H.R. 47 — Introduced in House

I 113th CONGRESS 1st Session H. R. 47 IN THE HOUSE OF REPRESENTATIVES January 3, 2013 Mr. Bishop of New York (for himself and Mr. Hanna) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to allow an unlimited exclusion from transfer taxes for certain farmland and land of conservation value, and for other purposes. 1. Short title This Act may be cited as the Farmland Preservation and Land Conservation Act of 2013. 2. Transfer tax exclusion for certain farmland and land of conservation value (a) Estate tax (1) In general Part IV of subchapter A of chapter 11 of the Internal Revenue Code of 1986 (relating to gross estate) is amended by inserting after section 2058 the following new section: 2059. Farm and conservation land (a) In general For purposes of the tax imposed by section 2001, the value of the taxable estate shall be determined by deducting from the value of the gross estate an amount equal to the adjusted value of the qualified farm or conservation land included in the estate. (b) Estates to which section applies This section shall apply to an estate if— (1) the decedent was (at the date of the decedent’s death) a citizen or resident of the United States, and (2) the executor elects the application of this section and files the agreement referred to in subsection (d)(2) with respect to the qualified farm or conservation land. (c) Definitions For purposes of this section— (1) Qualified farm or conservation land The term qualified farm or conservation land means any real property— (A) which is located in the United States, (B) which, on the date of the decedent’s death, was being used— (i) as a farm for farming purposes (within the meaning of section 2032A(e)), or (ii) exclusively for conservation purposes (within the meaning of section 170(h)), (C) with respect to which there is a recorded covenant which prevents any use of such land which is inconsistent with the uses described in subparagraph (B), and (D) which is designated in the agreement referred to in subsection (d)(2). (2) Adjusted value The term adjusted value means the value of the qualified farm or conservation land for purposes of this chapter, reduced by the amount allowable as a deduction under paragraph (4) of section 2053(a). (d) Election; agreement (1) Election The election under this section shall be made on the return of the tax imposed by section 2001. Such election shall be made in such manner as the Secretary shall by regulations prescribe. Such an election, once made, shall be irrevocable. (2) Agreement The agreement referred to in this paragraph is a written agreement signed by each person in being who has an interest (whether or not in possession) in any property designated in such agreement consenting to the application of subsection (e) with respect to such property. (3) Modification of election and agreement permitted The procedures prescribed under section 2032A(d)(3) shall apply for purposes of this subsection. (e) Tax treatment of dispositions and inconsistent uses In the case of a decedent’s estate which includes qualified farm or conservation land with respect to which there is a covenant described in subsection (c)(1)(C) (including such a covenant made by a prior decedent)— (1) Imposition of additional estate tax If, at any time after the decedent’s death and before the death of the heir— (A) the heir disposes of any interest (other than by a qualified conservation contribution (as defined in section 170(h))) in qualified farm or conservation land and the person acquiring such interest is not subject to the covenant described in subsection (c)(1)(C), or (B) the heir uses such land in any manner which violates the terms of such covenant, then, there is hereby imposed an additional estate tax. (2) Amount of additional tax (A) In general The amount of the additional tax imposed by paragraph (1) with respect to any interest shall be the amount equal to the sum of— (i) the adjusted tax difference with respect to the estate, and (ii) interest at the underpayment rate established under section 6621 on the amount determined under clause (i) for the period beginning on the due date for filing the estate tax return. (B) Adjusted tax difference with respect to estate For purposes of this subsection, the term adjusted tax difference with respect to the estate means the excess of— (i) what would have been the estate tax liability if the fair market value of the interest at the time of the disposition or use described in paragraph (1), over (ii) the estate tax liability. For purposes of this subparagraph, the term estate tax liability means the tax imposed by section 2001 reduced by the credits allowable against such tax. (3) Certain additional rules to apply Rules similar to the rules of paragraphs (2)(D), (2)(E), (3), (4), (5), and (8) of section 2032A(c) shall apply for purposes of this subsection. (4) Income tax treatment of dispositions For purposes of chapter 1, in any case in which an additional tax is imposed by this subsection by reason of any disposition or use of an interest, such interest (if not otherwise disposed of in a transaction in which gain is recognized) shall be treated as sold at its fair market value at the time of the disposition or use, and gain shall be recognized notwithstanding any provision of subtitle A. (f) Basis For purposes of this title, the basis of any qualified farm or conservation land which is included in the estate of a decedent pursuant to subsection (a) shall be the adjusted basis of such qualified farm or conservation land on the date of the decedent’s death. (g) Certain additional rules To apply For purposes of this section, rules similar to the following rules shall apply: (1) Certain real property included Section 2032A(e)(3). (2) Definitions of farm and farming purposes Paragraphs (4) and (5) of section 2032A(e). (3) Property acquired from decedent Section 2032A(e)(9). (4) Community property Section 2032A(e)(10). (5) Bond in lieu of personal liability Section 2032A(e)(11). (6) Special rule for woodlands Section 2032A(e)(13). (7) Statute of limitation Section 2032A(f). (8) Special rules for involuntary conversions of real property Section 2032A(h). (9) Exchanges of qualified real property Section 2032A(i). (h) Cross reference See section 6324C for special lien on farm and conservation land. . (2) Special lien for farm and conservation land Part II of subchapter C of chapter 64 of such Code (relating to liens) is amended by inserting after section 6324B the following new section: 6324C. Special lien on farm and conservation land (a) General rule In the case of qualified farm or conservation land (within the meaning of section 2059(c)(1)) with respect to which an election is in effect under section 2059(b)(2) or section 2524(a) or pursuant to section 2611(b)(2), an amount equal to the adjusted value attributable to such land (within the meaning of section 2059(c)(2)) shall be a lien in favor of the United States on such land. (b) Period of lien The lien imposed by this section shall arise at the time an election is filed under section 2059 and shall continue with respect to such qualified farm or conservation land until the earlier of— (1) such land is transferred to a qualified organization (as defined in section 170(h)(3)), (2) the liability for tax under subsection (e) of section 2059 with respect to such land has been satisfied or has become unenforceable by reason of lapse of time, or (3) it is established to the satisfaction of the Secretary that no further tax liability may arise under section 2059(e) with respect to such land. (c) Certain rules and definitions made applicable (1) In general The rule set forth in paragraphs (1), (3), and (4) of section 6324A(d) shall apply with respect to the lien imposed by this section as if it were a lien imposed by section 6324A. (2) Qualified farm or conservation land For purposes of this section, the term qualified farm or conservation land includes qualified replacement property (within the meaning of section 2032A(h)(3)(B)) and qualified exchange property (within the meaning of section 2032A(i)(3)). (d) Substitution of security for lien To the extent provided in regulations prescribed by the Secretary, the furnishing of security may be substituted for the lien imposed by this section. . (b) Conforming and clerical amendments (1) Section 1016(a) of such Code is amended by striking and at the end of paragraph (36), by striking the period at the end of paragraph (37) and inserting , and, and by inserting after paragraph (37) the following new paragraph: (38) to the extent provided in section 2059(f). . (2) The table of sections for part IV of subchapter A of chapter 11 of such Code is amended by inserting after the item relating to section 2058 the following new item: Sec. 2059. Farm and conservation land. . (3) The table of sections for part II of subchapter C of chapter 64 of such Code is amended by inserting after the item relating to section 6324B the following new item: Sec. 6324C. Special lien on farm and conservation land. . (c) Gift tax (1) In general Subchapter C of chapter 12 of subtitle B of such Code (deductions) is amended by redesignating section 2524 as section 2525 and inserting after section 2523 the following new section: 2524. Gift of farm and conservation land (a) In general In computing taxable gifts for the calendar year, there shall be allowed as a deduction in the case of a citizen or resident the adjusted value of all gifts made during such year which are qualified farm or conservation land if the donee elects the application of this section and files the agreement referred to in subsection (c)(2) with respect to the qualified farm or conservation land. (b) Definitions For purposes of this section— (1) Qualified farm or conservation land The term qualified farm or conservation land means any real property— (A) which is located in the United States, (B) which, on the date of the gift, was being used— (i) as a farm for farming purposes (within the meaning of section 2032A(e)), or (ii) exclusively for conservation purposes (within the meaning of section 170(h)), (C) with respect to which there is a recorded covenant which prevents any use of such land which is inconsistent with the uses described in subparagraph (B), and (D) which is designated in the agreement referred to in subsection (c)(2). (2) Adjusted value The term adjusted value means the value of the qualified farm or conservation land for purposes of this chapter, reduced by the amount allowable as a deduction under paragraph (4) of section 2053(a). (c) Election; agreement (1) Election The election under this section shall be made in such manner as the Secretary shall by regulations prescribe. Such an election, once made, shall be irrevocable. (2) Agreement The agreement referred to in this paragraph is a written agreement signed by each person in being who has an interest (whether or not in possession) in any property designated in such agreement consenting to the application of subsection (d) with respect to such property. (3) Modification of election and agreement permitted The procedures prescribed under section 2032A(d)(3) shall apply for purposes of this subsection. (d) Tax treatment of dispositions and inconsistent uses In the case of a decedent’s estate which includes qualified farm or conservation land with respect to which there is a covenant described in subsection (c)(1)(C) (including such a covenant made by a prior decedent)— (1) Imposition of additional gift tax If, at any time after the gift described in subsection (a) and before the death of the donee— (A) the donee disposes of any interest (other than by a qualified conservation contribution (as defined in section 170(h))) in qualified farm or conservation land and the person acquiring such interest is not subject to the covenant described in subsection (b)(1)(C), or (B) the donee uses such land in any manner which violates the terms of such covenant, then, there is hereby imposed an additional gift tax. (2) Amount of additional tax (A) In general The amount of the additional tax imposed by paragraph (1) with respect to any interest shall be the amount equal to the sum of— (i) the adjusted tax difference with respect to the gift, and (ii) interest at the underpayment rate established under section 6621 on the amount determined under clause (i) for the period beginning on the date of such gift. (B) Adjusted tax difference with respect to gift For purposes of this subsection, the term adjusted tax difference with respect to the gift means the excess of— (i) what would have been the gift tax liability if the fair market value of the interest at the time of the disposition or use described in paragraph (1), over (ii) the gift tax liability. For purposes of this subparagraph, the term gift tax liability means the tax imposed by section 2501 reduced by the credits allowable against such tax. (3) Certain additional rules to apply Rules similar to the rules of paragraphs (2)(D), (2)(E), (3), (4), (5), and (8) of section 2032A(c) shall apply for purposes of this subsection. (4) Income tax treatment of dispositions For purposes of chapter 1, in any case in which an additional tax is imposed by this subsection by reason of any disposition or use of an interest, such interest (if not otherwise disposed of in a transaction in which gain is recognized) shall be treated as sold at its fair market value at the time of the disposition or use, and gain shall be recognized notwithstanding any provision of subtitle A. (e) Certain additional rules To apply For purposes of this section, rules similar to the following rules shall apply: (1) Certain real property included Section 2032A(e)(3). (2) Definitions of farm and farming purposes Paragraphs (4) and (5) of section 2032A(e). (3) Bond in lieu of personal liability Section 2032A(e)(11). (4) Special rule for woodlands Section 2032A(e)(12). (5) Statute of limitation Section 2032A(f). (6) Special rules for involuntary conversions of real property Section 2032A(h). (7) Exchanges of qualified real property Section 2032A(i). (f) Cross reference See section 6324C for special lien on farm and conservation land. . (2) Conforming amendment Section 2525 of such Code, as amended by paragraph (1), is amended by striking sections 2522 and 2523 and inserting sections 2522, 2523, and 2524. (3) Clerical amendment The table of sections for such subchapter is amended by striking the last item and inserting the following new items: Sec. 2524. Gift of farm and conservation land. Sec. 2525. Extent of deductions. . (d) Generation skipping tax (1) Exclusion Subsection (b) of section 2611 of such Code (relating to certain transfers excluded) is amended by redesignating paragraph (2) as paragraph (3) and by inserting after paragraph (1) the following new paragraph: (2) any transfer which, if made inter vivos by an individual, would be treated as a deduction under section 2524 (relating to gift of farm and conservation land), or . (2) Applicable rules Subsection (b) of section 2611 of such Code is amended by adding at the end the following flush sentence: For purposes of paragraph (2), rules similar to the rules of section 2524 shall apply. . (e) Effective date The amendments made by this section shall apply to estates of decedents dying, gifts made, and generation-skipping transfers after December 31, 2012.