To amend the Internal Revenue Code of 1986 to exclude from gross income gain on the sale or exchange of certain farmland the use of which is restricted in perpetuity to use as farmland.

January 7, 2003

Mr. PITTS introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to exclude from gross income gain on the sale or exchange of certain farmland the use of which is restricted in perpetuity to use as farmland.

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 `Open Space Preservation Act of 2003'.

SEC. 2. EXCLUSION OF GAIN FROM SALE OF CERTAIN FARMLAND.

(a) GENERAL RULE- Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to items specifically excluded from gross income) is amended by redesignating section 139 as section 139A and by inserting after section 138 the following new section:

`SEC. 139. SALES AND EXCHANGES OF CERTAIN FARMLAND WHICH BY COVENANT IS RESTRICTED TO USE AS FARMLAND.

`(a) GENERAL RULE- In the case of an operator of qualified farmland, gross income does not include gain from the sale or exchange of qualified farmland if there is in effect on the date of such sale or exchange a qualified farmland conservation easement.

`(b) DEFINITIONS- For purposes of this section--

`(1) QUALIFIED FARMLAND- The term `qualified farmland' means any real property--

`(A) which is located in the United States,

`(B) which is used as a farm for farming purposes (within the meaning of section 2032A(e)), and

`(C) which is located in a county which has a population of 100 or more persons per square mile.

`(2) QUALIFIED FARMLAND CONSERVATION EASEMENT- The term `qualified farmland conservation easement' means a restriction (granted in perpetuity) which does not permit any use of the land for any purpose other than use as a farm for farming purposes (within the meaning of section 2032A(e)).

`(c) VERIFICATION OF EASEMENT- Subsection (a) shall not apply by reason of any qualified farmland conservation easement unless the taxpayer--

`(1) notifies (in such form and manner as the Secretary may by regulations prescribe) both the Secretary and the Secretary of Agriculture of the political subdivision of the State in which such easement is recorded, and

`(2) submits to the Secretary a copy of such easement.'

(b) CLERICAL AMENDMENT- The table of sections for such part is amended by striking the last item and inserting the following new items:

`Sec. 139. Sales and exchanges of certain farmland which by covenant is restricted to use as farmland.

`Sec. 139A. Cross references to other Acts.'

(c) EFFECTIVE DATE- The amendments made by this section shall apply to restrictions first recorded after December 31, 2003, and to sales and exchanges after such date.

END