II 117th CONGRESS 1st Session S. 2256 IN THE SENATE OF THE UNITED STATES June 24, 2021 Mr. Daines (for himself, Ms. Stabenow , Mr. Wyden , and Mr. Grassley ) 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 limit the charitable deduction for certain qualified conservation contributions.

1. Short title This Act may be cited as the Charitable Conservation Easement Program Integrity Act of 2021 . 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.