text: SECTION 1. SHORT TITLE.
  
      This Act may be cited as the ``Agricultural Producers Value-Added 
  Investment Tax Credit Act of 2004''.
  
  SEC. 2. CREDIT FOR FARMER INVESTMENT IN VALUE-ADDED AGRICULTURAL 
                PROPERTY.
  
      (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
  of the Internal Revenue Code of 1986 (relating to business related 
  credits) is amended by adding at the end the following new section:
  
  ``SEC. 45G. VALUE-ADDED AGRICULTURAL PROPERTY INVESTMENT CREDIT.
  
      ``(a) General Rule.--For purposes of section 38, in the case of a 
  taxpayer who is--
              ``(1) an eligible person, or
              ``(2) a farmer-owned entity,
  the value-added agricultural property investment credit determined 
  under this section for any taxable year is 50 percent of the basis of 
  any qualified value-added agricultural property placed in service 
  during the taxable year. In the case of a farmer-owned entity, such 
  credit shall be allocated on a pro rata basis among eligible persons 
  holding qualified interests in such entity as of the last day of such 
  taxable year.
      ``(b) Maximum Credit.--For purposes of subsection (a)--
              ``(1) Property placed in service by eligible person.--In 
          the case of property placed in service during a taxable year by 
          an eligible person, the credit determined under this section 
          for such year shall not exceed $30,000, reduced by the amount 
          of the creditable investments allowed for the taxable year 
          under paragraph (2).
              ``(2) Property placed in service by farmer-owned entity.--
                      ``(A) In general.--In the case of property placed 
                  in service by a farmer-owned entity, the credit 
                  determined under this section shall not exceed the sum 
                  of the eligible person's creditable investments in such 
                  entity as of the date such property is placed in 
                  service.
                      ``(B) Creditable investments.--For purposes of 
                  subparagraph (A), the term `creditable investments' 
                  means, with respect to any property placed in service 
                  by a farmer-owned entity, the aggregate qualified 
                  investments made by the eligible person in such entity, 
                  reduced (but not below zero) by the sum of--
                              ``(i) the amount of the aggregate qualified 
                          investments made by such person in such entity 
                          which were taken into account under this 
                          section with respect to property previously 
                          placed in service by such entity, and
                              ``(ii) the amount of the aggregate 
                          qualified investments made by such person in 
                          all other farmer-owned entities which were 
                          taken into account under this section with 
                          respect to property previously placed in 
                          service by such other entities.
                      ``(C) Limitation.--For purposes of this paragraph, 
                  the aggregate qualified investments made by the 
                  eligible person which may be taken into account for any 
                  taxable year shall not exceed $30,000.
      ``(c) Definitions.--For purposes of this section--
              ``(1) Qualified value-added agricultural property.--The 
          term `qualified value-added agricultural property' means 
          property--
                      ``(A) which is used to add value to a good or 
                  product, suitable for food or nonfood use, derived in 
                  whole or in part from organic matter which is available 
                  on a renewable basis, including agricultural crops and 
                  agricultural wastes and residues, wood wastes and 
                  residues, and domesticated animal wastes,
                      ``(B)(i) to which section 168 applies without 
                  regard to any useful life, or
                      ``(ii) with respect to which depreciation (or 
                  amortization in lieu of depreciation) is allowable and 
                  having a useful life (determined as of the time such 
                  property is placed in service) of 3 years or more, and
                      ``(C) which is owned and operated by an eligible 
                  person or a farmer-owned entity.
              ``(2) Eligible person.--
                      ``(A) In general.--The term `eligible person' means 
                  a person who materially participates during the taxable 
                  year in an eligible farming business.
                      ``(B) Material participation.--For purposes of 
                  subparagraph (A), the determination of whether a person 
                  materially participates in the trade or business of 
                  farming shall be made in a manner similar to the manner 
                  in which such determination is made under section 
                  2032A(e)(6). In the case that the person is a 
                  corporation, cooperative, partnership, estate, or 
                  trust, such determination shall be made at the 
                  shareholder, partner, or beneficial interests level (as 
                  the case may be).
                      ``(C) Eligible farming business.--For purposes of 
                  subparagraph (A), the term `eligible farming business' 
                  means a farming business (as defined in section 
                  263A(e)(4)) which is not a passive activity (within the 
                  meaning of section 469(c)).
              ``(3) Farmer-owned entity.--
                      ``(A) In general.--The term `farmer-owned entity' 
                  means--
                              ``(i) a corporation (including an S 
                          corporation) in which eligible persons own 50 
                          percent or more of the total voting power of 
                          the stock and 50 percent or more (in value) of 
                          the stock,
                              ``(ii) a partnership in which eligible 
                          persons own 50 percent or more of the total 
                          voting power of the profits interest and 50 
                          percent or more (in value) of the profits 
                          interest, and
                              ``(iii) a cooperative in which eligible 
                          persons own 50 percent or more of the total 
                          voting power of the member patronage interests 
                          and 50 percent or more (in value) of the member 
                          patronage interests.
                      ``(B) Constructive ownership rules.--For purposes 
                  of subparagraph (A), rules similar to the rules of 
                  section 263A(e)(2)(B) shall apply; except that, in 
                  applying such rules, the members of an individual's 
                  family shall be the individuals described in 
                  subparagraph (C).
                      ``(C) Members of family.--The family of any 
                  individual shall include only his spouse and children, 
                  grandchildren, and great grandchildren (whether by the 
                  whole or half blood), and the spouses of his children, 
                  grandchildren, and great grandchildren, who reside in 
                  the same household or jointly operate farming 
                  businesses (as defined in section 263A(e)(4)). For 
                  purposes of the preceding sentence, a child who is 
                  legally adopted, or who is placed with the taxpayer by 
                  an authorized placement agency for adoption by the 
                  taxpayer, shall be treated as a child by blood.
              ``(4) Qualified investments.--
                      ``(A) In general.--The term `qualified investments' 
                  means a payment of cash for the purchase of a qualified 
                  equity interest in a farmer-owned entity.
                      ``(B) Qualified equity interest.--The term 
                  `qualified equity interest' means--
                              ``(i) any stock in a domestic corporation 
                          if such stock is acquired by the taxpayer after 
                          December 31, 2004, and before January 1, 2011, 
                          at its original issue (directly or through an 
                          underwriter) from the corporation solely in 
                          exchange for cash,
                              ``(ii) any capital or profits interest in a 
                          domestic partnership if such interest is 
                          acquired by the taxpayer after December 31, 
                          2004, and before January 1, 2011, and
                              ``(iii) any patronage interest in a 
                          cooperative if such interest is acquired by the 
                          taxpayer after December 31, 2004, and before 
                          January 1, 2011.
                  Rules similar to the rules of section 1202(c)(3) shall 
                  apply for purposes of this paragraph.
      ``(d) Special Rules.--For purposes of this section--
              ``(1) Treatment of married individuals.--In the case of a 
          separate return by a married individual (as defined in section 
          7703), subsection (b)(3)(A) shall be applied by substituting 
          `$15,000' for `$30,000'.
              ``(2) Applicable rules.--Under regulations prescribed by 
          the Secretary--
                      ``(A) Allocation of credit in the case of estates 
                  and trusts.--Rules similar to the rules of subsection 
                  (d) of section 52 shall apply.
                      ``(B) Certain property not eligible.--Rules similar 
                  to the rules of section 50(b) shall apply.
              ``(3) Basis adjustment.--For purposes of this subtitle, if 
          a credit is allowed under this section to any eligible person 
          with respect to qualified value-added agricultural property, 
          the basis of such property shall be reduced by the amount of 
          the credit so allowed and increased by the amount of recapture 
          under subsection (e).
      ``(e) Recapture in the Case of Certain Dispositions.--
              ``(1) In general.--Under regulations prescribed by the 
          Secretary, rules similar to the rules of section 50(a) shall 
          apply with respect to an eligible person if, within the 5-year 
          period beginning on the date qualified value-added agricultural 
          property with respect to which such person was allowed a credit 
          under subsection (a) is originally placed in service--
                      ``(A) such property ceases to be qualified for 
                  purposes of this section,
                      ``(B) the eligible person or the farmer-owned 
                  entity (as the case may be) disposes of all or part of 
                  such property, or
                      ``(C) the eligible person or the farmer-owned 
                  entity (as the case may be) ceases to be an eligible 
                  person or farmer-owned entity for purposes of this 
                  section.
              ``(2) Special rules in event of death.--
                      ``(A) In general.--The period in paragraph (1) 
                  shall be suspended with respect to an eligible person 
                  for the 2-year period beginning on the date of death of 
                  such person.
                      ``(B) Heirs who are eligible persons.--In the case 
                  that an heir of an eligible person is also an eligible 
                  person, neither paragraph (1) nor subparagraph (A) of 
                  this paragraph (unless elected by such heir) shall 
                  apply with respect to the transfer of property to such 
                  heir.
      ``(f) Regulations.--The Secretary shall prescribe such regulations 
  as may be necessary to carry out the purposes of this section.
      ``(g) Termination.--This section shall not apply to property placed 
  in service after December 31, 2010.''.
      (b) Credit Allowed as Part of General Business Credit.--Section 
  38(b) of such Code (defining current year business credit) is amended 
  by striking ``plus'' at the end of paragraph (14), by striking the 
  period at the end of paragraph (15) and inserting ``, plus'', and by 
  adding at the end the following new paragraph:
              ``(16) in the case of an eligible person (as defined in 
          section 45G(c)), the value-added agricultural property 
          investment credit determined under section 45G(a).''.
      (c) Credit Allowable Against Minimum Tax.--
              (1) In general.--Paragraph (3) of section 38 of such Code 
          is amended--
                      (A) by inserting ``and value-added agricultural 
                  property credit'' after ``employee credit'' in the 
                  heading,
                      (B) by inserting ``and the value-added agricultural 
                  property credit'' after ``employee credit'' each place 
                  it appears in subparagraph (A), and
                      (C) by adding at the end the following new 
                  subparagraph:
                      ``(C) Value-added agricultural property credit.--
                  For purposes of this subsection, the term `value-added 
                  agricultural property credit' means the credit 
                  determined under section 45G.''
              (2) Conforming amendment.--Subclause (II) of section 
          38(c)(2)(A)(ii) of such Code is amended by inserting ``or the 
          value-added agricultural property credit'' after ``employment 
          credit''.
      (d) Limitation on Carryback.--Subsection (d) of section 39 of such 
  Code is amended by adding at the end thereof the following new 
  paragraph:
              ``(10) No carryback of value-added agricultural property 
          investment credit before effective date.--No portion of the 
          unused business credit for any taxable year which is 
          attributable to the credit determined under section 45G may be 
          carried back to any taxable year ending before the date of the 
          enactment of section 45G.''.
      (e) Deduction for Certain Unused Business Credits.--Subsection (c) 
  of section 196 of such Code is amended by striking ``and'' at the end 
  of paragraph (9), by striking the period at the end of paragraph (10) 
  and inserting ``, and'', and by adding after paragraph (10) the 
  following new paragraph:
              ``(11) the value-added agricultural property investment 
          credit determined under section 45G.''.
      (f) Basis Adjustment.--Subsection (a) of section 1016 of such Code 
  is amended by striking ``and'' at the end of paragraph (27), by 
  striking the period at the end of paragraph (28) and inserting ``; 
  and'', and by adding at the end the following new paragraph:
              ``(29) to the extent provided in section 45G(d)(3), in the 
          case of payments with respect to which a credit has been 
          allowed under section 38.''.
      (g) Clerical Amendment.--The table of sections for subpart D of 
  part IV of subchapter A of chapter 1 of such Code is amended by adding 
  at the end thereof the following new section:
  
                                ``Sec. 45G. Value-added agricultural 
                                          property investment credit.''.
      (h) Effective Date.--The amendments made by this section shall 
  apply to qualified investments (as defined in section 45G(c)(5) of the 
  Internal Revenue Code of 1986 (as added by this section) made, and 
  property placed in service, after December 31, 2004.
target: Agricultural Producers Value-Added Investment Tax Credit Act of 2004 - Amends the Internal Revenue Code to allow individuals who materially participate in a farming business and certain farmer-owned entities a business tax credit up to $30,000 for investment in qualified value-added agricultural property. Defines "qualified value-added agricultural property" as depreciable property which is used to add value to a good or product, suitable for food or nonfood use, derived in whole or in part from organic matter which is available on a renewable basis, including agricultural crops and agricultural wastes and residues, wood wastes and residues, and domesticated animal wastes. Terminates the credit after 2010.
feat_title: A bill to amend the Internal Revenue Code of 1986 to provide a tax credit for farmers' investments in value-added agriculture.