I
105TH CONGRESS
1ST SESSION
H. R. 1299
To amend the Internal Revenue Code of 1986 to provide relief from estate
and gift taxes.
IN THE HOUSE OF REPRESENTATIVES
APRIL 10, 1997
Mr. MCCRERY (for himself, Ms. DUNN, Mr. HERGER, Mr. CHRISTENSEN, and
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 provide
relief from estate and gift 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; AMENDMENT OF 1986 CODE.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Family Business Protection Act of 1997’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
TITLE I—RELIEF FOR ALL
INDIVIDUALS
SEC. 101. UNIFIED CREDIT AGAINST ESTATE AND GIFT
TAXES REPLACED WITH UNIFIED EXEMPTION
AMOUNT.
(a) IN GENERAL.—
(1) ESTATE TAX.—Part IV of subchapter A of
chapter 11 is amended by inserting after section
2051 the following new section:
‘‘SEC. 2052. EXEMPTION.
‘‘(a) IN GENERAL.—For purposes of the tax imposed
by section 2001, the value of the taxable estate shall be
determined by deducting from the value of the gross estate
an amount equal to the excess (if any) of—
‘‘(1) the exemption amount for the calendar
year in which the decedent died, over
‘‘(2) the sum of—
‘‘(A) the aggregate amount allowed as an
exemption under section 2521 (or the cor-
responding provisions of prior law) with respect
to gifts made by the decedent after December
31, 1976, and
‘‘(B) the aggregate amount of gifts made
by the decedent for which credit was allowed by
section 2505 (as in effect on the day before the
date of the enactment of the Family Business
Protection Act of 1997).
Gifts which are includible in the gross estate of the dece-
dent shall not be taken into account in determining the
amounts under paragraph (2).
‘‘(b) EXEMPTION AMOUNT.—For purposes of sub-
section (a), the term ‘exemption amount’ means the
amount determined in accordance with the following table:
‘‘In the case of
The exemption
calendar year:
amount is:
1998 .......................................................................
$680,000
1999 .......................................................................
$760,000
2000 .......................................................................
$840,000
2001 .......................................................................
$920,000
2002 or thereafter .................................................
$1,000,000.
‘‘(c) COST-OF-LIVING ADJUSTMENTS.—In the case of
any decedent dying in a calendar year after 2002, the
$1,000,000 amount set forth in subsection (b) shall be in-
creased by an amount equal to—
‘‘(1) $1,000,000, multiplied by
‘‘(2) the cost-of-living adjustment determined
under section 1(f)(3) for such calendar year by sub-
stituting ‘calendar year 2001’ for ‘calendar year
1992’ in subparagraph (B) thereof.
If any amount as adjusted under the preceding sentence
is not a multiple of $10,000, such amount shall be round-
ed to the nearest multiple of $10,000.’’
(2) GIFT TAX.—Subchapter C of chapter 12
(relating to deductions) is amended by inserting be-
fore section 2522 the following new section:
‘‘SEC. 2521. EXEMPTION.
‘‘(a) IN GENERAL.—In computing taxable gifts for
any calendar year, there shall be allowed as a deduction
in the case of a citizen or resident of the United States
an amount equal to the excess of—
‘‘(1) the exemption amount determined under
section 2052 for such calendar year, over
‘‘(2) the sum of—
‘‘(A) the aggregate amount allowed as an
exemption under this section (or the cor-
responding provisions of prior law) for all pre-
ceding calendar periods, and
‘‘(B) the aggregate amount of gifts for
which credit was allowed by section 2505 (as in
effect on the day before the date of the enact-
ment of the Family Business Protection Act of
1997).’’
(b) REPEAL OF UNIFIED CREDITS.—
(1) Section 2010 (relating to unified credit
against estate tax) is hereby repealed.
(2) Section 2505 (relating to unified credit
against gift tax) is hereby repealed.
(c) CONFORMING AMENDMENTS.—
(1) Subsection (b) of section 2001 is amended
by adding at the end the following new sentence:
‘‘For purposes of paragraph (2), the amount of the
tax payable under chapter 12 shall be determined
without regard to the credit provided by section
2505 (as in effect on the day before the date of the
enactment of the Family Business Protection Act of
1997).’’
(2) Paragraph (2) of section 2001(c) is amend-
ed to read as follows:
‘‘(2) PHASEOUT OF GRADUATED RATES.—The
amount of the tax determined under paragraph (1)
shall be increased by 5 percent of so much of the
taxable estate as exceeds $10,000,000 but does not
exceed the amount at which the average tax rate
under this section is 55 percent.’’
(3) Subsection (f) of section 2011 is amended
by striking ‘‘, reduced by the amount of the unified
credit provided by section 2010’’.
(4) Subsection (a) of section 2012 is amended
by striking ‘‘and the unified credit provided by sec-
tion 2010’’.
(5) Subsection (b) of section 2013 is amended
by inserting before the period at the end of the first
sentence ‘‘and increased by the exemption allowed
under section 2052 or 2106(a)(4) (or the cor-
responding provisions of prior law) in determining
the taxable estate of the transferor for purposes of
the estate tax’’.
(6) Subparagraph (A) of section 2013(c)(1) is
amended by striking ‘‘2010,’’.
(7) Paragraph (2) of section 2014(b) is amend-
ed by striking ‘‘2010,’’.
(8) Clause (ii) of section 2056A(b)(12)(C) is
amended to read as follows:
‘‘(ii) to treat any reduction in the tax
imposed by paragraph (1)(A) by reason of
the credit allowable under section 2010 (as
in effect on the day before the date of the
enactment of the Family Business Protec-
tion Act of 1997) or the exemption allow-
able under section 2052 with respect to the
decedent as such a credit or exemption (as
the case may be) allowable to such surviv-
ing spouse for purposes of determining the
amount of the exemption allowable under
section 2521 with respect to taxable gifts
made by the surviving spouse during the
year in which the spouse becomes a citizen
or any subsequent year,’’.
(9) Section 2102 is amended by striking sub-
section (c).
(10) Subsection (a) of section 2106 is amended
by adding at the end the following new paragraph:
‘‘(4) EXEMPTION.—
‘‘(A) IN
GENERAL.—An exemption of
$60,000.
‘‘(B) RESIDENTS OF POSSESSIONS OF THE
UNITED
STATES.—In the case of a decedent
who is considered to be a nonresident not a citi-
zen of the United States under section 2209,
the exemption under this paragraph shall be the
greater of—
‘‘(i) $60,000, or
‘‘(ii) that proportion of $175,000
which the value of that part of the dece-
dent’s gross estate which at the time of his
death is situated in the United States
bears to the value of his entire gross estate
wherever situated.
‘‘(C) SPECIAL RULES.—
‘‘(i) 
COORDINATION
WITH
TREA-
TIES.—To the extent required under any
treaty obligation of the United States, the
exemption allowed under this paragraph
shall be equal to the amount which bears
the same ratio to the exemption amount
under section 2052 (for the calendar year
in which the decedent died) as the value of
the part of the decedent’s gross estate
which at the time of his death is situated
in the United States bears to the value of
his entire gross estate wherever situated.
For purposes of the preceding sentence,
property shall not be treated as situated in
the United States if such property is ex-
empt from the tax imposed by this sub-
chapter under any treaty obligation of the
United States.
‘‘(ii) COORDINATION WITH GIFT TAX
EXEMPTION AND UNIFIED CREDIT.—If an
exemption has been allowed under section
2521 (or a credit has been allowed under
section 2505 as in effect on the day before
the date of the enactment of the Family
Business Protection Act of 1997) with re-
spect to any gift made by the decedent,
each dollar amount contained in subpara-
graph (A) or (B) or the exemption amount
applicable under clause (i) of this subpara-
graph (whichever applies) shall be reduced
by the exemption so allowed under 2521
(or, in the case of such a credit, by the
amount of the gift for which the credit was
so allowed).’’
(11) Subsection (c) of section 2107 is amend-
ed—
(A) by striking paragraph (1) and by re-
designating paragraphs (2) and (3) as para-
graphs (1) and (2), respectively, and
(B) by striking the second sentence of
paragraph (2) (as so redesignated).
(12) Section 2206 is amended by striking ‘‘the
taxable estate’’ in the first sentence and inserting
‘‘the sum of the taxable estate and the amount of
the exemption allowed under section 2052 or
2106(a)(4) in computing the taxable estate’’.
(13) Section 2207 is amended by striking ‘‘the
taxable estate’’ in the first sentence and inserting
‘‘the sum of the taxable estate and the amount of
the exemption allowed under section 2052 or
2106(a)(4) in computing the taxable estate’’.
(14) Subparagraph (B) of section 2207B(a)(1)
is amended to read as follows:
‘‘(B) the sum of the taxable estate and the
amount of the exemption allowed under section
2052 or 2106(a)(4) in computing the taxable
estate.’’
(15) Paragraph (3) of section 2504(a) is
amended to read as follows:
‘‘(3) the exemption (if any) allowable under sec-
tion 2521 (or the corresponding provisions of prior
law) shall be applied in all computations in respect
of preceding calendar periods ending before January
1, 1977, or after December 31, 1997, for purposes
of computing the tax for any calendar year.’’
(16) Paragraph (1) of section 6018(a) is
amended by striking ‘‘$600,000’’ and inserting ‘‘the
exemption amount under section 2052 for the cal-
endar year which includes the date of death’’.
(17) Subparagraph (A) of section 6601(j)(2) is
amended to read as follows:
‘‘(A) the amount of the tax which would be
imposed by chapter 11 on an amount of taxable
estate equal to the excess of $1,000,000 over
the exemption amount allowable under section
2052, or’’.
(18) The table of sections for part II of sub-
chapter A of chapter 11 is amended by striking the
item relating to section 2010.
(19) The table of sections for subchapter A of
chapter 12 is amended by striking the item relating
to section 2505.
(d) EFFECTIVE DATE.—The amendments made by
this section—
(1) insofar as they relate to the tax imposed by
chapter 11 of the Internal Revenue Code of 1986,
shall apply to estates of decedents dying after De-
cember 31, 1997, and
(2) insofar as they relate to the tax imposed by
chapter 12 of such Code, shall apply to gifts made
after December 31, 1997.
TITLE II—ADDITIONAL RELIEF
FOR 
FAMILY-OWNED 
BUSI-
NESSES AND FARMS
SEC. 201. FAMILY-OWNED BUSINESS EXCLUSION.
(a) IN GENERAL.—Part III of subchapter A of chap-
ter 11 (relating to gross estate) is amended by inserting
after section 2033 the following new section:
‘‘SEC. 2033A. FAMILY-OWNED BUSINESS EXCLUSION.
‘‘(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 lesser of—
‘‘(1) the adjusted value of the qualified family-
owned business interests of the decedent otherwise
includible in the estate, or
‘‘(2) the sum of—
‘‘(A) $1,500,000, plus
‘‘(B) 50 percent of the excess (if any) of
the adjusted value of such interests over
$1,500,000.
‘‘(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,
‘‘(2) the sum of—
‘‘(A) the adjusted value of the qualified
family-owned business interests which—
‘‘(i) are included in determining the
value of the gross estate (without regard to
this section), and
‘‘(ii) are acquired by a qualified heir
from, or passed to a qualified heir from,
the decedent (within the meaning of sec-
tion 2032A(e)(9)), plus
‘‘(B) the amount of the adjusted taxable
gifts of such interests from the decedent to
members of the decedent’s family taken into ac-
count under subsection 2001(b)(1)(B),
exceeds 50 percent of the adjusted gross estate, and
‘‘(3) 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—
‘‘(A) such interests were owned by the de-
cedent or a member of the decedent’s family,
and
‘‘(B) there was active management (within
the meaning of section 2032A(e)(12)) by the
decedent or a member of the decedent’s family
in the operation of the business to which such
interests relate.
‘‘(c) ADJUSTED GROSS ESTATE.—For purposes of
this section, the term ‘adjusted gross estate’ means the
value of the gross estate (determined without regard to
this section)—
‘‘(1) reduced by any amount deductible under
section 2053(a)(4), and
‘‘(2) increased by the sum of—
‘‘(A) the amount taken into account under
subsection (b)(2)(B), plus
‘‘(B) the amount of other gifts from the
decedent to the decedent’s spouse (at the time
of the gift) within 10 years of the date of the
decedent’s death, plus
‘‘(C) the amount of other gifts (not in-
cluded under subparagraph (A) or (B)) from
the decedent within 3 years of such date.
‘‘(d) ADJUSTED VALUE OF THE QUALIFIED FAMILY-
OWNED BUSINESS INTERESTS.—For purposes of this sec-
tion, the adjusted value of any qualified family-owned
business interest is the value of such interest for purposes
of this chapter (determined without regard to this sec-
tion), reduced by the excess of—
‘‘(1) any amount deductible under section
2053(a)(4), over
‘‘(2) the sum of—
‘‘(A) any indebtedness on any qualified
residence of the decedent the interest on which
is deductible under section 163(h)(3), plus
‘‘(B) any indebtedness to the extent the
taxpayer establishes that the proceeds of such
indebtedness were used for the payment of edu-
cational and medical expenses of the decedent,
the decedent’s spouse, or the decedent’s depend-
ents (within the meaning of section 152), plus
‘‘(C) any indebtedness not described in
subparagraph (A) or (B), to the extent such in-
debtedness does not exceed $10,000.
‘‘(e) QUALIFIED FAMILY-OWNED BUSINESS INTER-
EST.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘qualified family-owned business inter-
est’ means—
‘‘(A) an interest as a proprietor in a trade
or business carried on as a proprietorship, or
‘‘(B) an interest as a partner in a partner-
ship, or stock in a corporation, carrying on a
trade or business, if—
‘‘(i) at least—
‘‘(I) 50 percent of such partner-
ship or corporation is owned (directly
or indirectly) by the decedent or mem-
bers of the decedent’s family,
‘‘(II) 70 percent of such partner-
ship or corporation is so owned by 2
families (including the decedent’s fam-
ily), or
‘‘(III) 90 percent of such part-
nership or corporation is so owned by
3 families (including the decedent’s
family), and
‘‘(ii) at least 30 percent of such part-
nership or corporation is so owned by each
family described in subclause (II) or (III)
of clause (i).
‘‘(2) LIMITATION.—Such term shall not in-
clude—
‘‘(A) any interest in a trade or business
the principal place of business of which is not
located in the United States,
‘‘(B) any interest in—
‘‘(i) an entity which had, or
‘‘(ii) an entity which is a member of
a controlled group (as defined in section
267(f)(1)) which had,
readily tradable stock or debt on an established
securities market or secondary market (as de-
fined by the Secretary) within 3 years of the
date of the decedent’s death,
‘‘(C) any interest in a trade or business
not described in section 542(c)(2), if more than
35 percent of the adjusted ordinary gross in-
come of such trade or business for the taxable
year which includes the date of the decedent’s
death would qualify as personal holding com-
pany income (as defined in section 543(a)), and
‘‘(D) that portion of an interest in a trade
or business that is attributable to cash or mar-
ketable securities, or both, in excess of the rea-
sonably expected day-to-day working capital
needs of such trade or business.
‘‘(3) OWNERSHIP RULES.—
‘‘(A) INDIRECT
OWNERSHIP.—For pur-
poses of determining indirect ownership under
paragraph (1), rules similar to the rules of
paragraphs (2) and (3) of section 447(e) shall
apply.
‘‘(B) TIERED ENTITIES.—For purposes of
this section, if—
‘‘(i) a qualified family-owned business
holds an interest in another trade or busi-
ness, and
‘‘(ii) such interest would be a qualified
family-owned business interest if held di-
rectly by the family (or families) holding
interests in the qualified family-owned
business meeting the requirements of para-
graph (1)(B),
then the value of the qualified family-owned
business shall include the portion attributable
to the interest in the other trade or business.
‘‘(f) TAX TREATMENT OF FAILURE TO ACTIVELY
MANAGE BUSINESS OR DISPOSITIONS OF INTERESTS.—
‘‘(1) IN GENERAL.—There is imposed an addi-
tional estate tax if, within 10 years after the date
of the decedent’s death and before the date of the
qualified heir’s death—
‘‘(A) the qualified heir ceases to use for
the qualified use (within the meaning of section
2032A(c)(6)(B), determined by substituting ‘ac-
tive management’ for ‘material participation’
each place it appears) the qualified family-
owned business interest which was acquired (or
passed) from the decedent, or
‘‘(B) the qualified heir disposes of any por-
tion of a qualified family-owned business inter-
est (other than by a disposition to a member of
the qualified heir’s family or through a qualified
conservation 
contribution 
under 
section
170(h)).
‘‘(2) ADDITIONAL ESTATE TAX.—The amount
of the additional estate tax imposed by paragraph
(1) shall be equal to—
‘‘(A) the applicable percentage of adjusted
tax difference attributable to the qualified fam-
ily-owned business interest (as determined
under rules similar to the rules of section
2032A(c)(2)(B)), plus
‘‘(B) interest on the amount determined
under subparagraph (A) at the annual rate of
4 percent for the period beginning on the date
the estate tax liability was due under this chap-
ter and ending on the date such additional es-
tate tax is due.
‘‘(3) APPLICABLE PERCENTAGE.—For purposes
of paragraph (2), the term ‘applicable percentage’
means the percentage determined in accordance with
the following table for the year (in the 10-year pe-
riod referred to in paragraph (1)) in which the re-
capture event occurs:
In the case of the:
The applicable percentage is:
First 5 such years ..................................................... 100 percent
6th such year .............................................................
50 percent
7th such year .............................................................
40 percent
8th such year .............................................................
30 percent
9th such year .............................................................
20 percent
10th such year ...........................................................
10 percent.
‘‘(g) 
OTHER
DEFINITIONS
AND
APPLICABLE
RULES.—For purposes of this section—
‘‘(1) QUALIFIED
HEIR.—The term ‘qualified
heir’—
‘‘(A) has the meaning given to such term
by section 2032A(e)(1), and
‘‘(B) includes any active employee of the
trade or business to which the qualified family-
owned business interest relates if such employee
has been employed by such trade or business
for a period of at least 10 years before the date
of the decedent’s death.
‘‘(2) MEMBER
OF
THE
FAMILY.—The term
‘member of the family’ has the meaning given to
such term by section 447(e)(1).
‘‘(3) INFLATION ADJUSTMENT.—In the case of
estates of decedents dying in a calendar year after
1997, the $1,500,000 amount contained in sub-
section (a) shall be increased each place it appears
by an amount equal to—
‘‘(A) $1,500,000, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for such calendar
year by substituting ‘calendar year 1996’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
If any amount as adjusted under the preceding sen-
tence is not a multiple of $10,000, such amount
shall be rounded to the nearest multiple of $10,000.
‘‘(4) APPLICABLE RULES.—Rules similar to the
following rules shall apply:
‘‘(A) Section 2032A(b)(4) (relating to de-
cedents who are retired or disabled).
‘‘(B) Section 2032A(b)(5) (relating to spe-
cial rules for surviving spouses).
‘‘(C) Section 2032A(c)(2)(D) (relating to
partial dispositions).
‘‘(D) Section 2032A(c)(3) (relating to only
1 additional tax imposed with respect to any 1
portion).
‘‘(E) Section 2032A(c)(4) (relating to due
date).
‘‘(F) Section 2032A(c)(5) (relating to li-
ability for tax; furnishing of bond).
‘‘(G) Section 2032A(c)(7) (relating to no
tax if use begins within 2 years; active manage-
ment by eligible qualified heir treatment as ma-
terial participation).
‘‘(H) Section 2032A(e)(10) (relating to
community property).
‘‘(I) Section 2032A(e)(14) (relating to
treatment of replacement property acquired in
section 1031 or 1033 transactions).
‘‘(J) Section 2032A(f) (relating to statute
of limitations).
‘‘(K) Section 6166(b)(3) (relating to farm-
houses and certain other structures taken into
account).
‘‘(L) Subparagraphs (B), (C), and (D) of
section 6166(g)(1) (relating to acceleration of
payment).’’
(b) CLERICAL AMENDMENT.—The table of sections
for part III of subchapter A of chapter 11 is amended
by inserting after the item relating to section 2033 the
following new item:
‘‘Sec. 2033A. Family-owned business exclusion.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to estates of decedents dying after
December 31, 1996.
SEC. 202. INFLATION ADJUSTMENT OF MAXIMUM BENEFIT
UNDER SPECIAL ESTATE TAX VALUATION
RULES FOR CERTAIN FARM, ETC., REAL
PROPERTY.
(a) 
IN
GENERAL.—Paragraph 
(2) 
of 
section
2032A(a) (relating to limitation on aggregate reduction in
fair market value) is amended to read as follows:
‘‘(2) LIMITATION ON AGGREGATE REDUCTION
IN FAIR MARKET VALUE.—
‘‘(A) IN
GENERAL.—The aggregate de-
crease in the value of qualified real property
taken into account for purposes of this chapter
which results from the application of paragraph
(1) with respect to any decedent shall not ex-
ceed $750,000.
‘‘(B) INFLATION
ADJUSTMENT.—In the
case of estates of decedents dying in a calendar
year after 1996, the $750,000 amount set forth
in subparagraph (A) shall be increased by an
amount equal to—
‘‘(i) $750,000, multiplied by
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for such
calendar year by substituting ‘calendar
year 1995’ for ‘calendar year 1992’ in sub-
paragraph (B) thereof.
Any increase determined under the preceding
sentence shall be rounded to the nearest mul-
tiple of $1,000.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to estates of decedents dying
after December 31, 1996.
TITLE III—BENEFITS FOR
CONSERVATION EASEMENTS
SEC. 301. TREATMENT OF LAND SUBJECT TO A QUALIFIED
CONSERVATION EASEMENT.
(a) ESTATE TAX WITH RESPECT TO LAND SUBJECT
TO
A QUALIFIED CONSERVATION EASEMENT.—Section
2031 (relating to the definition of gross estate) is amend-
ed by redesignating subsection (c) as subsection (d) and
by inserting after subsection (b) the following new sub-
section:
‘‘(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
(4) shall, for purposes of calculating the amount of
tax imposed by section 2001, include the value of
any development right (as defined in paragraph (3))
retained by the donor in the conveyance of such
qualified conservation easement. The computation of
tax on any retained development right prescribed in
this paragraph shall be done in such manner and on
such forms as the Secretary shall prescribe.
‘‘(6) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) LAND
SUBJECT
TO
A
QUALIFIED
CONSERVATION
EASEMENT.—The term ‘land
subject to a qualified conservation easement’
means land—
‘‘(i) which is located in or within 50
miles of an area which, on the date of the
decedent’s death, is—
‘‘(I) a metropolitan area (as de-
fined by the Office of Management
and Budget), or
‘‘(II) a National Park or wilder-
ness area designated as part of the
National Wilderness Preservation Sys-
tem (unless it is determined by the
Secretary that land in or within 50
miles of such a park or wilderness
area is not under significant develop-
ment pressure),
‘‘(ii) which was owned by the decedent
or a member of the decedent’s family at all
times during the 3-year period ending on
the date of the decedent’s death, and
‘‘(iii) with respect to which a qualified
conservation easement is or has been made
by the decedent or a member of the dece-
dent’s family.
‘‘(B) QUALIFIED
CONSERVATION
EASE-
MENT.—The term ‘qualified conservation ease-
ment’ means a qualified conservation contribu-
tion (as defined in section 170(h)(1)) of a quali-
fied real property interest (as defined in section
170(h)(2)(C)), except that for this purpose the
term ‘qualified real property interest’ shall not
include any structure or building constituting ‘a
certified historic structure’ as defined in section
170(h)(4)(B), and the restriction on the use of
such interest described in section 170(h)(2)(C)
shall include a prohibition on commercial rec-
reational activity, except that the leasing of
fishing and hunting rights shall not be consid-
ered commercial recreational activity when such
leasing is subordinate to the activities of farm-
ing, ranching, forestry, horticulture or viticul-
ture.
‘‘(C) MEMBER
OF
FAMILY.—The term
‘member of the decedent’s family’ means any
member of the family (as defined in section
2032A(e)(2)) of the decedent.
‘‘(7) APPLICATION OF THIS SECTION TO INTER-
ESTS
IN
PARTNERSHIPS, 
CORPORATIONS, 
AND
TRUSTS.—The Secretary shall prescribe regulations
applying this section to an interest in a partnership,
corporation, or trust which, with respect to the dece-
dent, is an interest in a closely held business (within
the meaning of paragraph (1) of section 6166(b)).’’
(b) CARRYOVER BASIS.—Section 1014(a) (relating to
basis of property acquired from a decedent) is amended
by striking the period at the end of paragraph (3) and
inserting ‘‘, or’’ and by adding after paragraph (3) the
following new paragraph:
‘‘(4) to the extent of the applicability of the ex-
clusion described in section 2031(c), the basis in the
hands of the decedent.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to estates of decedents dying after
December 31, 1996.
SEC. 302. GIFT TAX ON LAND SUBJECT TO A QUALIFIED
CONSERVATION EASEMENT.
(a) GIFT TAX WITH RESPECT TO LAND SUBJECT TO
A QUALIFIED CONSERVATION EASEMENT.—Section 2503
(relating to taxable gifts) is amended by adding at the end
the following new subsection:
‘‘(h) GIFT TAX WITH RESPECT TO LAND SUBJECT
TO A QUALIFIED CONSERVATION EASEMENT.—The trans-
fer by gift of land subject to a qualified conservation ease-
ment shall not be treated as a transfer of property by gift
for purposes of this chapter. For purposes of this sub-
section, the term ‘land subject to a qualified conservation
easement’ has the meaning given to such term by section
2031(c); except that references to the decedent shall be
treated as references to the donor and references to the
date of the decedent’s death shall be treated as references
to the date of the transfer by the donor.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to gifts made after December 31,
1996.
SEC. 303. QUALIFIED CONSERVATION CONTRIBUTION IS
NOT A DISPOSITION.
(a) QUALIFIED CONSERVATION CONTRIBUTION IS
NOT A DISPOSITION.—Subsection (c) of section 2032A
(relating to alternative valuation method) is amended by
adding at the end the following new paragraphs:
‘‘(8) QUALIFIED CONSERVATION CONTRIBUTION
IS
NOT
A
DISPOSITION.—A qualified conservation
contribution (as defined in section 170(h)) by gift or
otherwise shall not be deemed a disposition under
subsection (c)(1)(A).
‘‘(9) EXCEPTION FOR REAL PROPERTY IS LAND
SUBJECT
TO
A
QUALIFIED
CONSERVATION
EASE-
MENT.—If qualified real property is land subject to
a qualified conservation easement (as defined in sec-
tion 2031(c)), the preceding paragraphs of this sub-
section shall not apply.’’
(b) LAND SUBJECT TO A QUALIFIED CONSERVATION
EASEMENT IS NOT DISQUALIFIED.—Subsection (b) of
section 2032A (relating to alternative valuation method)
is amended by adding at the end the following paragraph:
‘‘(E) If property is otherwise qualified real
property, the fact that it is land subject to a
qualified conservation easement (as defined in
section 2031(c)) shall not disqualify it under
this section.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to contributions made,
and easements granted, after December 31, 1996.
SEC. 
304. 
QUALIFIED 
CONSERVATION 
CONTRIBUTION
WHERE SURFACE AND MINERAL RIGHTS ARE
SEPARATED.
(a) IN GENERAL.—Section 170(h)(5)(B)(ii) (relating
to special rule) is amended to read as follows:
‘‘(ii) SPECIAL RULE.—With respect to any con-
tribution of property in which the ownership of the
surface estate and mineral interests has been and re-
mains separated, subparagraph (A) shall be treated
as met if the probability of surface mining occurring
on such property is so remote as to be negligible.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply with respect to contributions made
after December 31, 1992, in taxable years ending after
such date.
TITLE IV—BENEFITS FOR
HISTORIC PRESERVATION
SEC. 401. EXCLUSION FROM ESTATE TAX FOR HISTORIC
PROPERTY 
SUBJECT 
TO 
PRESERVATION
EASEMENT.
(a) IN GENERAL.—Part IV of subchapter A of chap-
ter 11 (relating to taxable estate) is amended by adding
at the end the following new section:
‘‘SEC. 2057. QUALIFIED HISTORIC PROPERTY.
‘‘(a) GENERAL RULE.—For purposes of the tax im-
posed by section 2001, the value of the taxable estate shall
be determined by deducting from the value of the gross
estate an amount equal to the value of any qualified his-
toric property included in the gross estate.
‘‘(b) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED HISTORIC PROPERTY.—
‘‘(A) IN
GENERAL.—The term ‘qualified
historic property’ means any historic property
if—
‘‘(i) on or before the date on which
the return of the tax imposed by section
2001 is filed, a qualified real property in-
terest described in section 170(h)(2)(C) in
such property is held by a qualified organi-
zation for the purpose described in section
170(h)(4)(A)(iv), and
‘‘(ii) such property is covered by an
agreement meeting the requirements of
subsection (c) which is entered into on or
before such date.
Clause (i) shall not be construed to require that
the property be held for the purpose described
therein for longer than the 20-year period re-
ferred to in subsection (c)(1)(D).
‘‘(B) TREATMENT
OF
PERSONAL
PROP-
ERTY.—Such term includes personal property
included within, or associated with, qualified
historic property (as defined in paragraph (1))
if such personal property—
‘‘(i) is held by the decedent holding
such qualified historic property,
‘‘(ii) has been so included within, or
associated with, such qualified historic
property throughout the 10-year period
ending on the date of the decedent’s death,
and
‘‘(iii) is covered by the agreement re-
ferred to in subparagraph (A)(ii) which
covers such qualified historic property.
‘‘(2) HISTORIC PROPERTY.—The term ‘historic
property’ means—
‘‘(A) any building (and its structural com-
ponents)—
‘‘(i) which is designated as a National
Historic Landmark under section 101 of
the National Historic Preservation Act
throughout the 10-year period ending on
the date of the decedent’s death,
‘‘(ii) which was owned by the decedent
or a member of the decedent’s family (as
defined in section 2032A(e)(2)) throughout
such 10-year period, and
‘‘(iii) which was originally used for
residential purposes, and
‘‘(B) any other real property to the extent
reasonably necessary for public view and visita-
tion of the property described in subparagraph
(A).
‘‘(3) QUALIFIED
ORGANIZATION.—The term
‘qualified organization’ has the meaning given to
such term by section 170(h)(3).
‘‘(4) TREATMENT
OF
QUALIFIED
HISTORIC
PROPERTY HELD BY A CORPORATION.—In the case
of a corporation all of the stock in which was held
on the date of the decedent’s death by the decedent
or members of the decedent’s family (as defined in
section 2032A(e)(2))—
‘‘(A) stock in such corporation shall be
treated for purposes of this section as qualified
historic property to the extent that the value of
such stock is attributable to qualified historic
property held by such corporation, but
‘‘(B) the requirements of subsection (c)
shall be met only if each member of the dece-
dent’s family holding such stock on such date
sign the agreement referred to in subsection (c).
‘‘(c) REQUIREMENTS FOR AGREEMENT.—
‘‘(1) IN GENERAL.—For purposes of subsection
(b)(1)(A)(ii), an agreement meets the requirements
of this subsection if—
‘‘(A) such agreement is a written agree-
ment signed by each person in being who has
an interest (whether or not in possession) in the
historic property (other than the qualified orga-
nization),
‘‘(B) such agreement is entered into with
a State historic preservation agency (or similar
State agency) and filed with the Secretary with
the return of the tax imposed by section 2001,
‘‘(C) such agreement provides that the only
activities carried on at the historic property are
activities which are substantially related (aside
from the need for income or funds or the use
made of the profits derived) to—
‘‘(i) the public view and visitation of
such property and the property described
in the last sentence of subsection (b)(1)
with respect to such property), and
‘‘(ii) the maintenance and preserva-
tion of such property and surrounding
areas for such public view and visitation,
‘‘(D) such agreement provides that the his-
toric property will be open to the public on a
substantial and regular basis for a period of at
least 20 years beginning on the date on which
the return of the tax imposed by section 2001
is filed, and
‘‘(E) such agreement provides that any ad-
mission fees (if any) shall bear a reasonable re-
lationship to admission fees for other com-
parable tourist sites and shall be approved by
such State historic preservation agency (or
similar State agency).
‘‘(2) TREATMENT
OF
FOOD, LODGING, AND
MEETING FACILITIES PROVIDED TO GENERAL PUB-
LIC.—The regular carrying on—
‘‘(A) a trade or business of providing lodg-
ing shall be treated as not substantially related
for purposes of paragraph (1)(C),
‘‘(B) a trade or business of providing food
shall be treated as not substantially related for
purposes of paragraph (1)(C) unless—
‘‘(i) such food is only provided to indi-
viduals who pay the generally applicable
admission fees (if any) for admission to
the property by individuals to whom no
food is provided, and
‘‘(ii) only an insubstantial portion of
the structures on the historic property is
devoted to the provision of such food, and
‘‘(C) a trade or business of providing facili-
ties for meetings or events shall be treated as
not substantially related for purposes of para-
graph (1)(C) unless all of the net proceeds from
such trade or business are used for mainte-
nance or preservation of the historic property.
‘‘(d) TAX TREATMENT OF DISPOSITIONS AND FAIL-
URE TO COMPLY WITH AGREEMENT.—
‘‘(1) IMPOSITION
OF
ADDITIONAL
ESTATE
TAX.—If, during the 20-year period referred to in
subsection (c)(1)(D)—
‘‘(A) any person signing the written agree-
ment referred to in subsection (c) disposes of
any interest in the qualified historic property,
or
‘‘(B) there is a violation of any provision
of such agreement (as determined under regula-
tions prescribed by the Secretary),
then there is hereby imposed an additional estate
tax.
‘‘(2) EXCEPTION FOR CERTAIN TRANSFEREES
WHO AGREE TO BE BOUND BY AGREEMENT.—No tax
shall be imposed under paragraph (1) by reason of
any disposition if the person acquiring the prop-
erty—
‘‘(A) is a qualified organization or is a
member of the family (as defined in section
2032A(e)(2)) of the person disposing of such
property, and
‘‘(B) agrees to be bound by the agreement
referred to in subsection (b)(4) and to be liable
for any tax under this subsection in the same
manner as the person disposing of such prop-
erty.
‘‘(3) AMOUNT OF ADDITIONAL TAX.—
‘‘(A) IN
GENERAL.—The amount of the
additional tax imposed by paragraph (1) with
respect to any property shall be an amount
equal to the applicable percentage of the excess
of—
‘‘(i) what would (but for subsection
(a)) have been the tax imposed by section
2001 (reduced by the credits allowable),
over
‘‘(ii) the tax imposed by section 2001
(as so reduced).
‘‘(B) 
APPLICABLE
PERCENTAGE.—For
purposes of subparagraph (A), the applicable
percentage is the percentage determined in ac-
cordance with the following table for the year
(of 20-year period referred to in subsection
(c)(1)(D)) in which the event described in para-
graph (1) occurs:
‘‘If the event
The applicable
occurs during:
percentage is:
The 1st 12 years of such 20-year period .................. 100 percent
The 13th or 14th year of such period .......................
80 percent
The 15th or 16th year of such period .......................
60 percent
The 17th or 18th year of such period .......................
40 percent
The 19th or 20th year of such period .......................
20 percent.
‘‘(4) DUE DATE.—The additional tax imposed
by this subsection shall be due and payable on the
day which is 6 months after the date of the disposi-
tion or violation referred to in paragraph (1).
‘‘(5) LIABILITY FOR TAX.—Any person signing
the agreement referred to in subsection (c) (other
than the executor) shall be personally liable for the
additional tax imposed by this subsection. If more
than 1 person is liable under this subsection, all
such persons shall be jointly and severally liable.
‘‘(6) CERTAIN OTHER RULES TO APPLY.—Rules
similar to the rules of sections 1016(c), 2013(f), and
2032A(f) shall apply for purposes of this subsection.
‘‘(e) OTHER SPECIAL RULES.—
‘‘(1) COORDINATION
WITH
DEDUCTION
FOR
TRANSFER
OF
EASEMENT.—Section 2055(f) shall
not apply to any interest referred to therein with re-
spect to property for which a deduction is allowed
under subsection (a).
‘‘(2) DENIAL
OF
DEDUCTION
OF
INDEBTED-
NESS
ON
EXCLUDED
PROPERTY.—No deduction
shall be allowed under section 2053 for indebtedness
in respect of property the value of which is deducted
under subsection (a).
‘‘(3) SUBMISSION OF ANNUAL INVENTORIES OF
PERSONAL PROPERTY.—The Secretary shall require
the submission to the Secretary of such inventories
of personal property which is qualified historic prop-
erty as the Secretary determines are necessary for
purposes of this section.’’
(b) TECHNICAL AMENDMENTS.—
(1) Subsection (a) of section 1014 of such Code
is amended by striking the period at the end of
paragraph (3) and inserting ‘‘, or’’ and by adding
after paragraph (3) the following new paragraph:
‘‘(4) in the case of property the value of which
was deducted under section 2057(a), the adjusted
basis of such property in the hands of the decedent
immediately before the death of the decedent.’’
(2) Subparagraph (A) of section 2056A(b)(10)
of such Code is amended by inserting ‘‘2057,’’ after
‘‘2056,’’.
(3) The table of sections for part IV of sub-
chapter A of chapter 11 of such Code is amended by
adding at the end the following new item:
‘‘Sec. 2057. Qualified historic property.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to the estates of dece-
dents dying after the date of the enactment of this Act.
Æ