Water and Agriculture Tax Reform Act of 2019

II 116TH CONGRESS 1ST SESSION S. 361 To amend the Internal Revenue Code of 1986 to facilitate water leasing and water transfers to promote conservation and efficiency. IN THE SENATE OF THE UNITED STATES FEBRUARY 6, 2019 Mr. GARDNER (for himself, Mr. CRAPO, Mr. ROBERTS, Mr. TESTER, Mr. BENNET, Mr. RISCH, and Mr. ENZI) 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 facilitate water leasing and water transfers to promote conserva- tion and efficiency. 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 ‘‘Water and Agriculture 4 Tax Reform Act of 2019’’. 5 VerDate Sep 11 2014 00:24 Feb 14, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S361.IS S361 pamtmann on DSKBFK8HB2PROD with BILLS 2 •S 361 IS SEC. 2. FACILITATE WATER LEASING AND WATER TRANS- 1 FERS TO PROMOTE CONSERVATION AND EF- 2 FICIENCY. 3 (a) IN GENERAL.—Paragraph (12) of section 501(c) 4 of the Internal Revenue Code of 1986 is amended by add- 5 ing at the end the following new subparagraph: 6 ‘‘(J) TREATMENT OF MUTUAL DITCH IRRI- 7 GATION COMPANIES.— 8 ‘‘(i) IN GENERAL.—In the case of a 9 mutual ditch or irrigation company or of a 10 like organization to a mutual ditch or irri- 11 gation company, subparagraph (A) shall be 12 applied without taking into account— 13 ‘‘(I) any income received or ac- 14 crued from the sale, lease, or ex- 15 change of fee or other interests in real 16 and personal property, including inter- 17 ests in water (other than income de- 18 rived from the sale, lease, or transfer 19 of water to nonmembers outside the 20 river basin or basins within which the 21 mutual ditch or irrigation company 22 operates), 23 ‘‘(II) any income received or ac- 24 crued from the sale or exchange of 25 stock in a mutual ditch or irrigation 26 VerDate Sep 11 2014 00:24 Feb 14, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S361.IS S361 pamtmann on DSKBFK8HB2PROD with BILLS 3 •S 361 IS company (or in a like organization to 1 a mutual ditch or irrigation company) 2 or contract rights for the delivery or 3 use of water, or 4 ‘‘(III) any income received or ac- 5 crued from the investment of income 6 described in subclause (I) or (II), 7 except that any income described in sub- 8 clause (I), (II), or (III) which is distrib- 9 uted or expended for expenses (other than 10 for operations, maintenance, and capital 11 improvements) of the mutual ditch or irri- 12 gation company or of the like organization 13 to a mutual ditch or irrigation company 14 (as the case may be) shall be treated as 15 nonmember income in the year in which it 16 is distributed or expended. For purposes of 17 the preceding sentence, expenses (other 18 than for operations, maintenance, and cap- 19 ital improvements) include expenses for the 20 construction of conveyances designed to de- 21 liver water outside of the system of the 22 mutual ditch or irrigation company or of 23 the like organization. 24 VerDate Sep 11 2014 00:24 Feb 14, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S361.IS S361 pamtmann on DSKBFK8HB2PROD with BILLS 4 •S 361 IS ‘‘(ii) TREATMENT OF ORGANIZA- 1 TIONAL GOVERNANCE.—In the case of a 2 mutual ditch or irrigation company or of a 3 like organization to a mutual ditch or irri- 4 gation company, where State law provides 5 that such a company or organization may 6 be organized in a manner that permits vot- 7 ing on a basis which is pro rata to share 8 ownership on corporate governance mat- 9 ters, subparagraph (A) shall be applied 10 without taking into account whether its 11 member shareholders have one vote on cor- 12 porate governance matters per share held 13 in the corporation. Nothing in this clause 14 shall be construed to create any inference 15 about the requirements of this subsection 16 for companies or organizations not in- 17 cluded in this clause.’’. 18 (b) EFFECTIVE DATE.—The amendment made by 19 subsection (a) shall apply to taxable years beginning after 20 December 31, 2018. 21 Æ VerDate Sep 11 2014 00:24 Feb 14, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6301 E:\BILLS\S361.IS S361 pamtmann on DSKBFK8HB2PROD with BILLS