Water and Agriculture Tax Reform Act of 2023

[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3954 Introduced in House (IH)]

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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.


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                    IN THE HOUSE OF REPRESENTATIVES

                              June 9, 2023

   Mr. Buck (for himself, Mr. Neguse, Mr. Newhouse, and Mr. Curtis) 
 introduced the following bill; which was referred to the Committee on 
                             Ways and Means

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                                 A BILL


 
To amend the Internal Revenue Code of 1986 to facilitate water leasing 
      and water transfers to promote conservation and efficiency.

    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 ``Water and Agriculture Tax Reform Act 
of 2023''.

SEC. 2. FACILITATE WATER LEASING AND WATER TRANSFERS TO PROMOTE 
              CONSERVATION AND EFFICIENCY.

    (a) In General.--Paragraph (12) of section 501(c) of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
subparagraph:
                    ``(K) Treatment of mutual ditch irrigation 
                companies.--
                            ``(i) In general.--In the case of a mutual 
                        ditch or irrigation company or of a like 
                        organization to a mutual ditch or irrigation 
                        company, subparagraph (A) shall be applied 
                        without taking into account--
                                    ``(I) any income received or 
                                accrued from the sale, lease, or 
                                exchange of fee or other interests in 
                                real and personal property, including 
                                interests in water,
                                    ``(II) any income received or 
                                accrued from the sale or exchange of 
                                stock in a mutual ditch or irrigation 
                                company (or in a like organization to a 
                                mutual ditch or irrigation company) or 
                                contract rights for the delivery or use 
                                of water, or
                                    ``(III) any income received or 
                                accrued from the investment of income 
                                described in subclause (I) or (II),
                        except that any income described in subclause 
                        (I), (II), or (III) which is distributed or 
                        expended for expenses (other than for 
                        operations, maintenance, and capital 
                        improvements) of the mutual ditch or irrigation 
                        company or of the like organization to a mutual 
                        ditch or irrigation company (as the case may 
                        be) shall be treated as nonmember income in the 
                        year in which it is distributed or expended. 
                        For purposes of the preceding sentence, 
                        expenses (other than for operations, 
                        maintenance, and capital improvements) include 
                        expenses for the construction of conveyances 
                        designed to deliver water outside of the system 
                        of the mutual ditch or irrigation company or of 
                        the like organization.
                            ``(ii) Treatment of organizational 
                        governance.--In the case of a mutual ditch or 
                        irrigation company or of a like organization to 
                        a mutual ditch or irrigation company, where 
                        State law provides that such a company or 
                        organization may be organized in a manner that 
                        permits voting on a basis which is pro rata to 
                        share ownership on corporate governance 
                        matters, subparagraph (A) shall be applied 
                        without taking into account whether its member 
                        shareholders have one vote on corporate 
                        governance matters per share held in the 
                        corporation. Nothing in this clause shall be 
                        construed to create any inference about the 
                        requirements of this subsection for companies 
                        or organizations not included in this 
                        clause.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after the date of the enactment of 
this Act.
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