article: SECTION 1. SHORT TITLE. This Act may be cited as the ``Irrigation Subsidy Reduction Act of 1996''. SEC. 2. FINDINGS. Congress finds that-- (1) the Federal reclamation program has been in existence for over 90 years, with an estimated taxpayer investment of over $70,000,000,000; (2) the program has had and continues to have an enormous effect on the water resources and aquatic environments of the western States; (3) irrigation water made available from Federal water projects in the West is a very valuable resource for which there are increasing and competing demands; (4) the justification for providing water at less than full cost was to benefit and promote the development of small family farms and exclude large corporate farms, but this purpose has been frustrated over the years due to inadequate implementation of subsidy and acreage limits; (5) below-cost water prices tend to encourage excessive use of scarce water supplies in the arid regions of the West, and reasonable price increases to the wealthiest western farmers would provide an economic incentive for greater water conservation; (6) the Federal Government has increasingly applied eligibility tests based on income for Federal entitlement and subsidy programs, measures that are consistent with the historic approach of the reclamation program's acreage limitations that seek to limit water subsidies to smaller farms; and (7) including a means test based on gross income in the reclamation program will increase the effectiveness of carrying out the family farm goals of the Federal reclamation laws. SEC. 3. AMENDMENTS. (a) Definitions.--Section 202 of the Reclamation Reform Act of 1982 (43 U.S.C. 390bb) is amended-- (1) by redesignating paragraphs (7), (8), (9), (10), and (11) as paragraphs (9), (10), (11), (12), and (13), respectively; (2) in paragraph (6) by striking ``owned or operated under a lease which'' and inserting ``owned, leased, or operated by an individual or legal entity and which''; (3) by inserting after paragraph (6) the following: ``(7) Legal entity.--The term `legal entity' includes a corporation, association, partnership, trust, joint tenancy, or tenancy in common, or any other entity that owns, leases, or operates a farm operation for the benefit of more than 1 individual under any form of agreement or arrangement. ``(8) Operator.-- ``(A) In general.--The term `operator'-- ``(i) means an individual or legal entity that operates a single farm operation on a parcel (or parcels) of land that is owned or leased by another person (or persons) under any form of agreement or arrangement (or agreements or arrangements); and ``(ii) if the individual or legal entity-- ``(I) is an employee of an individual or legal entity, includes the individual or legal entity; or ``(II) is a legal entity that controls, is controlled by, or is under common control with another legal entity, includes each such other legal entity. ``(B) Operation of a farm operation.--For the purposes of subparagraph (A), an individual or legal entity shall be considered to operate a farm operation if the individual or legal entity is the person that performs the greatest proportion of the decisionmaking for and supervision of the agricultural enterprise on land served with irrigation water.''; and (4) by adding at the end the following: ``(14) Single farm operation.-- ``(A) In general.--The term `single farm operation' means the total acreage of land served with irrigation water for which an individual or legal entity is the operator. ``(B) Rules for determining whether separate parcels are operated as a single farm operation.-- ``(i) Equipment- and labor-sharing activities.--The conduct of equipment- and labor-sharing activities on separate parcels of land by separate individuals or legal entities shall not by itself serve as a basis for concluding that the farming operations of the individuals or legal entities constitute a single farm operation. ``(ii) Performance of certain services.-- The performance by an individual or legal entity of an agricultural chemical application, pruning, or harvesting for a farm operation on a parcel of land shall not by itself serve as a basis for concluding that the farm operation on that parcel of land is part of a single farm operation operated by the individual or entity on other parcels of land.''. (b) Identification of Owners, Lessees, and Operators and of Single Farm Operations.--The Reclamation Reform Act of 1982 (43 U.S.C. 39aa et seq.) is amended by inserting after section 201 the following: ``SEC. 201A. IDENTIFICATION OF OWNERS, LESSEES, AND OPERATORS AND OF SINGLE FARM OPERATIONS. ``(a) In General.--Subject to subsection (b), for each parcel of land to which irrigation water is delivered or proposed to be delivered, the Secretary shall identify a single individual or legal entity as the owner, lessee, or operator. ``(b) Shared Decisionmaking and Supervision.--If the Secretary determines that no single individual or legal entity is the owner, lessee, or other individual that performs the greatest proportion of decisionmaking for and supervision of the agricultural enterprise on a parcel of land-- ``(1) all individuals and legal entities that own, lease, or perform a proportion of decisionmaking and supervision that is equal as among themselves but greater than the proportion performed by any other individual or legal entity shall be considered jointly to be the owner, lessee, or operator; and ``(2) all parcels of land of which any such individual or legal entity is the owner, lessee, or operator shall be considered to be part of the single farm operation of the owner, lessee, or operator identified under subsection (1). (c) Pricing.--Section 205 of the Reclamation Reform Act of 1982 (43 U.S.C. 390ee) is amended by adding at the end the following: ``(d) Single Farm Operations Generating More Than $500,000 in Gross Farm Income.-- ``(1) In general.--Notwithstanding subsections (a), (b), and (c), in the case of-- ``(A) a qualified recipient that reports gross farm income from a single farm operation in excess of $500,000 for a taxable year; or ``(B) a limited recipient that received irrigation water on or before October 1, 1981, and that reports gross farm income from a single farm operation in excess of $500,000 for a taxable year; irrigation water may be delivered to the single farm operation of the qualified recipient or limited recipient at less than full cost to a number of acres that does not exceed the number of acres determined under paragraph (2). ``(2) Maximum number of acres to which irrigation water may be delivered at less than full cost.--The number of acres determined under this subparagraph is the number equal to the number of acres of the single farm operation multiplied by a fraction, the numerator of which is $500,000 and the denominator of which is the amount of gross farm income reported by the qualified recipient or limited recipient in the most recent taxable year. ``(3) Inflation adjustment.-- ``(A) In general.--The $500,000 amount under paragraphs (1) and (2) for any taxable year beginning in a calendar year after 1997 shall be equal to the product of-- ``(i) $500,000, multiplied by ``(ii) the inflation adjustment factor for the taxable year. ``(B) Inflation adjustment factor.--The term `inflation adjustment factor' means, with respect to any calendar year, a fraction the numerator of which is the GDP implicit price deflator for the preceding calendar year and the denominator of which is the GDP implicit price deflator for 1996. Not later than April 1 of any calendar year, the Secretary shall publish the inflation adjustment factor for the preceding calendar year. ``(C) GDP implicit price deflator.--For purposes of subparagraph (B), the term `GDP implicit price deflator' means the first revision of the implicit price deflator for the gross domestic product as computed and published by the Secretary of Commerce. ``(D) Rounding.--If any increase determined under subparagraph (A) is not a multiple of $100, the increase shall be rounded to the next lowest multiple of $100.''. (d) Certification of Compliance.--Section 206 of the Reclamation Reform Act of 1982 (43 U.S.C. 390ff) is amended to read as follows: ``SEC. 206. CERTIFICATION OF COMPLIANCE. ``(a) In General.--As a condition to the receipt of irrigation water for land in a district that has a contract described in section 203, each owner, lessee, or operator in the district shall furnish the district, in a form prescribed by the Secretary, a certificate that the owner, lessee, or operator is in compliance with this title, including a statement of the number of acres owned, leased, or operated, the terms of any lease or agreement pertaining to the operation of a farm operation, and, in the case of a lessee or operator, a certification that the rent or other fees paid reflect the reasonable value of the irrigation water to the productivity of the land. ``(b) Documentation.--The Secretary may require a lessee or operator to submit for the Secretary's examination-- ``(1) a complete copy of any lease or other agreement executed by each of the parties to the lease or other agreement; and ``(2) a copy of the return of income tax imposed by chapter 1 of the Internal Revenue Code of 1986 for any taxable year in which the single farm operation of the lessee or operator received irrigation water at less than full cost.''. (e) Trusts.--Section 214 of the Reclamation Reform Act of 1982 (43 U.S.C. 390nn) is repealed. (f) Administrative Provisions.-- (1) Penalties.--Section 224(c) of the Reclamation Reform Act of 1982 (43 U.S.C. 390ww(c)) is amended-- (A) by striking ``(c) The Secretary'' and inserting the following: ``(c) Regulations; Data Collection; Penalties.-- ``(1) Regulations; data collection.--The Secretary''; and (B) by adding at the end the following: ``(2) Penalties.--Notwithstanding any other provision of law, the Secretary shall establish appropriate and effective penalties for failure to comply with any provision of this Act or any regulation issued under this Act.''. (2) Interest.--Section 224(i) of the Reclamation Reform Act of 1982 (43 U.S.C. 390ww(i)) is amended by striking the last sentence and inserting the following: ``The interest rate applicable to underpayments shall be equal to the rate applicable to expenditures under section 202(3)(C).''. (g) Reporting.--Section 228 of the Reclamation Reform Act of 1982 (43 U.S.C. 390zz) is amended by inserting ``operator or'' before ``contracting entity'' each place it appears. (h) Memorandum of Understanding.--The Reclamation Reform Act of 1982 (43 U.S.C. 390aa et seq.) is amended-- (1) by redesignating sections 229 and 230 as sections 230 and 231; and (2) by inserting after section 228 the following: ``SEC. 229. MEMORANDUM OF UNDERSTANDING. ``The Secretary, the Secretary of the Treasury, and the Secretary of Agriculture shall enter into a memorandum of understanding or other appropriate instrument to permit the Secretary, notwithstanding section 6103 of the Internal Revenue Code of 1986, to have access to and use of available information collected or maintained by the Department of the Treasury and the Department of Agriculture that would aid enforcement of the ownership and pricing limitations of Federal reclamation law.''.
summary: Irrigation Subsidy Reduction Act of 1996 - Amends the Reclamation Reform Act of 1982 to define the terms "legal entity," "operator," and "single farm operation." Directs the Secretary of the Interior, for each parcel of land to which irrigation water is delivered or proposed to be delivered, to identify a single individual or legal entity as the owner, lessee, or operator. Allows irrigation water to be delivered at less than the normal per-acre cost to either: (1) a qualified recipient that reports gross farm income from a single farm operation in excess of $500,000 per taxable year; or (2) a limited recipient that received such water on or before October 1, 1981, and that reports gross farm income in excess of such amount. Provides an inflation adjustment for calendar years after 1997. Requires lessees (currently, only owners and operators) of an irrigation district to furnish such district a certification of compliance with the Act. Allows the Secretary to require a lessee or operator to submit for examination a copy of a tax return for any taxable year in which the single farm operation of the lessee or operator received irrigation water at less than full cost. Repeals a provision exempting district lands held in trust from Federal reclamation ownership and cost pricing limitations. Directs the Secretary to establish penalties for failure to comply with provisions of the Act. Directs the Secretaries of the Interior, the Treasury, and Agriculture to enter into a memorandum of understanding to permit the Secretary of the Interior to have access to and use available information collected or maintained by either the Department of the Treasury or Agriculture that would aid in enforcement of the ownership and pricing limitations of Federal reclamation law.