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2008 Farm Bill Text & Report Language

This page includes legislative language from the Farm Bill as related to the conservation tax incentive, Farmland Protection Program and Grassland Reserve Program. In the weeks ahead, the Land Trust Alliance will post additional details and analysis on changes to these programs and other important conservation programs.

Key Sections for Land Conservation

 

Complete Legislative Language

 

Renewal of the Conservation Tax Incentive

Text from Title XV:
SEC. 15302. TWO-YEAR EXTENSION OF SPECIAL RULE ENCOURAGING CONTRIBUTIONS OF CAPITAL GAIN REAL PROPERTY FOR CONSERVATION PURPOSES.
(a) In General-
(1) INDIVIDUALS- Section 170(b)(1)(E)(vi) (relating to termination) is amended by striking `December 31, 2007' and inserting `December 31, 2009'.
(2) CORPORATIONS- Section 170(b)(2)(B)(iii) (relating to termination) is amended by striking `December 31, 2007' and inserting `December 31, 2009'.
(b) Effective Date- The amendments made by this section shall apply to contributions made in taxable years beginning after December 31, 2007.

Explanatory Statement:
Charitable contributions generally
In general, a deduction is permitted for charitable contributions, subject to certain limitations that depend on the type of taxpayer, the property contributed, and the donee organization. The amount of deduction generally equals the fair market value of the contributed property on the date of the contribution. Charitable deductions are provided for income, estate, and gift tax purposes.
[Footnote 3: Secs. 170, 2055, and 2522, respectively. Unless otherwise provided, all section references are to the Internal Revenue Code of 1986, as amended (the `Code').]

In general, in any taxable year, charitable contributions by a corporation are not deductible to the extent the aggregate contributions exceed 10 percent of the corporation's taxable income computed without regard to net operating or capital loss carrybacks. For individuals, the amount deductible is a percentage of the taxpayer's contribution base, (i.e., taxpayer's adjusted gross income computed without regard to any net operating loss carryback). The applicable percentage of the contribution base varies depending on the type of donee organization and property contributed. Cash contributions of an individual taxpayer to public charities, private operating foundations, and certain types of private nonoperating foundations may not exceed 50 percent of the taxpayer's contribution base. Cash contributions to private foundations and certain other organizations generally may be deducted up to 30 percent of the taxpayer's contribution base.

In general, a charitable deduction is not allowed for income, estate, or gift tax purposes if the donor transfers an interest in property to a charity while also either retaining an interest in that property or transferring an interest in that property to a noncharity for less than full and adequate consideration. Exceptions to this general rule are provided for, among other interests, remainder interests in charitable remainder annuity trusts, charitable remainder unitrusts, and pooled income funds, present interests in the form of a guaranteed annuity or a fixed percentage of the annual value of the property, and qualified conservation contributions.

Capital gain property
Capital gain property means any capital asset or property used in the taxpayer's trade or business the sale of which at its fair market value, at the time of contribution, would have resulted in gain that would have been long-term capital gain. Contributions of capital gain property to a qualified charity are deductible at fair market value within certain limitations. Contributions of capital gain property to charitable organizations described in section 170(b)(1)(A) (e.g., public charities, private foundations other than private non-operating foundations, and certain governmental units) generally are deductible up to 30 percent of the taxpayer's contribution base. An individual may elect, however, to bring all these contributions of capital gain property for a taxable year within the 50-percent limitation category by reducing the amount of the contribution deduction by the amount of the appreciation in the capital gain property. Contributions of capital gain property to charitable organizations described in section 170(b)(1)(B) (e.g., private non-operating foundations) are deductible up to 20 percent of the taxpayer's contribution base.

For purposes of determining whether a taxpayer's aggregate charitable contributions in a taxable year exceed the applicable percentage limitation, contributions of capital gain property are taken into account after other charitable contributions. Contributions of capital gain property that exceed the percentage limitation may be carried forward for five years.

Qualified conservation contributions
Qualified conservation contributions are not subject to the `partial interest' rule, which generally bars deductions for charitable contributions of partial interests in property. A qualified conservation contribution is a contribution of a qualified real property interest to a qualified organization exclusively for conservation purposes. A qualified real property interest is defined as: (1) the entire interest of the donor other than a qualified mineral interest; (2) a remainder interest; or (3) a restriction (granted in perpetuity) on the use that may be made of the real property. Qualified organizations include certain governmental units, public charities that meet certain public support tests, and certain supporting organizations. Conservation purposes include: (1) the preservation of land areas for outdoor recreation by, or for the education of, the general public; (2) the protection of a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem; (3) the preservation of open space (including farmland and forest land) where such preservation will yield a significant public benefit and is either for the scenic enjoyment of the general public or pursuant to a clearly delineated Federal, State, or local governmental conservation policy; and (4) the preservation of an historically important land area or a certified historic structure.

Qualified conservation contributions of capital gain property are subject to the same limitations and carryover rules of other charitable contributions of capital gain property.

Special rule regarding contributions of capital gain real property for conservation purposes

In general
Under a temporary provision that is effective for contributions made in taxable years beginning after December 31, 2005, the 30-percent contribution base limitation on contributions of capital gain property by individuals does not apply to qualified conservation contributions (as defined under present law). Instead, individuals may deduct the fair market value of any qualified conservation contribution to an organization described in section 170(b)(1)(A) to the extent of the excess of 50 percent of the contribution base over the amount of all other allowable charitable contributions. These contributions are not taken into account in determining the amount of other allowable charitable contributions. [Footnote 4: Sec. 170(b)(1)(E).]

Individuals are allowed to carry over any qualified conservation contributions that exceed the 50-percent limitation for up to 15 years.

For example, assume an individual with a contribution base of $100 makes a qualified conservation contribution of property with a fair market value of $80 and makes other charitable contributions subject to the 50-percent limitation of $60. The individual is allowed a deduction of $50 in the current taxable year for the non-conservation contributions (50 percent of the $100 contribution base) and is allowed to carry over the excess $10 for up to 5 years. No current deduction is allowed for the qualified conservation contribution, but the entire $80 qualified conservation contribution may be carried forward for up to 15 years.

Farmers and ranchers
In the case of an individual who is a qualified farmer or rancher for the taxable year in which the contribution is made, a qualified conservation contribution is allowable up to 100 percent of the excess of the taxpayer's contribution base over the amount of all other allowable charitable contributions.

In the above example, if the individual is a qualified farmer or rancher, in addition to the $50 deduction for non-conservation contributions, an additional $50 for the qualified conservation contribution is allowed and $30 may be carried forward for up to 15 years as a contribution subject to the 100-percent limitation.

In the case of a corporation (other than a publicly traded corporation) that is a qualified farmer or rancher for the taxable year in which the contribution is made, any qualified conservation contribution is allowable up to 100 percent of the excess of the corporation's taxable income (as computed under section 170(b)(2)) over the amount of all other allowable charitable contributions. Any excess may be carried forward for up to 15 years as a contribution subject to the 100-percent limitation.  [Footnote 5: Sec. 170(b)(2)(B).]

As an additional condition of eligibility for the 100 percent limitation, with respect to any contribution of property in agriculture or livestock production, or that is available for such production, by a qualified farmer or rancher, the qualified real property interest must include a restriction that the property remain generally available for such production. (There is no requirement as to any specific use in agriculture or farming, or necessarily that the property be used for such purposes, merely that the property remain available for such purposes.) Such additional condition does not apply to contributions made on or before August 17, 2006.

A qualified farmer or rancher means a taxpayer whose gross income from the trade or business of farming (within the meaning of section 2032A(e)(5)) is greater than 50 percent of the taxpayer's gross income for the taxable year.

Termination

The special rule regarding contributions of capital gain real property for conservation purposes does not apply to contributions made in taxable years beginning after December 31, 2007.

HOUSE BILL

No provision.

SENATE AMENDMENT

The Senate amendment makes permanent the special rule regarding contributions of capital gain real property for conservation purposes.

Effective date.--The provision is effective for contributions made in taxable years beginning after December 31, 2007.

CONFERENCE AGREEMENT

The conference agreement follows the Senate amendment by extending the special rule regarding contributions of capital gain real property for conservation purposes. However, under the conference agreement, the special rule does not apply for contributions made in taxable years beginning after December 31, 2009.

Farmland Protection Program (new name, but Ranchland included)


Text from Title II:
SEC. 2401. FARMLAND PROTECTION PROGRAM.
(a) Definitions- Section 1238H of the Food Security Act of 1985 (16 U.S.C. 3838h) is amended--
(1) by striking paragraph (1) and inserting the following new paragraph:
`(1) ELIGIBLE ENTITY- The term `eligible entity' means--
`(A) any agency of any State or local government or an Indian tribe (including a farmland protection board or land resource council established under State law); or
`(B) any organization that--
`(i) is organized for, and at all times since the formation of the organization has been operated principally for, 1 or more of the conservation purposes specified in clause (i), (ii), (iii), or (iv) of section 170(h)(4)(A) of the Internal Revenue Code of 1986;
`(ii) is an organization described in section 501(c)(3) of that Code that is exempt from taxation under section 501(a) of that Code; and
`(iii) is--
`(I) described in paragraph (1) or (2) of section 509(a) of that Code; or
`(II) described in section 509(a)(3), and is controlled by an organization described in section 509(a)(2), of that Code.'; and
(2) in paragraph (2)--
(A) in subparagraph (A)--
(i) by striking `that--' and inserting `that is subject to a pending offer for purchase from an eligible entity and--'; and
(ii) by striking clauses (i) and (ii) and inserting the following new clauses:
`(i) has prime, unique, or other productive soil;
`(ii) contains historical or archaeological resources; or
`(iii) the protection of which will further a State or local policy consistent with the purposes of the program.'; and
(B) in subparagraph (B)--
(i) in clause (iv), by striking `and' at the end; and
(ii) by striking clause (v) and inserting the following new clauses:
`(v) forest land that--
`(I) contributes to the economic viability of an agricultural operation; or
`(II) serves as a buffer to protect an agricultural operation from development; and
`(vi) land that is incidental to land described in clauses (i) through (v), if such land is necessary for the efficient administration of a conservation easement, as determined by the Secretary.'.
(b) Farmland Protection- Section 1238I of the Food Security Act of 1985 (16 U.S.C. 3838i) is amended to read as follows:
`SEC. 1238I. FARMLAND PROTECTION PROGRAM.
`(a) Establishment- The Secretary shall establish and carry out a farmland protection program under which the Secretary shall facilitate and provide funding for the purchase of conservation easements or other interests in eligible land.
`(b) Purpose- The purpose of the program is to protect the agricultural use and related conservation values of eligible land by limiting nonagricultural uses of that land.
`(c) Cost-Share Assistance-
`(1) PROVISION OF ASSISTANCE- The Secretary shall provide cost-share assistance to eligible entities for purchasing a conservation easement or other interest in eligible land.
`(2) FEDERAL SHARE- The share of the cost provided by the Secretary for purchasing a conservation easement or other interest in eligible land shall not exceed 50 percent of the appraised fair market value of the conservation easement or other interest in eligible land.
`(3) NON-FEDERAL SHARE-
`(A) SHARE PROVIDED BY ELIGIBLE ENTITY- The eligible entity shall provide a share of the cost of purchasing a conservation easement or other interest in eligible land in an amount that is not less than 25 percent of the acquisition purchase price.
`(B) LANDOWNER CONTRIBUTION- As part of the non-Federal share of the cost of purchasing a conservation easement or other interest in eligible land, an eligible entity may include a charitable donation or qualified conservation contribution (as defined by section 170(h) of the Internal Revenue Code of 1986) from the private landowner from which the conservation easement or other interest in land will be purchased.
`(d) Determination of Fair Market Value- Effective on the date of enactment of the Food, Conservation, and Energy Act of 2008, the fair market value of the conservation easement or other interest in eligible land shall be determined on the basis of an appraisal using an industry approved method, selected by the eligible entity and approved by the Secretary.
`(e) Bidding Down Prohibited- If the Secretary determines that 2 or more applications for cost-share assistance are comparable in achieving the purpose of the program, the Secretary shall not assign a higher priority to any 1 of those applications solely on the basis of lesser cost to the program.
`(f) Condition on Assistance-
`(1) CONSERVATION PLAN- Any highly erodible cropland for which a conservation easement or other interest is purchased using cost-share assistance provided under the program shall be subject to a conservation plan that requires, at the option of the Secretary, the conversion of the cropland to less intensive uses.
`(2) CONTINGENT RIGHT OF ENFORCEMENT- The Secretary shall require the inclusion of a contingent right of enforcement for the Secretary in the terms of a conservation easement or other interest in eligible land that is purchased using cost-share assistance provided under the program.
`(g) Agreements With Eligible Entities-
`(1) IN GENERAL- The Secretary shall enter into agreements with eligible entities to stipulate the terms and conditions under which the eligible entity is permitted to use cost-share assistance provided under subsection (c).
`(2) LENGTH OF AGREEMENTS- An agreement under this subsection shall be for a term that is--
`(A) in the case of an eligible entity certified under the process described in subsection (h), a minimum of five years; and
`(B) for all other eligible entities, at least three, but not more than five years.
`(3) SUBSTITUTION OF QUALIFIED PROJECTS- An agreement shall allow, upon mutual agreement of the parties, substitution of qualified projects that are identified at the time of the proposed substitution.
`(4) MINIMUM REQUIREMENTS- An eligible entity shall be authorized to use its own terms and conditions, as approved by the Secretary, for conservation easements and other purchases of interests in land, so long as such terms and conditions--
`(A) are consistent with the purposes of the program;
`(B) permit effective enforcement of the conservation purposes of such easements or other interests; and
`(C) include a limit on the impervious surfaces to be allowed that is consistent with the agricultural activities to be conducted.
`(5) EFFECT OF VIOLATION- If a violation occurs of a term or condition of an agreement entered into under this subsection--
`(A) the agreement shall remain in force; and
`(B) the Secretary may require the eligible entity to refund all or part of any payments received by the entity under the program, with interest on the payments as determined appropriate by the Secretary.
`(h) Certification of Eligible Entities-
`(1) CERTIFICATION PROCESS- The Secretary shall establish a process under which the Secretary may--
`(A) directly certify eligible entities that meet established criteria;
`(B) enter into long-term agreements with certified entities, as authorized by subsection (g)(2)(A); and
`(C) accept proposals for cost-share assistance to certified entities for the purchase of conservation easements or other interests in eligible land throughout the duration of such agreements.
`(2) CERTIFICATION CRITERIA- In order to be certified, an eligible entity shall demonstrate to the Secretary that the entity will maintain, at a minimum, for the duration of the agreement--
`(A) a plan for administering easements that is consistent with the purpose of this subchapter;
`(B) the capacity and resources to monitor and enforce conservation easements or other interests in land; and
`(C) policies and procedures to ensure--
`(i) the long-term integrity of conservation easements or other interests in eligible land;
`(ii) timely completion of acquisitions of easements or other interests in eligible land; and
`(iii) timely and complete evaluation and reporting to the Secretary on the use of funds provided by the Secretary under the program.
`(3) REVIEW AND REVISION-
`(A) REVIEW- The Secretary shall conduct a review of eligible entities certified under paragraph (1) every three years to ensure that such entities are meeting the criteria established under paragraph (2).
`(B) REVOCATION- If the Secretary finds that the certified entity no longer meets the criteria established under paragraph (2), the Secretary may--
`(i) allow the certified entity a specified period of time, at a minimum 180 days, in which to take such actions as may be necessary to meet the criteria; and
`(ii) revoke the certification of the entity, if after the specified period of time, the certified entity does not meet the criteria established in paragraph (2).'.
SEC. 2701. FUNDING OF CONSERVATION PROGRAMS UNDER FOOD SECURITY ACT OF 1985.
(d) Farmland Protection Program- Paragraph (4) of section 1241(a) of the Food Security Act of 1985 (16 U.S.C. 3841(a)) is amended to read as follows:
`(4) The farmland protection program under subchapter C of chapter 2, using, to the maximum extent practicable--
`(A) $97,000,000 in fiscal year 2008;
`(B) $121,000,000 in fiscal year 2009;
`(C) $150,000,000 in fiscal year 2010;
`(D) $175,000,000 in fiscal year 2011; and
`(E) $200,000,000 in fiscal year 2012.'.

Explanatory Statement:
(19) Farm and Ranchland Protection Program (Section 1238I of FSA)
The House bill establishes a certification process for States. It allows grants to be made to certified States based on the demonstrated need for farm and ranch land protection. Up to 10 percent of those funds may be used for the costs of purchasing and enforcing easements. The bill states that the Secretary may also enter into agreements with eligible entities. The terms and conditions of the agreements must be consistent with the purposes of the program, as well as include a requirement consistent with agricultural activities regarding impervious surfaces. It also requires the use of a conservation plan for highly erodible cropland.
The House bill provides for the Federal Government to retain a Federal contingent right of enforcement or executory limitation in an easement to ensure its enforcement. This right is not considered an acquisition of property.

The House bill provides cost-share assistance for purchasing an easement, but the assistance may not exceed 50 percent of the appraised fair market value of the easement. The fair market value is determined by an appraisal using an industry-approved method. (Section 2110 of the House bill)

The Senate amendment modifies the definition of eligible forest land to include land that contributes to the economic viability of an operation or serves as a buffer. It also amends the definition to include land that is incidental to other eligible land to ensure efficient administration of the program. The provision requires the Secretary to enter into cooperative agreements with eligible entities as long as the terms and conditions of the cooperative agreement include: entity qualifications, specific projects, substitution of projects, use of funds, flexibility to use unique terms and conditions for easements, impervious surface limitation, appraisal method, and charitable contributions.

The Senate amendment requires the protection of Federal investment through an executory limitation, but specifies that the executory limitation is not a Federal acquisition of real property and will not trigger any Federal appraisal or other real property requirements.

The amendment limits the amount the Secretary can share in the costs of purchasing the easement to 50 percent of the appraised fair market value and establishes minimum amounts entities pay based on the amount of landowner contributions. The Senate amendment requires appraisals based on Uniform standards of Professional Appraisal Practice or any other industry-approved standard. (Section 2371 of the Senate amendment)

The Conference substitute adopts the House provision with amendment.

The Managers expect the changes to the Farmland Protection Program (FPP) will provide flexibility and certainty to program participants. The substitute makes changes to the administrative requirements, appraisal methodology, and terms and conditions of cooperative agreements which shall make the overall program more user-friendly.

The substitute clarifies the purpose of the program as protecting land for agricultural use by limiting nonagricultural uses of the land. The substitute adopts the Senate provision to modify the definition of eligible land to include forestland and other land that contributes to the economic viability of an operation.

The substitute establishes a certification process similar to the House bill for all eligible entities. To become certified, entities must have the authority and resources to enforce easements, polices in place that are consistent with the purposes of the program, and clear procedures to protect the integrity of the program.

The substitute adopts terms and conditions for cooperative agreements similar to the Senate amendment. The cooperative agreement sets forth the working relationship between the Department and the entity in carrying out the program. The terms and conditions will stipulate the length of the agreement; allow for the substitution of qualified projects; and maintain, at a minimum, that the agreement is consistent with the purpose of the program, provide for adequate enforcement of the easement, and include a limit on impervious surfaces. Once an entity is certified, it may enter into an agreement for a minimum of five years with the Department.

Non-certified entities may enter into agreements of not less than 3, but not more than 5 years. In selecting offers from eligible entities for funding, the Managers expect the Secretary to consider the sufficiency of the offer regarding effective monitoring and enforcement, reversionary interest, or other such factors that will affect the long-term integrity of easement being acquired under the program.

The Managers intend any violation of the terms and conditions will result in a penalty to the eligible entity and the agreement will remain in place. It is the expectation that the violation and penalty terms will be outlined in all cooperative agreements between the eligible entity and the Secretary.

The substitute provides for the Federal Government to retain a Federal contingent right of enforcement in an easement to ensure its enforcement. The Managers do not intend this right to be considered to be an acquisition of real property, but in the event an easement cannot be enforced by the eligible entity the Federal Government shall ensure the easement remains in force. (Section 2401 of Conference substitute)

Grassland Reserve Program

Text from Title II:
SEC. 2403. GRASSLAND RESERVE PROGRAM.
Subchapter D of chapter 2 of subtitle D of title XII of the Food Security Act of 1985 (16 U.S.C. 3838n et seq.), as redesignated by section 2301(a)(1), is amended to read as follows:
`SUBCHAPTER D--GRASSLAND RESERVE PROGRAM
`SEC. 1238N. GRASSLAND RESERVE PROGRAM.
`(a) Establishment and Purpose- The Secretary shall establish a grassland reserve program (referred to in this subchapter as the `program') for the purpose of assisting owners and operators in protecting grazing uses and related conservation values by restoring and conserving eligible land through rental contracts, easements, and restoration agreements.
`(b) Enrollment of Acreage-
`(1) ACREAGE ENROLLED- The Secretary shall enroll an additional 1,220,000 acres of eligible land in the program during fiscal years 2009 through 2012.
`(2) METHODS OF ENROLLMENT- The Secretary shall enroll eligible land in the program through the use of;
`(A) a 10-year, 15-year, or 20-year rental contract;
`(B) a permanent easement; or
`(C) in a State that imposes a maximum duration for easements, an easement for the maximum duration allowed under the law of that State.
`(3) LIMITATION- Of the total amount of funds expended under the program to acquire rental contracts and easements described in paragraph (2), the Secretary shall use, to the extent practicable--
`(A) 40 percent for rental contacts; and
`(B) 60 percent for easements.
`(4) ENROLLMENT OF CONSERVATION RESERVE LAND-
`(A) PRIORITY- Upon expiration of a contract under subchapter B of chapter 1 of this subtitle, the Secretary shall give priority for enrollment in the program to land previously enrolled in the conservation reserve program if--
`(i) the land is eligible land, as defined in subsection (c); and
`(ii) the Secretary determines that the land is of high ecological value and under significant threat of conversion to uses other than grazing.
`(B) MAXIMUM ENROLLMENT- The number of acres of land enrolled under the priority described in subparagraph (A) in a calendar year shall not exceed 10 percent of the total number of acres enrolled in the program in that calendar year.
`(c) Eligible Land Defined- For purposes of the program, the term `eligible land' means private or tribal land that--
`(1) is grassland, land that contains forbs, or shrubland (including improved rangeland and pastureland) for which grazing is the predominant use;
`(2) is located in an area that has been historically dominated by grassland, forbs, or shrubland, and the land--
`(A) could provide habitat for animal or plant populations of significant ecological value if the land--
`(i) is retained in its current use; or
`(ii) is restored to a natural condition;
`(B) contains historical or archaeological resources; or
`(C) would address issues raised by State, regional, and national conservation priorities; or
`(3) is incidental to land described in paragraph (1) or (2), if the incidental land is determined by the Secretary to be necessary for the efficient administration of a rental contract or easement under the program.
`SEC. 1238O. DUTIES OF OWNERS AND OPERATORS.
`(a) Rental Contracts- To be eligible to enroll eligible land in the program under a rental contract, the owner or operator of the land shall agree--
`(1) to comply with the terms of the contract and, when applicable, a restoration agreement;
`(2) to suspend any existing cropland base and allotment history for the land under another program administered by the Secretary; and
`(3) to implement a grazing management plan, as approved by the Secretary, which may be modified upon mutual agreement of the parties.
`(b) Easements- To be eligible to enroll eligible land in the program through an easement, the owner of the land shall agree--
`(1) to grant an easement to the Secretary or to an eligible entity described in section 1238Q;
`(2) to create and record an appropriate deed restriction in accordance with applicable State law to reflect the easement;
`(3) to provide a written statement of consent to the easement signed by persons holding a security interest or any vested interest in the land;
`(4) to provide proof of unencumbered title to the underlying fee interest in the land that is the subject of the easement;
`(5) to comply with the terms of the easement and, when applicable, a restoration agreement;
`(6) to implement a grazing management plan, as approved by the Secretary, which may be modified upon mutual agreement of the parties; and
`(7) to eliminate any existing cropland base and allotment history for the land under another program administered by the Secretary.
`(c) Restoration Agreements-
`(1) WHEN APPLICABLE- To be eligible for cost-share assistance to restore eligible land subject to a rental contract or an easement under the program, the owner or operator of the land shall agree to comply with the terms of a restoration agreement.
`(2) TERMS AND CONDITIONS- The Secretary shall prescribe the terms and conditions of a restoration agreement by which eligible land that is subject to a rental contract or easement under the program shall be restored.
`(3) DUTIES- The restoration agreement shall describe the respective duties of the owner or operator and the Secretary, including the Federal share of restoration payments and technical assistance.
`(d) Terms and Conditions Applicable to Rental Contracts and Easements-
`(1) PERMISSIBLE ACTIVITIES- The terms and conditions of a rental contract or easement under the program shall permit--
`(A) common grazing practices, including maintenance and necessary cultural practices, on the land in a manner that is consistent with maintaining the viability of grassland, forb, and shrub species appropriate to that locality;
`(B) haying, mowing, or harvesting for seed production, subject to appropriate restrictions during the nesting season for birds in the local area that are in significant decline or are conserved in accordance with Federal or State law, as determined by the State Conservationist;
`(C) fire presuppression, rehabilitation, and construction of fire breaks; and
`(D) grazing related activities, such as fencing and livestock watering.
`(2) PROHIBITIONS- The terms and conditions of a rental contract or easement under the program shall prohibit--
`(A) the production of crops (other than hay), fruit trees, vineyards, or any other agricultural commodity that is inconsistent with maintaining grazing land; and
`(B) except as permitted under a restoration plan, the conduct of any other activity that would be inconsistent with maintaining grazing land enrolled in the program.
`(3) ADDITIONAL TERMS AND CONDITIONS- A rental contract or easement under the program shall include such additional provisions as the Secretary determines are appropriate to carry out or facilitate the purposes and administration of the program.
`(e) Violations- On a violation of the terms or conditions of a rental contract, easement, or restoration agreement entered into under this section--
`(1) the contract or easement shall remain in force; and
`(2) the Secretary may require the owner or operator to refund all or part of any payments received under the program, with interest on the payments as determined appropriate by the Secretary.
`SEC. 1238P. DUTIES OF SECRETARY.
`(a) Evaluation and Ranking of Applications-
`(1) CRITERIA- The Secretary shall establish criteria to evaluate and rank applications for rental contracts and easements under the program.
`(2) CONSIDERATIONS- In establishing the criteria, the Secretary shall emphasize support for--
`(A) grazing operations;
`(B) plant and animal biodiversity; and
`(C) grassland, land that contains forbs, and shrubland under the greatest threat of conversion to uses other than grazing.
`(b) Payments-
`(1) IN GENERAL- In return for the execution of a rental contract or the granting of an easement by an owner or operator under the program, the Secretary shall--
`(A) make rental contract or easement payments to the owner or operator in accordance with paragraphs (2) and (3); and
`(B) make payments to the owner or operator under a restoration agreement for the Federal share of the cost of restoration in accordance with paragraph (4).
`(2) RENTAL CONTRACT PAYMENTS-
`(A) PERCENTAGE OF GRAZING VALUE OF LAND- In return for the execution of a rental contract by an owner or operator under the program, the Secretary shall make annual payments during the term of the contract in an amount, subject to subparagraph (B), that is not more than 75 percent of the grazing value of the land covered by the contract.
`(B) PAYMENT LIMITATION- Payments made under 1 or more rental contracts to a person or legal entity, directly or indirectly, may not exceed, in the aggregate, $50,000 per year.
`(3) EASEMENT PAYMENTS-
`(A) IN GENERAL- Subject to subparagraph (B), in return for the granting of an easement by an owner under the program, the Secretary shall make easement payments in an amount not to exceed the fair market value of the land less the grazing value of the land encumbered by the easement.
`(B) METHOD FOR DETERMINATION OF COMPENSATION- In making a determination under subparagraph (A), the Secretary shall pay as compensation for an easement acquired under the program the lowest of--
`(i) the fair market value of the land encumbered by the easement, as determined by the Secretary, using--
`(I) the Uniform Standards of Professional Appraisal Practices; or
`(II) an area-wide market analysis or survey;
`(ii) the amount corresponding to a geographical cap, as determined by the Secretary in regulations; or
`(iii) the offer made by the landowner.
`(C) SCHEDULE- Easement payments may be provided in up to 10 annual payments of equal or unequal amount, as agreed to by the Secretary and the owner.
`(4) RESTORATION AGREEMENT PAYMENTS-
`(A) FEDERAL SHARE OF RESTORATION- The Secretary shall make payments to an owner or operator under a restoration agreement of not more than 50 percent of the costs of carrying out measures and practices necessary to restore functions and values of that land.
`(B) PAYMENT LIMITATION- Payments made under 1 or more restoration agreements to a person or legal entity, directly or indirectly, may not exceed, in the aggregate, $50,000 per year.
`(5) PAYMENTS TO OTHERS- If an owner or operator who is entitled to a payment under the program dies, becomes incompetent, is otherwise unable to receive the payment, or is succeeded by another person who renders or completes the required performance, the Secretary shall make the payment, in accordance with regulations promulgated by the Secretary and without regard to any other provision of law, in such manner as the Secretary determines is fair and reasonable in light of all the circumstances.
`SEC. 1238Q. DELEGATION OF DUTY.
`(a) Authority to Delegate- The Secretary may delegate a duty under the program--
`(1) by transferring title of ownership to an easement to an eligible entity to hold and enforce; or
`(2) by entering into a cooperative agreement with an eligible entity for the eligible entity to own, write, and enforce an easement.
`(b) Eligible Entity Defined- In this section, the term `eligible entity' means--
`(1) an agency of State or local government or an Indian tribe; or
`(2) an organization that--
`(A) is organized for, and at all times since the formation of the organization has been operated principally for, one or more of the conservation purposes specified in clause (i), (ii), (iii), or (iv) of section 170(h)(4)(A) of the Internal Revenue Code of 1986;
`(B) is an organization described in section 501(c)(3) of that Code that is exempt from taxation under section 501(a) of that Code; and
`(C) is described in--
`(i) paragraph (1) or (2) of section 509(a) of that Code; or
`(ii) in section 509(a)(3) of that Code, and is controlled by an organization described in section 509(a)(2) of that Code.
`(c) Transfer of Title of Ownership-
`(1) TRANSFER- The Secretary may transfer title of ownership to an easement to an eligible entity to hold and enforce, in lieu of the Secretary, subject to the right of the Secretary to conduct periodic inspections and enforce the easement, if--
`(A) the Secretary determines that the transfer will promote protection of grassland, land that contains forbs, or shrubland;
`(B) the owner authorizes the eligible entity to hold or enforce the easement; and
`(C) the eligible entity agrees to assume the costs incurred in administering and enforcing the easement, including the costs of restoration or rehabilitation of the land as specified by the owner and the eligible entity.
`(2) APPLICATION- An eligible entity that seeks to hold and enforce an easement shall apply to the Secretary for approval.
`(3) APPROVAL BY SECRETARY- The Secretary may approve an application described in paragraph (2) if the eligible entity--
`(A) has the relevant experience necessary, as appropriate for the application, to administer an easement on grassland, land that contains forbs, or shrubland;
`(B) has a charter that describes a commitment to conserving ranchland, agricultural land, or grassland for grazing and conservation purposes; and
`(C) has the resources necessary to effectuate the purposes of the charter.
`(d) Cooperative Agreements-
`(1) AUTHORIZED; TERMS AND CONDITIONS- The Secretary shall establish the terms and conditions of a cooperative agreement under which an eligible entity shall use funds provided by the Secretary to own, write, and enforce an easement, in lieu of the Secretary.
`(2) MINIMUM REQUIREMENTS- At a minimum, the cooperative agreement shall--
`(A) specify the qualification of the eligible entity to carry out the entity's responsibilities under the program, including acquisition, monitoring, enforcement, and implementation of management policies and procedures that ensure the long-term integrity of the easement protections;
`(B) require the eligible entity to assume the costs incurred in administering and enforcing the easement, including the costs of restoration or rehabilitation of the land as specified by the owner and the eligible entity;
`(C) specify the right of the Secretary to conduct periodic inspections to verify the eligible entity's enforcement of the easement;
`(D) subject to subparagraph (E), identify a specific project or a range of projects to be funded under the agreement;
`(E) allow, upon mutual agreement of the parties, substitution of qualified projects that are identified at the time of substitution;
`(F) specify the manner in which the eligible entity will evaluate and report the use of funds to the Secretary;
`(G) allow the eligible entity flexibility to develop and use terms and conditions for easements, if the Secretary finds the terms and conditions consistent with the purposes of the program and adequate to enable effective enforcement of the easements;
`(H) if applicable, allow an eligible entity to include a charitable donation or qualified conservation contribution (as defined by section 170(h) of the Internal Revenue Code of 1986) from the landowner from which the easement will be purchased as part of the entity's share of the cost to purchase an easement; and
`(I) provide for a schedule of payments to an eligible entity, as agreed to by the Secretary and the eligible entity.
`(3) COST SHARING-
`(A) IN GENERAL- As part of a cooperative agreement with an eligible entity under this subsection, the Secretary may provide a share of the purchase price of an easement under the program.
`(B) MINIMUM SHARE BY ELIGIBLE ENTITY- The eligible entity shall be required to provide a share of the purchase price at least equivalent to that provided by the Secretary.
`(C) PRIORITY- The Secretary may accord a higher priority to proposals from eligible entities that leverage a greater share of the purchase price of the easement.
`(4) VIOLATION- If an eligible entity violates the terms or conditions of a cooperative agreement entered into under this subsection--
`(A) the cooperative agreement shall remain in force; and
`(B) the Secretary may require the eligible entity to refund all or part of any payments received by the eligible entity under the program, with interest on the payments as determined appropriate by the Secretary.
`(e) Protection of Federal Investment- When delegating a duty under this section, the Secretary shall ensure that the terms of an easement include a contingent right of enforcement for the Department.'.
SEC. 2701. FUNDING OF CONSERVATION PROGRAMS UNDER FOOD SECURITY ACT OF 1985.
(e) Grassland Reserve Program- Paragraph (5) of section 1241(a) of the Food Security Act of 1985 (16 U.S.C. 3841(a)) is amended to read as follows:
`(5) The grassland reserve program under subchapter D of chapter 2.'.

Explanatory Statement:


(11) Grassland Reserve Program (Section 1238N-1238Q of FSA)
(a) Establishment and purpose (Section 1238N)

The House bill establishes an enrollment goal of 1,340,000 acres by 2012. It revises the enrollment process to be based on acreage rather than funding and requires that at least 60 percent of program acreage be in long term easements and agreements. It adds a priority for enrolling CRP acres, except that no more than 10 percent of the acreage enrolled in any year may be from CRP; and prohibits duplicate payments for such land enrolled in GRP. It establishes that the method for determining the fair market value of enrolled land will be an appraisal, a market survey, a geographic cap, or the landowner offer; whichever results in the lowest amount of compensation to be paid. It authorizes the Secretary to enter into agreements with States and their subdivisions to advance the purposes of the program through a grassland reserve enhancement option. (Section 2104 of the House bill)

The Senate amendment eliminates short-term rental agreements and the requirement for enrollment of at least 40 contiguous acres. It provides for enrollment of land through 30-year contracts and easements and permanent easements. The 30-year contract option is included to encourage tribal participation in the program. A new authority is added for the Secretary to enter into cooperative agreements with eligible entities for the purpose of purchasing, holding, monitoring, and enforcing easements. The Senate amendment adds a definition of eligible entity, expands eligible land to include land that contains historical or archeological resources or would further goals of certain fish and wildlife plans or initiatives, and specifies that easements of the maximum duration by State law are equivalent to permanent easements. (Section 2381 of the Senate amendment)

The Conference substitute adopts an acreage enrollment goal of an additional 1,220,000 acres by 2012. The Conference substitute includes 10-, 15-, and 20-year rental contracts and permanent easements. Easements of the maximum duration allowed by State law are considered as permanent easements. The Managers expect that the 20-year rental contracts will be used to encourage tribal group participation in the program.

The Conference substitute strikes the House priority for 60 percent of acreage in long term contracts and retains current law that 60 percent of the funds would be dedicated to easements, while 40 percent of the funds would be dedicated to short term contracts. In addition, the Conference substitute adopts a priority for enrollment of CRP land with a modification to clarify that the priority applies upon expiration of the CRP contract.

The Conference substitute adopts the Senate additions to eligible land with technical corrections. It does not include a Grassland Reserve Enhancement provision. It adopts the Senate definition of eligible entity and authority for the Secretary to enter cooperative agreements with entities to purchase easements. It also adopts the House bill provision in regard to the method for determining fair market value with a technical correction.
(b) Requirements relating to easements and contracts (Section 1238O)

The Senate amendment modifies terms and conditions of easements and agreements to permit fire presuppression and addition of grazing-related activities, such as fencing and livestock watering. Criteria for evaluating applications for enrollment are expanded to provide additional flexibility to the Secretary, and in the case of agreements with eligible entities, to provide a priority to applications that include a cash contribution or leverage other resources toward the purchase price of easements.
The House bill has no comparable provision.

The Conference substitute adopts the Senate amendment. The Managers expect these additions to encourage improved management of enrolled acreage, particularly where breaking of the soil surface may be required to manage invasive species or improve grazing systems, and to leverage additional resources for the protection of grasslands.

The Conference substitute adds implementation of a grazing management plan as a new general requirement of landowners enrolling in the program. With the inclusion of a grazing management plan, the Managers emphasize the conservation purpose of the program, but further clarify that once established these plans are modified only by mutual agreement of the involved parties.
(c) Payments (Section 1238P)

The Senate amendment strikes rental agreement payments and modifies the rate of compensation for restoration agreements. Permanent easements will be paid at a rate of not less than 90 nor more than 100 percent of the eligible restoration costs. Thirty-year easements and contracts will be at the rate of not less than 50 nor more than 75 percent of the eligible restoration costs. The compensation schedule is lengthened to allow for up to 30 annual payments, corresponding to the newly established 30-year contract agreement.

The House bill has no comparable provision.

The Conference substitute adopts the cost-share rate for restoration agreements of not more than 50 percent of the costs of carrying out restoration activities. (d) Delegation to private organizations (1238Q)

The House bill expands on the authority of the Secretary to transfer easement titles to private organizations and to also allow entities to own and write easements under this section, subject to periodic inspections by the Secretary.

The Senate amendment provides authority for the Secretary to enter into cooperative agreements with eligible entities for those entities to purchase, own, enforce, and monitor easements. Terms and conditions of cooperative agreements require entities to demonstrate qualifications, specify parcels to be enrolled, allow substitutions as agreed to by the parties, specify entity reporting on fund use, allow entities to use their own easement instruments, require appraisals using an industry approved method, allow a landowner contribution as a share of the purchase price, and specify a payment schedule. The Secretary shall require easements to contain a contingent right to protect the public investment.

The Conference substitute adopts the Senate amendment provision for cooperative agreements between the Secretary and eligible entities with a modification to the language specifying that eligible entities shall assume costs of administering and enforcing easements.

The Conference substitute adopts a requirement for a contingent right of enforcement. In selecting offers from eligible entities for funding, the Managers expect the Secretary to consider the sufficiency of the offer regarding effective monitoring and enforcement, reversionary interest, or other such factors that will affect the long-term integrity of easement being acquired under the program. The Conference establishes that eligible entities shall provide a share of the easement purchase price that is equal to the share provided by the Secretary. (Section 2403 of Conference substitute)

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