Charitable Conservation Easement Program Integrity Act of 2021

II 117TH CONGRESS 1ST SESSION S. 2256 To amend the Internal Revenue Code of 1986 to limit the charitable deduction for certain qualified conservation contributions. IN THE SENATE OF THE UNITED STATES JUNE 24, 2021 Mr. DAINES (for himself, Ms. STABENOW, Mr. WYDEN, and Mr. GRASSLEY) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to limit the charitable deduction for certain qualified conservation contributions. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Charitable Conserva- 4 tion Easement Program Integrity Act of 2021’’. 5 VerDate Sep 11 2014 04:57 Jul 08, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S2256.IS S2256 kjohnson on DSK79L0C42PROD with BILLS 2 •S 2256 IS SEC. 2. LIMITATION ON DEDUCTION FOR QUALIFIED CON- 1 SERVATION CONTRIBUTIONS MADE BY PASS- 2 THROUGH ENTITIES. 3 (a) IN GENERAL.—Section 170(h) of the Internal 4 Revenue Code of 1986 is amended by adding at the end 5 the following new paragraph: 6 ‘‘(7) LIMITATION ON DEDUCTION FOR QUALI- 7 FIED CONSERVATION CONTRIBUTIONS MADE BY 8 PASS-THROUGH ENTITIES.— 9 ‘‘(A) IN GENERAL.—A contribution by a 10 partnership (whether directly or as a distribu- 11 tive share of a contribution of another partner- 12 ship) shall not be treated as a qualified con- 13 servation contribution for purposes of this sec- 14 tion if the amount of such contribution exceeds 15 2.5 times the sum of each partner’s relevant 16 basis in such partnership. 17 ‘‘(B) RELEVANT BASIS.—For purposes of 18 this paragraph— 19 ‘‘(i) IN GENERAL.—The term ‘relevant 20 basis’ means, with respect to any partner, 21 the portion of such partner’s modified 22 basis in the partnership which is allocable 23 (under rules similar to the rules of section 24 755) to the portion of the real property 25 VerDate Sep 11 2014 04:57 Jul 08, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2256.IS S2256 kjohnson on DSK79L0C42PROD with BILLS 3 •S 2256 IS with respect to which the contribution de- 1 scribed in subparagraph (A) is made. 2 ‘‘(ii) MODIFIED BASIS.—The term 3 ‘modified basis’ means, with respect to any 4 partner, such partner’s adjusted basis in 5 the partnership as determined— 6 ‘‘(I) immediately before the con- 7 tribution described in subparagraph 8 (A), 9 ‘‘(II) without regard to section 10 752, and 11 ‘‘(III) by the partnership after 12 taking into account the adjustments 13 described in subclauses (I) and (II) 14 and such other adjustments as the 15 Secretary may provide. 16 ‘‘(C) EXCEPTION FOR CONTRIBUTIONS 17 OUTSIDE 3-YEAR HOLDING PERIOD.—Subpara- 18 graph (A) shall not apply to any contribution 19 which is made at least 3 years after the latest 20 of— 21 ‘‘(i) the last date on which the part- 22 nership that made such contribution ac- 23 quired any portion of the real property 24 VerDate Sep 11 2014 04:57 Jul 08, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2256.IS S2256 kjohnson on DSK79L0C42PROD with BILLS 4 •S 2256 IS with respect to which such contribution is 1 made, 2 ‘‘(ii) the last date on which any part- 3 ner in the partnership that made such con- 4 tribution acquired any interest in such 5 partnership, and 6 ‘‘(iii) if the interest in the partnership 7 that made such contribution is held 8 through one or more partnerships— 9 ‘‘(I) the last date on which any 10 such partnership acquired any interest 11 in any other such partnership, and 12 ‘‘(II) the last date on which any 13 partner in any such partnership ac- 14 quired any interest in such partner- 15 ship. 16 ‘‘(D) EXCEPTION FOR FAMILY PARTNER- 17 SHIPS.— 18 ‘‘(i) IN GENERAL.—Subparagraph (A) 19 shall not apply with respect to any con- 20 tribution made by any partnership if sub- 21 stantially all of the partnership interests in 22 such partnership are held, directly or indi- 23 rectly, by an individual and members of 24 the family of such individual. 25 VerDate Sep 11 2014 04:57 Jul 08, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2256.IS S2256 kjohnson on DSK79L0C42PROD with BILLS 5 •S 2256 IS ‘‘(ii) MEMBERS OF THE FAMILY.—For 1 purposes of this subparagraph, the term 2 ‘members of the family’ means, with re- 3 spect to any individual— 4 ‘‘(I) the spouse of such indi- 5 vidual, and 6 ‘‘(II) any individual who bears a 7 relationship to such individual which 8 is described in subparagraphs (A) 9 through (G) of section 152(d)(2). 10 ‘‘(E) APPLICATION TO OTHER PASS- 11 THROUGH ENTITIES.—Except as may be other- 12 wise provided by the Secretary, the rules of this 13 paragraph shall apply to S corporations and 14 other pass-through entities in the same manner 15 as such rules apply to partnerships. 16 ‘‘(F) REGULATIONS.—The Secretary shall 17 prescribe such regulations or other guidance as 18 may be necessary or appropriate to carry out 19 the purposes of this paragraph, including regu- 20 lations or other guidance— 21 ‘‘(i) to require reporting, including re- 22 porting related to tiered partnerships and 23 the modified basis of partners, and 24 VerDate Sep 11 2014 04:57 Jul 08, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S2256.IS S2256 kjohnson on DSK79L0C42PROD with BILLS 6 •S 2256 IS ‘‘(ii) to prevent the avoidance of the 1 purposes of this paragraph.’’. 2 (b) APPLICATION OF ACCURACY-RELATED PEN- 3 ALTIES.— 4 (1) IN GENERAL.—Section 6662(b) of the In- 5 ternal Revenue Code of 1986 is amended by insert- 6 ing after paragraph (9) the following new para- 7 graph: 8 ‘‘(10) Any disallowance of a deduction by rea- 9 son of section 170(h)(7).’’. 10 (2) TREATMENT AS GROSS VALUATION 11 MISSTATEMENT.—Section 6662(h)(2) of such Code 12 is amended by striking ‘‘and’’ at the end of subpara- 13 graph (B), by striking the period at the end of sub- 14 paragraph (C) and inserting ‘‘, and’’, and by adding 15 at the end the following new subparagraph: 16 ‘‘(D) any disallowance of a deduction de- 17 scribed in subsection (b)(10).’’. 18 (3) NO REASONABLE CAUSE EXCEPTION.—Sec- 19 tion 6664(c)(2) of such Code is amended by insert- 20 ing ‘‘or to any disallowance of a deduction described 21 in section 6662(b)(10)’’ before the period at the end. 22 (4) APPROVAL OF ASSESSMENT NOT RE- 23 QUIRED.—Section 6751(b)(2)(A) of such Code is 24 VerDate Sep 11 2014 04:57 Jul 08, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S2256.IS S2256 kjohnson on DSK79L0C42PROD with BILLS 7 •S 2256 IS amended by striking ‘‘subsection (b)(9)’’ and insert- 1 ing ‘‘paragraph (9) or (10) of subsection (b)’’. 2 (c) APPLICATION OF STATUTE OF LIMITATIONS ON 3 ASSESSMENT AND COLLECTION.— 4 (1) EXTENSION FOR CERTAIN ADJUSTMENTS 5 MADE UNDER PRIOR LAW.—In the case of any dis- 6 allowance of a deduction by reason of section 7 170(h)(7) of the Internal Revenue Code of 1986 (as 8 added by this section) or any penalty imposed under 9 section 6662 of such Code with respect to such dis- 10 allowance, section 6229(d)(2) of such Code (as in ef- 11 fect before its repeal) shall be applied by sub- 12 stituting ‘‘2 years’’ for ‘‘1 year’’. 13 (2) EXTENSION FOR LISTED TRANSACTIONS.— 14 Any contribution described in section 170(h)(7)(A) 15 of the Internal Revenue Code of 1986 (as added by 16 this section) shall be treated for purpose of sections 17 6501(c)(10) and 6235(c)(6) of such Code as a 18 transaction specifically identified by the Secretary on 19 December 23, 2016, as a tax avoidance transaction 20 for purposes of section 6011 of such Code. 21 (d) APPLICATION TO CERTAIN TRANSACTIONS DIS- 22 ALLOWED UNDER OTHER PROVISIONS OF LAW.—In the 23 case of any disallowance of a deduction under section 170 24 of the Internal Revenue Code of 1986 with respect a 25 VerDate Sep 11 2014 04:57 Jul 08, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S2256.IS S2256 kjohnson on DSK79L0C42PROD with BILLS 8 •S 2256 IS transaction described in Internal Revenue Service Notice 1 2017-10 with respect to a taxable year ending before the 2 date of the enactment of this Act, such disallowance shall 3 be treated for purposes of section 6662(b)(10) of such 4 Code (as added by this section) and subsection (c)(1) as 5 being by reason of section 170(h)(7) of such Code (as 6 added by this section). 7 (e) EFFECTIVE DATE.— 8 (1) IN GENERAL.—Except as provided in para- 9 graph (2), the amendments made by this section 10 shall apply to contributions made after December 11 23, 2016, in taxable years ending after such date. 12 (2) CERTIFIED HISTORIC STRUCTURES.—In the 13 case of contributions the conservation purpose (as 14 defined in section 170(h)(4) of the Internal Revenue 15 Code of 1986) of which is the preservation of a cer- 16 tified historic structure (as defined in section 17 170(h)(4)(C) of such Code), the amendments made 18 by this section shall apply to contributions made in 19 taxable years beginning after December 31, 2018. 20 (3) NO INFERENCE.—No inference is intended 21 as to the appropriate treatment of contributions 22 made in taxable years ending on or before the date 23 specified in paragraph (1) or (2), whichever is appli- 24 cable, or as to any activity not described in section 25 VerDate Sep 11 2014 04:57 Jul 08, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2256.IS S2256 kjohnson on DSK79L0C42PROD with BILLS 9 •S 2256 IS 170(h)(7) of the Internal Revenue Code of 1986, as 1 added by this section. 2 Æ VerDate Sep 11 2014 04:57 Jul 08, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6301 E:\BILLS\S2256.IS S2256 kjohnson on DSK79L0C42PROD with BILLS