article: SECTION 1. SHORT TITLE. This Act may be cited as the ``Agricultural Water Conservation Act''. SEC. 2. CONGRESSIONAL FINDINGS. The Congress finds that-- (1) the Federal Government has an historic commitment to assisting areas of the Nation in need of developing adequate water supplies, (2) water is becoming increasingly scarce and expensive in many parts of the United States, which is compounded when multiple years of drought occur, (3) in most areas of the United States, farms are overwhelmingly the largest water consumers, and (4) it is in the national interest for farmers to implement water conservation measures which address water conservation needs and for the Federal Government to promote such conservation measures. SEC. 3. CREDIT FOR PURCHASE AND INSTALLATION OF AGRICULTURAL WATER CONSERVATION SYSTEMS. (a) In General.--Subpart B of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to foreign tax credit, etc.) is amended by adding at the end the following new section: ``SEC. 30B. PURCHASE AND INSTALLATION OF AGRICULTURAL WATER CONSERVATION SYSTEMS. ``(a) Allowance of Credit.--In the case of an eligible taxpayer, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 30 percent of the water conservation system expenses paid or incurred by the taxpayer during such year. ``(b) Maximum Credit.--The credit allowed by subsection (a) with respect to any water conservation system shall not exceed the product of $500 and the number of acres served by such system. ``(c) Definitions.--For purposes of this section-- ``(1) Eligible taxpayer.--The term `eligible taxpayer' means any taxpayer if-- ``(A) at least 50 percent of such taxpayer's gross income is normally derived from a trade or business referred to in paragraph (3)(C), and ``(B) such taxpayer complies with all Federal, State, and local water rights and environmental laws. ``(2) Water conservation system expenses.-- ``(A) In general.--The term `water conservation system expenses' means expenses for the purchase and installation of a water conservation system but only if-- ``(i) the land served by the water is entirely in an area which has been identified, in the taxable year or in any of the 3 preceding taxable years, as an area of-- ``(I) extreme drought severity on the Palmer Drought Severity Index published by the National Oceanic and Atmospheric Administration, or ``(II) water shortage (due to increasing demands, limited supplies, or limited storage) by the Natural Resources Conservation Service of the Department of Agriculture or the Bureau of Reclamation of the Department of the Interior, ``(ii) the taxpayer has in effect a water conservation plan which has been reviewed and approved by such Service and Bureau, ``(iii) such expenses are consistent with such plan, and ``(iv) there is an irrigation water savings of at least 5 percent which is attributable to such system. For purposes of clause (iv), water savings shall be determined and verified under regulations prescribed jointly by such Service and Bureau. ``(B) Water conservation system.--The term `water conservation system' means materials or equipment which are primarily designed to substantially conserve irrigation water used or to be used on farm land. ``(C) Farm land.--The term `farm land' means land used in a trade or business by the taxpayer or a tenant of the taxpayer for-- ``(i) the production of crops, fruits, or other agricultural products, ``(ii) the raising, harvesting, or growing of trees, or ``(iii) the sustenance of livestock. ``(c) Limitation Based on Amount of Tax.-- ``(1) Liability for tax.--The credit allowable under subsection (a) for any taxable year shall not exceed the excess (if any) of-- ``(A) the regular tax for the taxable year, reduced by the sum of the credits allowable under subpart A and the preceding sections of this subpart, over ``(B) the tentative minimum tax for the taxable year. ``(2) Carryforward of unused credit.--If the amount of the credit allowable under subsection (a) for any taxable year exceeds the limitation under paragraph (1) for the taxable year, the excess shall be carried to the succeeding taxable year and added to the amount allowable as a credit under subsection (a) for such succeeding taxable year. ``(d) Denial of Double Benefit.--No deduction shall be allowed under this chapter with respect to any expense which is taken into account in determining the credit under this section, and any increase in the basis of any property which would (but for this subsection) result from such expense shall be reduced by the amount of credit allowed under this section for such expense.'' (b) Technical Amendment.--Subsection (a) of section 1016 of such Code is amended by striking ``and'' at the end of paragraph (25), by striking the period at the end of paragraph (26) and inserting ``; and'', and by adding at the end the following new paragraph: ``(27) to the extent provided in section 30B(d), in the case of amounts with respect to which a credit has been allowed under section 30B.'' (c) Clerical Amendment.--The table of sections for subpart B of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item: ``Sec. 30B. Purchase and installation of agricultural water conservation systems.'' (d) Effective Date.--The amendments made by this section shall apply to amounts paid or incurred after the date of the enactment of this Act, in taxable years ending after such date.
summary: Agricultural Water Conservation Act - Amends the Internal Revenue Code to allow a tax credit for water conservation system expenses, if used on farm land having an extreme drought or a water shortage and meeting other requirements. Limits the amount of the credit and allows unused credit to be carried to the succeeding taxable year. Reduces by the amount of the credit any basis increase that would otherwise occur.