To amend the Internal Revenue Code of 1986 to provide involuntary conversion tax relief for producers forced to sell livestock due to weather-related conditions or Federal land management agency policy or action, and for other purposes.

January 29, 2003

Mr. MORAN of Kansas (for himself, Mrs. CUBIN, Mr. OSBORNE, Mr. REHBERG, and Mrs. MUSGRAVE) introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to provide involuntary conversion tax relief for producers forced to sell livestock due to weather-related conditions or Federal land management agency policy or action, 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 `Livestock Reinvestment Extension Act of 2003'.

SEC. 2. INVOLUNTARY CONVERSION RELIEF FOR PRODUCERS FORCED TO SELL LIVESTOCK DUE TO WEATHER-RELATED CONDITIONS OR FEDERAL LAND MANAGEMENT AGENCY POLICY OR ACTION.

(a) INCOME INCLUSION RULES- Subsection (e) of section 451 of the Internal Revenue Code of 1986 (relating to general rule for taxable year of inclusion) is amended to read as follows:

`(e) SPECIAL RULE FOR PROCEEDS FROM LIVESTOCK SOLD ON ACCOUNT OF WEATHER-RELATED CONDITIONS OR FEDERAL LAND MANAGEMENT AGENCY POLICY OR ACTION-

`(1) IN GENERAL- If--

`(A) a taxpayer sells or exchanges livestock in excess of the number the taxpayer would sell if he followed his usual business practices, and

`(B) the taxpayer establishes that, under his usual business practices, the sale or exchange would not have occurred in the taxable year in which it occurred if it were not for--

`(i) a drought, flood, or other weather-related condition that resulted in the area being designated as eligible for assistance by the Federal Government, or

`(ii) forced sales resulting from Federal land management agency policy or action,

the taxpayer may elect to include income from such excess sales or exchanges for the second taxable year following the taxable year in which the circumstance applicable under subparagraph (B) ceased to exist.

`(2) LIMITATION- Paragraph (1) shall apply only to a taxpayer whose principal trade or business is farming (within the meaning of section 6420(c)(3)).

`(3) SPECIAL RULES FOR DROUGHT DESIGNATIONS- For purposes of this subsection, areas may be designated as eligible for drought condition assistance--

`(A) by Federal Government declaration, or

`(B) through Farm Service Agency flash reports as verified and approved by the Farm Service Agency director of the State in which such condition exists.'.

(b) RULES FOR REPLACEMENT OF INVOLUNTARILY CONVERTED LIVESTOCK- Subsection (e) of section 1033 of such Code (relating to involuntary conversions) is amended to read as follows:

`(e) LIVESTOCK SOLD ON ACCOUNT OF WEATHER-RELATED CONDITIONS OR FEDERAL LAND MANAGEMENT AGENCY POLICY OR ACTION-

`(1) IN GENERAL- For purposes of this subtitle, the sale or exchange of livestock (other than poultry) by the taxpayer in excess of the number the taxpayer would sell if he followed usual business practices, shall be treated as an involuntary conversion to which this section applies if such livestock are sold or exchanged by the taxpayer solely on account of--

`(A) drought, flood, or other weather-related conditions, or

`(B) forced sales caused by Federal land management agency policy or action.

`(2) EXTENSION OF REPLACEMENT PERIOD-

`(A) DROUGHTS, ETC- In a case to which paragraph (1)(A) applies, the 2-year period in subsection (a)(2)(B) shall not expire before the later of--

`(i) 4 years after the close of the first taxable year in which any part of the gain upon the conversion is realized, or

`(ii) 2 years after the close of the taxable year in which the drought, flood, or other weather-related condition ceased to exist.

`(B) FORCED SALES- In a case to which paragraph (1)(B) applies, the 2-year period in subsection (a)(2)(B) shall not expire before 2 years after the close of the taxable year in which the forced sales resulting from Federal land management agency policy or action have ended.'.

(3) CONVERSION BY HEIRS- Section 1033(a)(2) of such Code is amended by adding at the end the following new subparagraph:

`(F) CONVERSION OF CERTAIN PROPERTY BY HEIRS- In the case of an involuntary conversion of property described in subsection (e), if the taxpayer dies during the period specified in subparagraph (B), the requirements of subparagraph (A) shall be satisfied if the decedent's--

`(i) personal representative,

`(ii) the beneficiary of the converted property, if no personal representative exists, or

`(iii) the trustee in the case of a trust,

replaces the property within such period.'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to sales and exchanges after December 31, 2000.

END