[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 2746 Introduced in Senate (IS)]
106th CONGRESS
2d Session
S. 2746
To amend the Internal Revenue Code of 1986 to allow a credit against
income tax for investment by farmers in value-added agricultural
property.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
June 15, 2000
Mr. Ashcroft (for himself and Mr. Grams) 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 allow a credit against
income tax for investment by farmers in value-added agricultural
property.
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 ``Farmers' Value-Added Agricultural
Investment Tax Credit Act''.
SEC. 2. CREDIT FOR FARMER INVESTMENT IN VALUE-ADDED AGRICULTURAL
PROPERTY.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 (relating to business related
credits) is amended by adding at the end the following new section:
``SEC. 45D. VALUE-ADDED AGRICULTURAL PROPERTY INVESTMENT CREDIT.
``(a) General Rule.--For purposes of section 38, in the case of a
taxpayer who is--
``(1) an eligible person, or
``(2) a farmer-owned entity,
the value-added agricultural property investment credit determined
under this section for any taxable year is 50 percent of the basis of
any qualified value-added agricultural property placed in service
during the taxable year. In the case of a farmer-owned entity, such
credit shall be allocated on a pro rata basis among eligible persons
holding qualified interests in such entity as of the last day of such
taxable year.
``(b) Maximum Credit.--For purposes of subsection (a)--
``(1) Property placed in service by eligible person.--In
the case of property placed in service during a taxable year by
an eligible person, the credit determined under this section
for such year shall not exceed $30,000, reduced by the amount
of the creditable investments allowed for the taxable year
under paragraph (2).
``(2) Property placed in service by farmer-owned entity.--
``(A) In general.--In the case of property placed
in service by a farmer-owned entity, the credit
determined under this section shall not exceed the sum
of the eligible person's creditable investments in such
entity as of the date such property is placed in
service.
``(B) Creditable investments.--For purposes of
subparagraph (A), the term `creditable investments'
means, with respect to any property placed in service
by a farmer-owned entity, the aggregate qualified
investments made by the eligible person in such entity,
reduced (but not below zero) by the sum of--
``(i) the amount of the aggregate qualified
investments made by such person in such entity
which were taken into account under this
section with respect to property previously
placed in service by such entity, and
``(ii) the amount of the aggregate
qualified investments made by such person in
all other farmer-owned entities which were
taken into account under this section with
respect to property previously placed in
service by such other entities.
``(C) Limitation.--For purposes of this paragraph,
the aggregate qualified investments made by the
eligible person which may be taken into account for any
taxable year shall not exceed $30,000.
``(c) Definitions.--For purposes of this section--
``(1) Qualified value-added agricultural property.--The
term `qualified value-added agricultural property' means
property--
``(A) which is used to add value to a good or
product, suitable for food or nonfood use, derived in
whole or in part from organic matter which is available
on a renewable basis, including agricultural crops and
agricultural wastes and residues, wood wastes and
residues, and domesticated animal wastes,
``(B)(i) to which section 168 applies without
regard to any useful life, or
``(ii) with respect to which depreciation (or
amortization in lieu of depreciation) is allowable and
having a useful life (determined as of the time such
property is placed in service) of 3 years or more, and
``(C) which is owned and operated by an eligible
person or a farmer-owned entity.
``(2) Eligible person.--
``(A) In general.--The term `eligible person' means
a person who materially participates during the taxable
year in an eligible farming business.
``(B) Material participation.--For purposes of
subparagraph (A), the determination of whether a person
materially participates in the trade or business of
farming shall be made in a manner similar to the manner
in which such determination is made under section
2032A(e)(6). In the case that the person is a
corporation, cooperative, partnership, estate, or
trust, such determination shall be made at the
shareholder, partner, or beneficial interests level (as
the case may be).
``(C) Eligible farming business.--For purposes of
subparagraph (A), the term `eligible farming business'
means a farming business (as defined in section 263A(e)(4)) which is
not a passive activity (within the meaning of section 469(c)).
``(3) Farmer-owned entity.--
``(A) In general.--The term `farmer-owned entity'
means--
``(i) a corporation (including an S
corporation) in which eligible persons own 50
percent or more of the total voting power of
the stock and 50 percent or more (in value) of
the stock,
``(ii) a partnership in which eligible
persons own 50 percent or more of the total
voting power of the profits interest and 50
percent or more (in value) of the profits
interest, and
``(iii) a cooperative in which eligible
persons own 50 percent or more of the total
voting power of the member patronage interests
and 50 percent or more (in value) of the member
patronage interests.
``(B) Constructive ownership rules.--For purposes
of subparagraph (A), rules similar to the rules of
section 263A(e)(2)(B) shall apply; except that, in
applying such rules, the members of an individual's
family shall be the individuals described in
subparagraph (C).
``(C) Members of family.--The family of any
individual shall include only his spouse and children,
grandchildren, and great grandchildren (whether by the
whole or half blood), and the spouses of his children,
grandchildren, and great grandchildren, who reside in
the same household or jointly operate farming
businesses (as defined in section 263A(e)(4)). For
purposes of the preceding sentence, a child who is
legally adopted, or who is placed with the taxpayer by
an authorized placement agency for adoption by the
taxpayer, shall be treated as a child by blood.
``(4) Qualified investments.--
``(A) In general.--The term `qualified investments'
means a payment of cash for the purchase of a qualified
equity interest in a farmer-owned entity.
``(B) Qualified equity interest.--The term
`qualified equity interest' means--
``(i) any stock in a domestic corporation
if such stock is acquired by the taxpayer after
December 31, 2000, and before January 1, 2007,
at its original issue (directly or through an
underwriter) from the corporation solely in
exchange for cash,
``(ii) any capital or profits interest in a
domestic partnership if such interest is
acquired by the taxpayer after December 31,
2000, and before January 1, 2007, and
``(iii) any patronage interest in a
cooperative if such interest is acquired by the
taxpayer after December 31, 2000, and before
January 1, 2007.
Rules similar to the rules of section 1202(c)(3) shall
apply for purposes of this paragraph.
``(d) Special Rules.--For purposes of this section--
``(1) Treatment of married individuals.--In the case of a
separate return by a married individual (as defined in section
7703), subsection (b)(3)(A) shall be applied by substituting
`$15,000' for `$30,000'.
``(2) Applicable rules.--Under regulations prescribed by
the Secretary--
``(A) Allocation of credit in the case of estates
and trusts.--Rules similar to the rules of subsection
(d) of section 52 shall apply.
``(B) Certain property not eligible.--Rules similar
to the rules of section 50(b) shall apply.
``(3) Basis adjustment.--For purposes of this subtitle, if
a credit is allowed under this section to any eligible person
with respect to qualified value-added agricultural property,
the basis of such property shall be reduced by the amount of
the credit so allowed and increased by the amount of recapture
under subsection (e).
``(e) Recapture in the Case of Certain Dispositions.--
``(1) In general.--Under regulations prescribed by the
Secretary, rules similar to the rules of section 50(a) shall
apply with respect to an eligible person if, within the 5-year
period beginning on the date qualified value-added agricultural
property with respect to which such person was allowed a credit
under subsection (a) is originally placed in service--
``(A) such property ceases to be qualified for
purposes of this section,
``(B) the eligible person or the farmer-owned
entity (as the case may be) disposes of all or part of
such property, or
``(C) the eligible person or the farmer-owned
entity (as the case may be) ceases to be an eligible
person or farmer-owned entity for purposes of this
section.
``(2) Special rules in event of death.--
``(A) In general.--The period in paragraph (1)
shall be suspended with respect to an eligible person
for the 2-year period beginning on the date of death of
such person.
``(B) Heirs who are eligible persons.--In the case
that an heir of an eligible person is also an eligible
person, neither paragraph (1) nor subparagraph (A) of
this paragraph (unless elected by such heir) shall
apply with respect to the transfer of property to such
heir.
``(f) Regulations.--The Secretary shall prescribe such regulations
as may be necessary to carry out the purposes of this section.
``(g) Termination.--This section shall not apply to property placed
in service after December 31, 2006.''.
(b) Credit Allowed as Part of General Business Credit.--Section
38(b) of such Code (defining current year business credit) is amended
by striking ``plus'' at the end of paragraph (11), by striking the
period at the end of paragraph (12) and inserting ``, plus'', and by
adding at the end the following new paragraph:
``(13) in the case of an eligible person (as defined in
section 45D(c)), the value-added agricultural property
investment credit determined under section 45D(a).''.
(c) Credit Allowable Against Minimum Tax.--
(1) In general.--Subsection (c) of section 38 of such Code
is amended by redesignating paragraph (3) as paragraph (4) and
by inserting after paragraph (2) the following new paragraph:
``(3) Value-added agricultural property investment credit
allowed against minimum tax.--
``(A) In general.--The amount determined under
paragraph (1)(A) shall be reduced by the portion of the
value-added agricultural property investment credit not
used against the normal limitation.
``(B) Portion of value-added agricultural property
investment credit not used against normal limitation.--
For purposes of subparagraph (A), the portion of the
value-added agricultural property investment credit not
used against the normal limitation is the excess (if
any) of--
``(i) the portion of the credit allowable
under subsection (a) which is attributable to
the value-added agricultural property
investment credit, over
``(ii) the limitation of paragraph (1)
(determined without regard to this paragraph)
reduced by the portion of the credit under
subsection (a) which is not so attributable.''.
(2) Conforming amendment.--Subclause (II) of section
38(c)(2)(A)(ii) of such Code is amended by inserting ``or the
value-added agricultural property investment credit'' after
``employment credit''.
(d) Limitation on Carryback.--Section 39(d) of such Code is amended
by adding at the end the following new paragraph:
``(9) No carryback of value-added agricultural property
investment credit before effective date.--No portion of the
unused business credit for any taxable year which is
attributable to the credit determined under section 45D may be
carried back to any taxable year ending before the date of the
enactment of section 45D.''.
(e) Deduction for Certain Unused Business Credits.--Section 196(c)
of such Code is amended by striking ``and'' at the end of paragraph
(7), by striking the period at the end of paragraph (8) and inserting
``, and'', and by adding after paragraph (8) the following new
paragraph:
``(9) the value-added agricultural property investment
credit determined under section 45D.''.
(f) Basis Adjustment.--Section 1016(a) of such Code is amended by
striking ``and'' at the end of paragraph (26), by striking the period
at the end of paragraph (27) and inserting ``, and'', and by adding at
the end the following new paragraph:
``(28) to the extent provided in section 45D(d)(3), in the
case of payments with respect to which a credit has been
allowed under section 38.''.
(g) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 of such Code is amended by adding
at the end the following new section:
``Sec. 45D. Value-added agricultural
property investment credit.''.
(h) Effective Date.--The amendments made by this section shall
apply to qualified investments (as defined in section 45D(c)(5) of the
Internal Revenue Code of 1986 (as added by this section)) made, and
property placed in service, after December 31, 2000.
<all>
Introduced in Senate
Sponsor introductory remarks on measure. (CR S5271-5272)
Read twice and referred to the Committee on Finance.
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