Title: Water and Agriculture Tax Reform Act of 2019
Policy area: Taxation

Summary:
Water and Agriculture Tax Reform Act of 2019
This bill permits tax-exempt mutual ditch or irrigation companies to earn income from dispositions of certain property and stock interests without affecting their tax-exempt status, but requires that such income be used to pay the costs of operations, maintenance, and capital improvements of such a company.
The bill also establishes a rule regarding the organizational governance of mutual ditch or irrigation companies. Where state law provides that such a company may be organized in a manner that permits voting on a basis that is pro rata to share ownership on corporate governance matters, the tax-exempt status of the mutual ditch or irrigation company must be determined without taking into account whether its member shareholders have one vote on corporate governance matters per share held in the corporation.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 361 Introduced in Senate (IS)]

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116th CONGRESS
  1st Session
                                 S. 361

To amend the Internal Revenue Code of 1986 to facilitate water leasing 
      and water transfers to promote conservation and efficiency.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            February 6, 2019

   Mr. Gardner (for himself, Mr. Crapo, Mr. Roberts, Mr. Tester, Mr. 
 Bennet, Mr. Risch, and Mr. Enzi) introduced the following bill; which 
        was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to facilitate water leasing 
      and water transfers to promote conservation and efficiency.

    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 ``Water and Agriculture Tax Reform Act 
of 2019''.

SEC. 2. FACILITATE WATER LEASING AND WATER TRANSFERS TO PROMOTE 
              CONSERVATION AND EFFICIENCY.

    (a) In General.--Paragraph (12) of section 501(c) of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
subparagraph:
                    ``(J) Treatment of mutual ditch irrigation 
                companies.--
                            ``(i) In general.--In the case of a mutual 
                        ditch or irrigation company or of a like 
                        organization to a mutual ditch or irrigation 
                        company, subparagraph (A) shall be applied 
                        without taking into account--
                                    ``(I) any income received or 
                                accrued from the sale, lease, or 
                                exchange of fee or other interests in 
                                real and personal property, including 
                                interests in water (other than income 
                                derived from the sale, lease, or 
                                transfer of water to nonmembers outside 
                                the river basin or basins within which 
                                the mutual ditch or irrigation company 
                                operates),
                                    ``(II) any income received or 
                                accrued from the sale or exchange of 
                                stock in a mutual ditch or irrigation 
                                company (or in a like organization to a 
                                mutual ditch or irrigation company) or 
                                contract rights for the delivery or use 
                                of water, or
                                    ``(III) any income received or 
                                accrued from the investment of income 
                                described in subclause (I) or (II),
                        except that any income described in subclause 
                        (I), (II), or (III) which is distributed or 
                        expended for expenses (other than for 
                        operations, maintenance, and capital 
                        improvements) of the mutual ditch or irrigation 
                        company or of the like organization to a mutual 
                        ditch or irrigation company (as the case may 
                        be) shall be treated as nonmember income in the 
                        year in which it is distributed or expended. 
                        For purposes of the preceding sentence, 
                        expenses (other than for operations, 
                        maintenance, and capital improvements) include 
                        expenses for the construction of conveyances 
                        designed to deliver water outside of the system 
                        of the mutual ditch or irrigation company or of 
                        the like organization.
                            ``(ii) Treatment of organizational 
                        governance.--In the case of a mutual ditch or 
                        irrigation company or of a like organization to 
                        a mutual ditch or irrigation company, where 
                        State law provides that such a company or 
                        organization may be organized in a manner that 
                        permits voting on a basis which is pro rata to 
                        share ownership on corporate governance 
                        matters, subparagraph (A) shall be applied 
                        without taking into account whether its member 
                        shareholders have one vote on corporate 
                        governance matters per share held in the 
                        corporation. Nothing in this clause shall be 
                        construed to create any inference about the 
                        requirements of this subsection for companies 
                        or organizations not included in this 
                        clause.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 2018.
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