Charitable Conservation Easement Program Integrity Act of 2021
Bill: S.2256 | Sponsor: Sen. Daines, Steve (R-MT)
Policy area: Taxation

Summary:
Charitable Conservation Easement Program Integrity Act of 2021
This bill imposes a limitation on the tax deduction for qualified conservation contributions made by certain partnerships if the amount of the contribution exceeds 2.5% times the sum of each partner's relevant basis in the partnership. This limitation also applies to other pass-thru entities, such as S corporations.

To amend the Internal Revenue Code of 1986 to limit the charitable 
      deduction for certain qualified conservation contributions.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Charitable Conservation Easement 
Program Integrity Act of 2021''.

SEC. 2. LIMITATION ON DEDUCTION FOR QUALIFIED CONSERVATION 
              CONTRIBUTIONS MADE BY PASS-THROUGH ENTITIES.

    (a) In General.--Section 170(h) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new paragraph:
            ``(7) Limitation on deduction for qualified conservation 
        contributions made by pass-through entities.--
                    ``(A) In general.--A contribution by a partnership 
                (whether directly or as a distributive share of a 
                contribution of another partnership) shall not be 
                treated as a qualified conservation contribution for 
                purposes of this section if the amount of such 
                contribution exceeds 2.5 times the sum of each 
                partner's relevant basis in such partnership.
                    ``(B) Relevant basis.--For purposes of this 
                paragraph--
                            ``(i) In general.--The term `relevant 
                        basis' means, with respect to any partner, the 
                        portion of such partner's modified basis in the 
                        partnership which is allocable (under rules 
                        similar to the rules of section 755) to the 
                        portion of the real property with respect to 
                        which the contribution described in 
                        subparagraph (A) is made.
                            ``(ii) Modified basis.--The term `modified 
                        basis' means, with respect to any partner, such 
                        partner's adjusted basis in the partnership as 
                        determined--
                                    ``(I) immediately before the 
                                contribution described in subparagraph 
                                (A),
                                    ``(II) without regard to section 
                                752, and
                                    ``(III) by the partnership after 
                                taking into account the adjustments 
                                described in subclauses (I) and (II) 
                                and such other adjustments as the 
                                Secretary may provide.
                    ``(C) Exception for contributions outside 3-year 
                holding period.--Subparagraph (A) shall not apply to 
                any contribution which is made at least 3 years after 
                the latest of--
                            ``(i) the last date on which the 
                        partnership that made such contribution 
                        acquired any portion of the real property with 
                        respect to which such contribution is made,
                            ``(ii) the last date on which any partner 
                        in the partnership that made such contribution 
                        acquired any interest in such partnership, and
                            ``(iii) if the interest in the partnership 
                        that made such contribution is held through one 
                        or more partnerships--
                                    ``(I) the last date on which any 
                                such partnership acquired any interest 
                                in any other such partnership, and
                                    ``(II) the last date on which any 
                                partner in any such partnership 
                                acquired any interest in such 
                                partnership.
                    ``(D) Exception for family partnerships.--
                            ``(i) In general.--Subparagraph (A) shall 
                        not apply with respect to any contribution made 
                        by any partnership if substantially all of the 
                        partnership interests in such partnership are 
                        held, directly or indirectly, by an individual 
                        and members of the family of such individual.
                            ``(ii) Members of the family.--For purposes 
                        of this subparagraph, the term `members of the 
                        family' means, with respect to any individual--
                                    ``(I) the spouse of such 
                                individual, and
                                    ``(II) any individual who bears a 
                                relationship to such individual which 
                                is described in subparagraphs (A) 
                                through (G) of section 152(d)(2).
                    ``(E) Application to other pass-through entities.--
                Except as may be otherwise provided by the Secretary, 
                the rules of this paragraph shall apply to S 
                corporations and other pass-through entities in the 
                same manner as such rules apply to partnerships.
                    ``(F) Regulations.--The Secretary shall prescribe 
                such regulations or other guidance as may be necessary 
                or appropriate to carry out the purposes of this 
                paragraph, including regulations or other guidance--
                            ``(i) to require reporting, including 
                        reporting related to tiered partnerships and 
                        the modified basis of partners, and
                            ``(ii) to prevent the avoidance of the 
                        purposes of this paragraph.''.
    (b) Application of Accuracy-Related Penalties.--
            (1) In general.--Section 6662(b) of the Internal Revenue 
        Code of 1986 is amended by inserting after paragraph (9) the 
        following new paragraph:
            ``(10) Any disallowance of a deduction by reason of section 
        170(h)(7).''.
            (2) Treatment as gross valuation misstatement.--Section 
        6662(h)(2) of such Code is amended by striking ``and'' at the 
        end of subparagraph (B), by striking the period at the end of 
        subparagraph (C) and inserting ``, and'', and by adding at the 
        end the following new subparagraph:
                    ``(D) any disallowance of a deduction described in 
                subsection (b)(10).''.
            (3) No reasonable cause exception.--Section 6664(c)(2) of 
        such Code is amended by inserting ``or to any disallowance of a 
        deduction described in section 6662(b)(10)'' before the period 
        at the end.
            (4) Approval of assessment not required.--Section 
        6751(b)(2)(A) of such Code is amended by striking ``subsection 
        (b)(9)'' and inserting ``paragraph (9) or (10) of subsection 
        (b)''.
    (c) Application of Statute of Limitations on Assessment and 
Collection.--
            (1) Extension for certain adjustments made under prior 
        law.--In the case of any disallowance of a deduction by reason 
        of section 170(h)(7) of the Internal Revenue Code of 1986 (as 
        added by this section) or any penalty imposed under section 
        6662 of such Code with respect to such disallowance, section 
        6229(d)(2) of such Code (as in effect before its repeal) shall 
        be applied by substituting ``2 years'' for ``1 year''.
            (2) Extension for listed transactions.--Any contribution 
        described in section 170(h)(7)(A) of the Internal Revenue Code 
        of 1986 (as added by this section) shall be treated for purpose 
        of sections 6501(c)(10) and 6235(c)(6) of such Code as a 
        transaction specifically identified by the Secretary on 
        December 23, 2016, as a tax avoidance transaction for purposes 
        of section 6011 of such Code.
    (d) Application to Certain Transactions Disallowed Under Other 
Provisions of Law.--In the case of any disallowance of a deduction 
under section 170 of the Internal Revenue Code of 1986 with respect a 
transaction described in Internal Revenue Service Notice 2017-10 with 
respect to a taxable year ending before the date of the enactment of 
this Act, such disallowance shall be treated for purposes of section 
6662(b)(10) of such Code (as added by this section) and subsection 
(c)(1) as being by reason of section 170(h)(7) of such Code (as added 
by this section).
    (e) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to contributions 
        made after December 23, 2016, in taxable years ending after 
        such date.
            (2) Certified historic structures.--In the case of 
        contributions the conservation purpose (as defined in section 
        170(h)(4) of the Internal Revenue Code of 1986) of which is the 
        preservation of a certified historic structure (as defined in 
        section 170(h)(4)(C) of such Code), the amendments made by this 
        section shall apply to contributions made in taxable years 
        beginning after December 31, 2018.
            (3) No inference.--No inference is intended as to the 
        appropriate treatment of contributions made in taxable years 
        ending on or before the date specified in paragraph (1) or (2), 
        whichever is applicable, or as to any activity not described in 
        section 170(h)(7) of the Internal Revenue Code of 1986, as 
        added by this section.
                                 <all>