To amend the Internal Revenue Code of 1986 to make improvements to assist young farmers and ranchers.

February 8, 2005

Mr. KING of Iowa (for himself, Mr. SHIMKUS, Mr. LEACH, Mr. LATHAM, and Mr. NUSSLE) introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to make improvements to assist young farmers and ranchers.

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 `Agricultural Bond Improvement Act of 2005'.

SEC. 2. EXEMPTION OF AGRICULTURAL BONDS FROM PRIVATE ACTIVITY BOND VOLUME LIMITS.

(a) In General- Section 146(g) of the Internal Revenue Code of 1986 (relating to exception for certain bonds) is amended by striking `and' at the end of paragraph (3), by striking the period at the end of paragraph (4) and inserting `, and', and by inserting after paragraph (4) the following new paragraph:

`(5) any qualified small issue bond described in section 144(a)(12)(B)(ii).'.

(b) Effective Date- The amendments made by this section shall apply to bonds issued after the date of the enactment of this Act.

SEC. 3. FARM SERVICE AGENCY GUARANTEES EXEMPTED FROM FEDERAL GUARANTEE PROHIBITION ON TAX-EXEMPT BONDS.

(a) In General- Subparagraph (A) of section 149(b)(3) of the Internal Revenue Code of 1986 (relating to certain insurance programs) is amended by striking `or' at the end of clause (ii), by striking the period at the end of clause (iii) and inserting `, or', and by inserting after clause (iii) the following new clause:

`(iv) any guarantee of a loan under title III of the Consolidated Farm and Rural Development Act.'.

(b) Effective Date- The amendments made by this section shall apply to bonds issued after the date of the enactment of this Act.

SEC. 4. INCREASE IN LOAN LIMITS ON AGRICULTURAL BONDS.

(a) In General- Subparagraph (A) of section 147(c)(2) of the Internal Revenue Code of 1986 (relating to general rule for exception for first-time farmers) is amended to read as follows:

`(A) IN GENERAL-

`(i) If the requirements of subparagraph (B) are met with respect to any land, paragraph (1) shall not apply to such land, and subsection (d) shall not apply to property to be used thereon for farming purposes, but only to the extent of expenditures (financed with the proceeds of the issue) not in excess of $450,000.

`(ii) In the case of any calendar year after 2005, the $450,000 amount contained in clause (i) shall be increased by an amount equal to such dollar amount multiplied by the inflation percentage determined under section 305(c) of the Consolidated Farm and Rural Development Act (7 U.S.C. 1925(c)) for the calendar year, determined by substituting `calendar year' for `fiscal year' each place it appears and by substituting `2004' for `1996' in paragraph (2) thereof. Any increase determined under this clause shall be rounded to the nearest multiple of $100.'.

(b) Conforming Amendment- Section 147(c)(2)(C)(i)(II) of such Code is amended by striking `$250,000' and inserting `the amount in effect under subparagraph (A)(i)'.

(c) Effective Date- The amendment made by this section shall apply to bonds issued after the date of the enactment of this Act.

SEC. 5. REPEAL OF DOLLAR AMOUNT IN DEFINITION OF SUBSTANTIAL FARMLAND.

(a) In General- Subparagraph (E) of section 147(c)(2) of the Internal Revenue Code of 1986 (defining substantial farmland) is amended to read as follows:

`(E) SUBSTANTIAL FARMLAND- For purposes of this paragraph, the term `substantial farmland' means any parcel of land unless such parcel is smaller than 30 percent of the average size of a farm in the county in which such parcel is located.'.

(b) Effective Date- The amendment made by this section shall apply to bonds issued after the date of the enactment of this Act.

END