To amend the Internal Revenue Code of 1986 to exclude from gross income gain on the sale or exchange of farmland development rights.

February 8, 2005

Mr. PITTS (for himself and Mr. GERLACH) 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 farmland development rights.

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 `Family Farm Preservation Act of 2005'.

SEC. 2. EXCLUSION OF GAIN FROM SALE OF FARMLAND DEVELOPMENT RIGHTS.

(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 inserting after section 139A the following new section:

`SEC. 139B. SALES AND EXCHANGES OF FARMLAND DEVELOPMENT RIGHTS TO QUALIFIED CONSERVATION ORGANIZATION.

`(a) General Rule- In the case of the owner of eligible farmland, gross income does not include gain from the sale or exchange of qualified farmland development rights to a qualified conservation organization.

`(b) Qualified Farmland Development Rights- For purposes of subsection (a)--

`(1) IN GENERAL- The term `qualified farmland development rights' means a restriction (granted in perpetuity) with respect to eligible farmland which does not permit any use of such farmland for any purpose other than use as a farm for farming purposes (within the meaning of section 2032A(e)) or for exclusively conservation purposes (within the meaning of section 170(h)(5)).

`(2) FARM AND FARMING PURPOSES- The terms `farm' and `farming purposes' have the meanings given such terms by section 2032A(e).

`(3) ELIGIBLE FARMLAND- The term `eligible 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.

`(c) Qualified Conservation Organization- For purposes of this section, the term `qualified conservation organization' means, with respect to any taxable year, an organization described in section 170(h)(3) and organized to serve primarily conservation purposes (as defined in section 170(h)(4)).

`(d) Regulations- The Secretary may prescribe such regulations as may be necessary or appropriate to carry out this section, including regulations providing for--

`(1) a recapture of the benefit of the exclusion from gross income under subsection (a) if the qualified farmland development rights are extinguished in a subsequent taxable year, and

`(2) interest at the underpayment rate established under section 6621 on the amount determined pursuant to paragraph (1) for each prior taxable year for the period beginning on the due date for filing the return for the prior taxable year involved.

No deduction shall be allowed under this chapter for interest described in paragraph (2).'.

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

`Sec. 139B. Sales and exchanges of farmland development rights to qualified conservation organization.'.

(c) Effective Date- The amendments made by this section shall apply to sales and exchanges after December 31, 2005.

END