IN GENERAL.—Part III of subchapter A of chap-
ter 11 of the Internal Revenue Code of 1986 (relating to
gross estate) is amended by inserting after section 2033
the following new section:
‘‘SEC. 2033A. EXCLUSION OF FARMLAND WHICH BY COV-
ENANT IS RESTRICTED TO USE AS FARM-
LAND.
‘‘(a) IN GENERAL.—In the case of an estate of a de-
cedent to which this section applies, the value of the gross
estate shall not include the adjusted value of farmland in-
cluded in the estate if there is in effect on the date of
death a qualified covenant which does not permit any use
of such farmland for any purpose other than use as farm-
land.
‘‘(b) ESTATES TO WHICH SECTION APPLIES.—This
section shall apply to an estate if—
‘‘(1) the decedent was (at the date of the dece-
dent’s death) a citizen or resident of the United
States, and
‘‘(2) during the 8-year period ending on the
date of the decedent’s death there have been periods
aggregating 5 years or more during which—