A bill to amend the Internal Revenue Code of 1986 to allow a refundable tax credit for wetland restoration and conservation expenses.

SECTION 1. REFUNDABLE CREDIT FOR WETLAND RESTORATION AND CONSERVATION 
              EXPENSES.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to refundable credits) 
is amended by redesignating section 35 as section 36 and by inserting 
after section 34 the following new section:

``SEC. 35. WETLAND RESTORATION AND CONSERVATION EXPENSES.

    ``(a) Allowance of Credit.--In the case of an eligible taxpayer, 
there shall be allowed as a credit against the tax imposed by this 
subtitle for the taxable year in an amount equal to the sum of--
            ``(1) the wetland restoration credit, plus
            ``(2) the wetland conservation credit, plus
            ``(3) the wetland easement credit.
    ``(b) Wetland Restoration Credit.--
            ``(1) In general.--The wetland restoration credit for any 
        taxable year is an amount equal to the wetland restoration 
        expenditures paid or incurred by the eligible taxpayer for such 
        taxable year.
            ``(2) Wetland restoration expenditures.--For purposes of 
        this subsection, the term `wetland restoration expenditure' 
        means an expenditure for the restoration of farmed wetland or 
        prior converted wetland to fully functioning wetland 
        condition--
                    ``(A) pursuant to a restoration plan approved by 
                the Natural Resources Conservation Service of the 
                Department of Agriculture, and
                    ``(B) paid or incurred during the first 5 years of 
                the qualified conservation agreement or qualified 
                conservation easement relating to such farmed wetland 
                or prior converted wetland.
        Such term shall not include any expenditure which is required 
        to be made pursuant to any Federal or State law.
    ``(c) Wetland Conservation Credit.--
            ``(1) In general.--The wetland conservation credit for any 
        taxable year is an amount equal to the sum of--
                    ``(A) the applicable percentage of the soil-
                specific Conservation Reserve Program rental rate 
                applicable to the eligible taxpayer's qualified wetland 
                for such taxable year under title XII of the Food 
                Security Act of 1985, plus
                    ``(B) any fee for certification of compliance paid 
                or incurred by the eligible taxpayer in such taxable 
                year with respect to the qualified conservation 
                agreement relating to such qualified wetland.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1)(A), the applicable percentage is equal to, in the case of 
        an eligible taxpayer who has entered into a qualified 
        conservation agreement with a term of--
                    ``(A) at least 10 years, but less than 20 years, 50 
                percent,
                    ``(B) at least 20 years, but less than 30 years, 60 
                percent, and
                    ``(C) 30 years, 70 percent.
            ``(3) Denial of credit if wetland easement credit is 
        elected.--With respect to any qualified wetland with respect to 
        which the taxpayer makes an election under subsection (d) for 
        any taxable year, the wetland conservation credit with respect 
        to such qualified wetland for such taxable year is zero.
    ``(d) Wetland Easement Credit.--
            ``(1) In general.--At the election of the eligible 
        taxpayer, the wetland easement credit for any taxable year is 
        an amount equal to the fair market value of any qualified 
        wetland of the taxpayer subject to a qualified conservation 
        easement.
            ``(2) Determination of value.--For purposes of paragraph 
        (1), the value of such qualified wetland is the fair market 
        value of such qualified wetland in agricultural use (as 
        determined by a certified appraisal) during the taxable year 
        (determined as of the date of the grant of the easement).
            ``(3) Election.--An election under this subsection shall 
        apply to the taxable year for which made.
    ``(e) Definitions.--For purposes of this section--
            ``(1) Eligible taxpayer.--The term `eligible taxpayer' 
        means a taxpayer who--
                    ``(A) owns property which consists of--
                            ``(i) wetlands, farmed wetlands, or prior 
                        converted wetlands, and
                            ``(ii) the surrounding or immediately 
                        adjacent actively farmed cropland, and
                    ``(B) with respect to such property, has entered 
                into a qualified conservation agreement or a qualified 
                conservation easement.
            ``(2) Qualified wetland.--
                    ``(A) In general.--The term `qualified wetland' 
                means--
                            ``(i) wetland, including farmed wetland or 
                        prior converted wetland, which through the use 
                        of wetland restoration expenditures is being 
                        converted to fully functioning wetland 
                        condition, plus
                            ``(ii) as determined under a qualified 
                        conservation agreement or a qualified 
                        conservation easement, such surrounding or 
                        immediately adjacent nonwetland as is 
                        appropriate to buffer the water quality or 
                        wildlife habitat values associated with the 
                        wetland, but only to the extent the nonwetland 
                        acreage is not more than 3 times greater than 
                        the wetland acreage.
                    ``(B) Certain property excluded.--Such term shall 
                not include any acre of land with respect to which 
                contract or easement payments are received in the 
                taxable year from the Conservation Reserve Program or 
                the Wetlands Reserve Program under title XII of the 
                Food Security Act of 1985.
            ``(3) Wetland, farmed wetland, and prior converted 
        wetland.--The terms `wetland', `farmed wetland', and `prior 
        converted wetland' shall have the meanings given such terms by 
        title XII of the Food Security Act of 1985.
            ``(4) Qualified conservation agreement.--
                    ``(A) In general.--The term `qualified conservation 
                agreement' means an agreement by the eligible 
                taxpayer--
                            ``(i) with a governmental unit referred to 
                        in section 170(c)(1),
                            ``(ii) for a term of not less than 10 years 
                        and not more than 30 years,
                            ``(iii) under which the taxpayer agrees to 
                        comply with the conservation requirements of 
                        subparagraph (B) with respect to the qualified 
                        wetland, and
                            ``(iv) under which the taxpayer agrees to 
                        obtain a certification of compliance not less 
                        than every 5 years during the period of the 
                        agreement.
                    ``(B) Conservation requirements.--An eligible 
                taxpayer complies with the conservation requirements of 
                this subparagraph if--
                            ``(i) the taxpayer does not use the 
                        qualified wetland for agricultural production, 
                        and
                            ``(ii) the taxpayer does not drain, dredge, 
                        fill, level, or otherwise manipulate the 
                        qualified wetland (including the removal of 
                        woody vegetation, or any activity which results 
                        in impairing or reducing the flow, circulation, 
                        or reach of water) for the purpose, or that has 
                        the effect, of making production of an 
                        agricultural commodity or development of built 
                        structures on such wetland possible.
            ``(5) Qualified conservation easement.--The term `qualified 
        conservation easement' means an easement granted in perpetuity 
        by the eligible taxpayer restricting the use which may be made 
        of the qualified wetland to a qualified organization 
        exclusively for conservation purposes (as defined in section 
        170(h)).
    ``(f) Special Rules.--
            ``(1) Denial of double benefit.--
                    ``(A) In general.--No credit shall be allowed under 
                subsection (a) for any expense for which a deduction or 
                credit is allowed under any other provision of this 
                chapter.
                    ``(B) Grants.--No credit shall be allowed under 
                subsection (a) for any expense to the extent that funds 
                for such expense are received under any Federal, State, 
                or local program.
            ``(2) Married couples must file joint returns.--If the 
        taxpayer is a married individual (within the meaning of section 
        7703), this section shall apply only if the taxpayer and the 
        taxpayer's spouse file a joint return for the taxable year.''
    (b) Conforming Amendments.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting before the period ``, or 
        from section 35 of such Code''.
            (2) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 of the Internal Revenue Code of 1986 
        is amended by striking the last item and inserting the 
        following:

                              ``Sec. 35. Wetland restoration and 
                                        conservation expenses.
                              ``Sec. 36. Overpayments of tax.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1998.

Summary: Amends the Internal Revenue Code to allow a refundable tax credit for wetland restoration, conservation, and easement expenses for any taxable year.  Prescribes formulae for the determination of the three elements of such credit.