text: 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.
target: 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.
feat_title: Agricultural Water Conservation Act