S. 1105 | U.S. Senate Bill | Community Forestry Conservation Act of 2011

S 1105

112th CONGRESS
1st Session

S. 1105

To provide a Federal tax exemption for forest conservation bonds, and for other purposes.

IN THE SENATE OF THE UNITED STATES

May 26, 2011

Mrs. MURRAY (for herself, Ms. CANTWELL, Mrs. SHAHEEN, and Mr. MERKLEY) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To provide a Federal tax exemption for forest conservation bonds, and for other purposes.

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 `Community Forestry Conservation Act of 2011'.

SEC. 2. FOREST CONSERVATION BONDS.

(a) Tax-Exempt Bond Financing-

(1) IN GENERAL- For purposes of the Internal Revenue Code of 1986, any qualified forest conservation bond shall be treated as an exempt facility bond under section 142 of such Code.

(2) QUALIFIED FOREST CONSERVATION BOND- For purposes of this section, the term `qualified forest conservation bond' means any bond issued as part of an issue if--

(A) 95 percent or more of the net proceeds (as defined in section 150(a)(3) of such Code) of such issue are to be used for qualified project costs,

(B) such bond is issued for a qualified organization, and

(3) LIMITATION ON AGGREGATE AMOUNT ISSUED-

(A) IN GENERAL- The maximum aggregate face amount of bonds which may be issued under this subsection shall not exceed $3,000,000,000 for all projects (excluding refunding bonds).

(B) INITIAL ALLOCATION OF LIMITATION- The limitation described in subparagraph (A) shall be allocated by the Secretary of the Treasury among qualified organizations as follows:

(i) Thirty-five percent for qualified project costs with respect to the cost of acquisition by any qualified organization in the Pacific Northwest region.

(ii) Thirty percent for qualified project costs with respect to the cost of acquisition by any qualified organization in the Western region.

(iii) Seventeen and one-half percent for qualified project costs with respect to the cost of acquisition by any qualified organization in the Southeast region.

(iv) Seventeen and one-half percent for qualified project costs with respect to the cost of acquisition by any qualified organization in the Northeast region.

(C) PROCEDURE FOR ISSUANCE- The Secretary shall establish a system for allocating the limitation to qualified forest conservation bonds within each region, which shall be based on the chronological order, within each region, in which applications are made to the Secretary for an allocation of the limitation.

(D) SECONDARY ALLOCATION PROCEDURE- If, for the period ending on the last day of the 24th month after the date of enactment of this Act, the limitation amount for any region under subparagraph (B) exceeds the amount of bonds allocated by the Secretary of the Treasury during such period, the Secretary of the Treasury may allocate such excess among qualified organizations in any other region in such manner as the Secretary of the Treasury determines appropriate.

(E) REGIONS- For purposes of this paragraph--

(i) PACIFIC NORTHWEST REGION- The term `Pacific Northwest region' means Region 6 as defined by the United States Forest Service of the Department of Agriculture under section 202.2 of title 36, Code of Federal Regulations.

(ii) WESTERN REGION- The term `Western region' means Regions 1, 2, 3, 4, 5, and 10 (as so defined).

(iii) SOUTHEAST REGION- The term `Southeast region' means Region 8 (as so defined).

(iv) NORTHEAST REGION- The term `Northeast region' means Region 9 (as so defined).

(4) QUALIFIED PROJECT COSTS- For purposes of this subsection, the term `qualified project costs' means the sum of--

(A) the cost of acquisition (directly or through reimbursement or refinancing) by the qualified organization from an unrelated person of forests and forest land which at the time of acquisition or immediately thereafter are subject to a conservation restriction described in subsection (c)(2),

(B) interest payments on the qualified forest conservation bonds for the 3-year period beginning on the date of issuance of such bonds, and

(5) SPECIAL RULES- In applying the Internal Revenue Code of 1986 to any qualified forest conservation bond, the following modifications shall apply:

(A) Section 146 of such Code (relating to volume cap) shall not apply.

(B) For purposes of section 147(b) of such Code (relating to maturity may not exceed 120 percent of economic life), the land and standing timber acquired with proceeds of qualified forest conservation bonds shall have an economic life of 35 years.

(C) Subsections (c) and (d) of section 147 of such Code (relating to limitations on acquisition of land and existing property) shall not apply.

(D) Section 57(a)(5) of such Code (relating to tax-exempt interest) shall not apply to interest on qualified forest conservation bonds.

(6) TREATMENT OF CURRENT REFUNDING BONDS- Paragraphs (2)(C) and (3) shall not apply to any bond (or series of bonds) issued to refund a qualified forest conservation bond issued before the date which is 48 months after the date of the enactment of this Act, if--

(A) the average maturity date of the issue of which the refunding bond is a part is not later than the average maturity date of the bonds to be refunded by such issue,

(B) the amount of the refunding bond does not exceed the outstanding amount of the refunded bond, and

(C) the net proceeds of the refunding bond are used to redeem the refunded bond not later than 90 days after the date of the issuance of the refunding bond.

For purposes of subparagraph (A), average maturity shall be determined in accordance with section 147(b)(2)(A) of such Code.

(7) EFFECTIVE DATE- This subsection shall apply to obligations issued on or after the date which is 180 days after the enactment of this Act.

(b) Items From Qualified Harvesting Activities Not Subject to Tax or Taken Into Account-

(1) IN GENERAL- Income, gains, deductions, losses, or credits from a qualified harvesting activity conducted by a qualified organization shall not be subject to tax or taken into account under subtitle A of the Internal Revenue Code of 1986.

(2) LIMITATION- The amount of income excluded from gross income under paragraph (1) for any taxable year shall not exceed the amount used by the qualified organization to make debt service payments during such taxable year for qualified forest conservation bonds.

(3) QUALIFIED HARVESTING ACTIVITY- For purposes of paragraph (1)--

(A) IN GENERAL- The term `qualified harvesting activity' means the sale, lease, or harvesting, of standing timber--

(i) on land owned by a qualified organization which was acquired with proceeds of qualified forest conservation bonds, and

(ii) pursuant to a qualified conservation plan adopted by the qualified organization within 2 years of the acquisition.

(B) EXCEPTIONS-

(i) CESSATION AS QUALIFIED ORGANIZATION- The term `qualified harvesting activity' shall not include any sale, lease, or harvesting for any period during which the organization ceases to qualify as a qualified organization.

(ii) EXCEEDING LIMITS ON HARVESTING- The term `qualified harvesting activity' shall not include any sale, lease, or harvesting of standing timber on land acquired with proceeds of qualified forest conservation bonds to the extent that the average quantity of timber removed from such land exceeds the quantity which can be removed from such land annually in perpetuity on a sustained-yield basis measured over the harvest rotation with respect to such land. The limitation described in the preceding sentence shall not apply to post-fire restoration and rehabilitation or sanitation harvesting of timber stands which are substantially damaged by fire, windthrow, or other catastrophes, or which are in imminent danger from insect or disease attack.

(4) TERMINATION- This subsection shall not apply to any qualified harvesting activity of a qualified organization occurring after the date on which--

(A) there is no outstanding qualified forest conservation bond with respect to such qualified organization, or

(B) any such bond ceases to be a tax-exempt bond.

(5) PARTIAL RECAPTURE OF BENEFITS IF HARVESTING LIMIT EXCEEDED- If, as of the date that this subsection ceases to apply under paragraph (4)(B), the quantity of timber removed from the land exceeds the requirement of paragraph (3)(B)(ii), the tax imposed by chapter 1 of the Internal Revenue Code of 1986 shall be increased, under rules prescribed by the Secretary of the Treasury, by the sum of the tax benefits attributable to such excess and interest at the underpayment rate under section 6621 of such Code for the period of the underpayment.

(1) QUALIFIED CONSERVATION PLAN- The term `qualified conservation plan' means a multiple land use program or plan which--

(A) is designed and administered primarily for the purposes of protecting and enhancing wildlife and fish, timber, scenic attributes, recreation, and soil and water quality of the forest and forest land,

(B) mandates that conservation of forest and forest land is the single-most significant use of the forest and forest land, and

(i) restoring and maintaining reference conditions for the region's ecotype,

(ii) restoring and maintaining a representative sample of young, mid, and late successional forest age classes,

(iii) maintaining or restoring the resources' ecological health for purposes of preventing damage from fire, insect, or disease,

(iv) maintaining or enhancing wildlife or fish habitat, or

(v) enhancing research opportunities in sustainable renewable resource uses.

(2) CONSERVATION RESTRICTION- The conservation restriction described in this paragraph is a restriction which--

(A) is granted (through sale or donation) in perpetuity to an unrelated person which is described in section 170(h)(3) of such Code and which, in the case of a nongovernmental unit, is organized and operated for conservation purposes,

(B) meets the requirements of clause (ii) or (iii)(II) of section 170(h)(4)(A) of such Code,

(C) obligates the qualified organization to pay the costs incurred by the holder of the conservation restriction in monitoring compliance with such restriction to the extent the holder of the conservation restriction does not have a dedicated source of such funding, and

(D) requires an increasing level of conservation benefits to be provided whenever circumstances allow it.

(3) QUALIFIED ORGANIZATION- The term `qualified organization' means, during the time any qualified forest conversation bond for the organization is outstanding, an organization exempt from tax under section 501(a)--

(A) substantially all the activities of which are charitable, scientific or educational, including acquiring, protecting, restoring, managing, sustainably harvesting, and developing forest lands and other renewable resources for the long-term charitable, educational, scientific, and public benefit,

(B) which periodically conducts educational programs designed to inform the public of environmentally sensitive forestry management and conservation techniques,

(i) at least 20 percent of the members of which are representatives of the conservation community,

(ii) at least 20 percent of the members of which are public officials, and

(iii) not more than one-third of the members of which are individuals who are or were at any time within 5 years before the beginning of a term of membership on the board, an employee of, independent contractor with respect to, officer of, director of, or held a material financial interest in, a commercial forest products enterprise with which the qualified organization has a contractual or other financial arrangement,

(D) the bylaws of which require at least two-thirds of the members of the board of directors to vote affirmatively to approve the qualified conservation plan and any change thereto, and

(E) upon dissolution, is required to dedicate its assets to--

(i) an organization described in section 501(c)(3) of such Code which is organized and operated for conservation purposes, or

(ii) a governmental unit described in section 170(c)(1) of such Code.

(4) UNRELATED PERSON- The term `unrelated person' means a person who is not a related person.

(5) RELATED PERSON- A person shall be treated as related to another person if--

(A) such person bears a relationship to such other person described in section 267(b) (determined without regard to paragraph (9) thereof), or 707(b)(1), of such Code, determined by substituting `25 percent' for `50 percent' each place it appears therein, and

(B) in the case such other person is a non-profit organization, if such person controls directly or indirectly more than 25 percent of the governing body of such organization.

END