I 118TH CONGRESS 1ST SESSION H. R. 3954 To amend the Internal Revenue Code of 1986 to facilitate water leasing and water transfers to promote conservation and efficiency. IN THE HOUSE OF REPRESENTATIVES JUNE 9, 2023 Mr. BUCK (for himself, Mr. NEGUSE, Mr. NEWHOUSE, and Mr. CURTIS) in- troduced the following bill; which was referred to the Committee on Ways and Means 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 2023’’. 5 VerDate Sep 11 2014 22:56 Jun 28, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H3954.IH H3954 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 3954 IH 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 ‘‘(K) 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, 18 ‘‘(II) any income received or ac- 19 crued from the sale or exchange of 20 stock in a mutual ditch or irrigation 21 company (or in a like organization to 22 a mutual ditch or irrigation company) 23 or contract rights for the delivery or 24 use of water, or 25 VerDate Sep 11 2014 22:56 Jun 28, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3954.IH H3954 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 3954 IH ‘‘(III) any income received or ac- 1 crued from the investment of income 2 described in subclause (I) or (II), 3 except that any income described in sub- 4 clause (I), (II), or (III) which is distrib- 5 uted or expended for expenses (other than 6 for operations, maintenance, and capital 7 improvements) of the mutual ditch or irri- 8 gation company or of the like organization 9 to a mutual ditch or irrigation company 10 (as the case may be) shall be treated as 11 nonmember income in the year in which it 12 is distributed or expended. For purposes of 13 the preceding sentence, expenses (other 14 than for operations, maintenance, and cap- 15 ital improvements) include expenses for the 16 construction of conveyances designed to de- 17 liver water outside of the system of the 18 mutual ditch or irrigation company or of 19 the like organization. 20 ‘‘(ii) TREATMENT OF ORGANIZA- 21 TIONAL GOVERNANCE.—In the case of a 22 mutual ditch or irrigation company or of a 23 like organization to a mutual ditch or irri- 24 gation company, where State law provides 25 VerDate Sep 11 2014 22:56 Jun 28, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3954.IH H3954 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 3954 IH that such a company or organization may 1 be organized in a manner that permits vot- 2 ing on a basis which is pro rata to share 3 ownership on corporate governance mat- 4 ters, subparagraph (A) shall be applied 5 without taking into account whether its 6 member shareholders have one vote on cor- 7 porate governance matters per share held 8 in the corporation. Nothing in this clause 9 shall be construed to create any inference 10 about the requirements of this subsection 11 for companies or organizations not in- 12 cluded in this clause.’’. 13 (b) EFFECTIVE DATE.—The amendment made by 14 subsection (a) shall apply to taxable years beginning after 15 the date of the enactment of this Act. 16 Æ VerDate Sep 11 2014 22:56 Jun 28, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6301 E:\BILLS\H3954.IH H3954 kjohnson on DSK79L0C42PROD with BILLS