Farmland Stewardship Agreement Outline

The Proposed Full-Term Farmland Stewardship Agreement
— An Outline
updated July 30, 2001

Here is an outline of the proposed Full-Term Farmland Stewardship Agreement:

DEFINITIONS

Terms are listed in the order in which they appear in the text.

(1) FARMLAND STEWARDSHIP AGREEMENT - The term 'Farmland Stewardship Agreement' means a 'blending tool' that uses a 'service contract' to combine together one or more different conservation and/or regulatory programs into a single agreement with a single application. The agreement tailors these programs to the specific needs, opportunities and challenges offered by individual parcels of land, and removes administrative and regulatory obstacles that previously may have limited the use of these programs on agricultural lands. The Farmland Stewardship Agreement can be used as a 'stand-alone' program to implement conservation practices on private lands, or it can be used to complement and work together with any other program or programs, including local and private programs. When existing programs do not address a particular need on a specific property, the Farmland Stewardship Agreement can be used to 'fill in the gaps.'

(2) SERVICE CONTRACT - The term 'service contract' means 'a legally binding agreement between two parties, whereby one party agrees to perform one or more services, according to criteria spelled out in the contract, and the other party agrees to pay the first party for the service(s) rendered.'

(3) PHYTOREMEDIATION - The term 'pytoremediation' means 'using green living plant materials to remove contaminants from water and soil.' These plants can, in turn, be harvested and used to produce biofuels, bioplastics and other bioproducts.

(4) CARBON SEQUESTERING - The term 'carbon sequestering' means 'the process of providing plant cover to take CO₂ from the air and create a 'carbon sink.'' Plants convert CO₂ to carbon, some of which ends up as roots, stems, leaves and some of which is returned to the soil via plant residues. The objective is to sequester as much as possible to keep it out of the air and thus avoid contributing to the 'greenhouse effect.'

(5) BIOFUEL - The term 'biofuel' means 'an energy source derived from living organisms.' Most commonly the energy source is plant residue, harvested, dried and burned, or further processed into solid, liquid, or gaseous fuels. The most familiar and widely used biomass fuel is wood. Agricultural waste, including materials such as cereal straw, seed hulls, corn stalks and cobs, is also a significant source. Native shrubs and herbaceous plants, such as some species of willow and prairie switchgrass, are potential sources. Animal waste, and the methane gas that occurs as a byproduct, is also a bountiful source. Biofuels include--

(A) 'biodiesel,' which is derived from conversions of soybean oil, canola (rapeseed) oil, sunflower oil, tallow, and even waste grease from fast-food restaurants.

(B) 'ethanol,' which is derived from corn. It can be used both as a replacement for gasoline and as an additive to make gasoline burn cleaner.

(C) 'methane,' which is a combustible gas produced from organic materials such as animal waste, fermented plant material and garbage. Raw bio-gas has about half the heat value of natural gas.

(D) 'SuperEnzymes,' which can be used to break down the woody, fibrous part of the 279 million metric tons of plant waste that are generated in the U.S. annually from industrial, commercial and agricultural production into fermentable sugars which, in turn, can be used to produce fuel or industrial chemicals.

(E) 'wood heat,' which is the world's original energy source. Energy and forestry scientists generally agree that, provided harvesting is conducted in a sustainable manner, the combustion of wood for energy production is essentially carbon dioxide neutral when the normal forest regeneration period is considered. When wood combustion replaces the consumption of fossil fuels, the net reduction in carbon dioxide release is almost immediate.

(F) 'wood gas.' Gasification of wood wastes is considered by some scientists to be the cleanest, most efficient combustion method known. It has been used for decades where clean heat is required. Examples include the thousands of vehicles which were directly fueled by Gasifiers during World War II, and the coal gas 'works' which were common in cities all over the world before natural gas. These produced gas which combusted so clean it was used in chimney-less household appliances such as cookers and heaters, without adverse effects.

(6) BIOMASS - The term 'biomass' means 'plant material, vegetation or agricultural waste used as a fuel or energy source.'

(7) BIOPLASTICS - The term 'bioplastics' means the 'use of plant materials to create biodegradable plastics.' A recently discovered gene that allows plants to package and store materials in their cells is opening the door to producing new types of plastics from plant materials. Scientists have reported that crop plants such as corn or soybeans hold the potential to create plants that provide the starting materials to make the plastics we already have and new plastics with never-before-seen properties. A biodegradable, edible corn-based shrink wrap is creating a new market for corn and replacing some petroleum-based plastics. Some annual native plants, such as Lesquerella fendleri, are capable of being cultivated throughout the southern half of the U.S. The plant's seed yields more than 25% (by weight) of oil compositionally similar to and in some ways structurally superior to castor oil, which is currently the only available commercial source of hydroxy acids used in the production of coatings, lubricants, plastics, and a host of other products.

(8) BIOPRODUCTS - The term 'bioproducts' means the 'use of plant materials and plant byproducts, such as glucose, starch and protein, to replace petroleum-based products, additives and activators,' which are used in the production of solvents, paints, adhesives, chemicals and everyday products as diverse as styrofoam cups and tires.

THE AGREEMENT

During the term of a Farmland Stewardship Agreement, an owner or operator of a farm, ranch or woodland would agree to implement a plan to provide one or more specific services to benefit the public at large. These services may include ecological services, such as carrying out management practices to maintain the ecological integrity of wildlife habitats, wetlands or other natural ecosystems, or practices to improve filtration of water or aquifer recharge, control invasive and exotic species, or limit non-agricultural development to preserve open space or prime, unique or other productive agricultural lands. These services may also include carbon sequestering, phytoremediation or production of biofuels, bioplastics or other bioproducts. Such agreements would --

(1) have a minimum duration of 20 years,

(2) be written as long-term service contracts to ensure that the services specified are carried out by the owner/operator in a consistent, on-going, responsible manner,

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(3) be initiated by:

(A) a owner/operator who makes application through a USDA Natural Resources Conservation Service office, or

(B) a local conservation district, private land trust or other qualifying nonprofit organization, or local, regional, state or federal agency, that has secured the willingness of a owner/operator to enter into a Farmland Stewardship Agreement, is willing to provide cost sharing and take responsibility for monitoring the agreement, and makes application through a USDA Natural Resources Conservation Service office (responsibilities in this case for negotiating with the owner/operator and administering the agreement would rest with said conservation district, land trust, nonprofit or agency);

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(4) require that the agency responsible for the agreement:

(A) work in cooperation with owner/operator to prepare a status report on the agreement at least once every five (5) years; such report shall be submitted to the USDA Natural Resources Conservation Service and shall form the basis for determining if any changes should be made in the agreement, its administration, the services which the owner/operator is to provide under the agreement, the fees paid to the owner/operator, whether any "bonus payments" are due to the owner/operator, and whether any modifications are necessary or desirable in the agreement’s farm operation document or best management practices,

(B) inform the owner/operator in writing at least twice -- in year 16 and year 17 of the agreement -- of requirements for written termination notice and for 3-year transition from date of termination notice, so the owner/operator has the opportunity to give notice in a timely manner and terminate the agreement at the end of its 20-year term,

(C) inform the owner/operator how and in what form payment will be made if notice to terminate is not received and the agreement automatically renews per #7 below.

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(5) notwithstanding #7 below, require that the agreement shall terminate at the end of its original term if the agency responsible for the agreement is unable to secure funding for or make timely payment to the owner/operator for any period covered by an automatic extension or renewal of the agreement,

(6) require a 3-year transition period from the date of notification to allow all parties ample time to determine how the properties subject to the agreements shall be affected and governed by the land use regulations that will be in effect at the time of termination of the agreements (and allow agencies time to begin the process of land acquisition, or to negotiate permanent conservation easements, if those courses of action are decided upon by the parties),

(7) be automatically renewing on a year-to-year basis, unless specified otherwise in the agreement, until terminated by written notice from the owner/operator,

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(8) contain incentives -- in the form of "bonus payments" -- for owners/operators to convert the agreements into permanent conservation easements and/or provide government agencies with the right of first refusal if the land is offered for sale,

(9) reward owners/operators -- again, in the form of "bonus payments" -- for taking actions that provide additional or higher quality services beyond those specified in the agreement, such as actions to improve habitats on their property so the habitats will support additional species and expanded populations of threatened and endangered species, or for taking actions that improve other natural resources covered by the agreement,

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(10) provide federal tax incentives (see separate description of proposed tax incentives under compensation, below) as one form of compensation, which, if approved, may be used as the sole form of compensation or combined with other forms of compensation, which may include but are not limited to:

(A) per acre fees based on the value of the service provided, paid in cash, securities, land or other negotiable instruments,

(B) guarantees to receive, use and discharge water at specified volumes for the duration of the agreement, and

(C) the ability to consolidate all permits and regulatory requirements into the farm operation document so that the document can act as a comprehensive operating plan that will satisfy all permits, regulations and requirements from all governmental entities, or all participating entities, for the entire term of the agreement,

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(11) allow payment of monetary fees in a lump sum at the onset of the agreement, with proceeds invested in a securitized bond through which annual payments can be made to the owner/operator or his or her designee,

(A) require that funds to cover all bonus payments that may become payable during the term of the agreement also be invested at the onset of the agreement in a securitized bond, with annual payments authorized to the owner/operator if the bonus payments become due; if not, upon termination of the agreement all funds in the bond shall revert to the agency that invested said funds, and

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(12) contain:

(A) a map, prepared by the administering agency at no charge to the owner/operator, showing the "conservation premises," which shall be the focus of the agreement and contain properties on which specific services shall be provided, such as management of wildlife habitats, wetlands or other natural ecosystems, and the "adjoining lands" that also are a part of the property, but contain structures, are devoted to other than natural uses, or are not included in the services to be provided by the owner/operator,

(B) property description,

(C) aerial photograph of "conservation premises" and "adjoining lands,

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(D) description of the land, water and/or subsurface areas that shall be the focus of the agreement. In the case of ecological service contracts, this would describe habitats, wetlands and other natural resources and ecosystems of significant value covered by the agreement; such description may mention species that are observed on the property at the time of the survey for the purposes of guidance in developing management practices and demonstrating the conservation values of the property, or may indicate that "such habitats are known to support listed species such as ...," but shall not include an inventory of species or population count, since the species observed at the time of the survey may change according to season, migratory and foraging patterns, or other factors beyond the owner's/operator's control; under this agreement, the owner/operator is not responsible for the health or numbers of any specific species, but is instead responsible for caring for and maintaining the habitats and other natural features of the property that contain and support any observed species,

(E) description of current property use,

(F) operation document that will govern current and proposed agricultural, forestry and/or resource extraction activities; such document may be modified by mutual consent, if necessitated by changing conditions, during the reviews of the agreement that shall proceed each status report to be submitted to the USDA Natural Resources Conservation Service at least once every five years under (4)(A) above,

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(G) description of management activities and practices that are to be applied to the "conservation premises" and, if applicable, the "adjoining lands" on which current and proposed ag, forestry and/or resource extraction activities will take place; such description also may be modified by mutual consent, if necessitated by changing conditions, during the reviews of the agreement that shall proceed each status report to be submitted to the USDA Natural Resources Conservation Service under (4)(A) above;

(H) management fee detail, describing payments that will be made through monetary payments; tax deductions, reductions, exclusions and credits; or other means for carrying out the agreed-to management activities and practices on the "conservation premises" and "adjoining lands,"

(I) bonus payment detail, for activities that result in measurable improvements in the services rendered over and above the level of service provided in the agreement, such as habitat or resource conservation improvements, and/or for providing additional services, such as occasional, supervised access by the public to portions of the property,

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(J) arrangements for compliance monitoring and access; such monitoring may be conducted by the owner/operator after appropriate training by the agency responsible for the agreement, but shall be subject to review and verification by the agency and can be supplemented with aerial or remote sensing methods of monitoring,

(K) arrangements for assignment,

(L) default and penalties, and

(M) encumbrance provisions for recording.

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Eligible Lands

(a) All private lands are eligible which are in primarily native or natural condition, or are classified as cropland, pasture or grazing lands, or timberlands by the Secretary of Agriculture.

(b) Payments would be made in the form of monetary fees or tax incentives based on the market value of the service provided. Such fee or level of compensation would be set by the Secretary of Agriculture and periodically reviewed every five years, but no fee under this subpart would be lower than $5,000 per year as a base payment for all properties enrolled by an owner, or less than an additional aggregate amount of $25 per acre for the services rendered on all acreages on the property designated as "conservation premises."

(c) Payments also could be made in the form of tax incentives or monetary fees on a per acre basis for "adjoining lands" which have low-intensity uses, such as pasture and grazing lands, and which can be managed to minimize adverse impacts on the "conservation premises," as a means of encouraging the continuation of these low-intensity uses and to prevent their conversion to more intense uses that might cause more adverse impacts on the "conservation premises." Such fee or level of compensation would be set by the Secretary of Agriculture and periodically reviewed every five years, but no fee under this subpart would be lower than the equivalent of $10 per acre per year.

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Paying For Farmland Stewardship Agreements

OPTION 1: FEDERAL TAX INCENTIVES

America's Rural Landowners - Partners in Conserving our Natural Resources

About 402 million acres of the nation's total land area of 1,893 million acres are in federal ownership. Of the remaining land, almost 90 percent is devoted to agricultural and forestry. The largest groups of private landowners in the U.S. include:

Ranchers (who control 523 million acres, or 35% of all non-federal land in the U.S.)

Farmers (who control 375 million acres, plus 33 million acres enrolled in the Conservation Reserve Program, or 28% of all non-federal land), and

Timber companies and private woodland owners (who control 399 million acres, or 27% of all non-federal land).

Together, these three groups of private landowners control 1,330 million acres --70 percent of the total US land area! These are the lands that are needed to sustain the nation's water resources, wildlife, open space and environment. They are the lands needed for future food and fiber production. And they are the lands that provide the services for America's built environment. (Source: USDA, Natural Resources Inventory, 1997)

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Proposed Federal Tax Incentives For Rural Landowners

Several bills have been introduced in the U.S. Congress to cut taxes rates and, over a several-year period, phase out and eliminate federal estate taxes.

Here are some tax incentives that could complement and supplement the tax proposals already pending in Congress. These incentives have been reviewed by more than 150 private owners/operators and ag leaders in Florida. There is strong support among these individuals to incorporate the following concepts into the pending tax bills.

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Legislative History

The following tax incentives are patterned after a bill introduced in the U.S. Senate by Sen. Dirk Kempthorne of Idaho during the 104th Congress. The bill, S.1181, was intended to provide incentives for owners/operators to enter into "endangered species protection agreements," as part of a related bill, S.1180, to reauthorize the Endangered Species Act. Neither bill was acted on before the close of Congress at the end of 1998. Kempthorne is now the Governor of Idaho and President of the Western Governors' Association.

Sen. Max Baucus of Montana used the same language as the basis for S.1392, introduced in the 106^th Congress in July 1999 to amend the Internal Revenue Code of 1986 to provide tax incentives for the voluntary conservation of endangered species.

Hence, the basic structure for these ideas already exists and has a legislative history, on which the following ideas can be built.

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Purpose

The package of tax incentives is designed to:

1. Keep agricultural and forestry operations economically viable. These proposals recognize the economic strains placed on farmers and ranchers as a result of recent weather, trade and price fluctuations that have created a series of economic crises in the agricultural industry. It also recognizes that, when farms and ranches go out of business, the owners are likely to sell their land -- their best remaining asset -- to the highest bidder and, as a result, their land could very well be converted to more intense, developed uses that may be at odds with protecting existing wildlife habitats, wetlands and other ecological values on their property.

2. Encourage owners/operators to enter into Farmland Stewardship Agreements to provide for long-term management and maintenance of wildlife habitats, wetlands and other natural resources on their properties. (Information on the Farmland Stewardship Agreement concept is available on request; see the project web site, http://privatelands.org)

3. Increase incentives for owners/operators to place permanent conservation easements on all or a portion of their property.

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Proposed Tax Incentives

The proposed package of tax incentives is described below. Dollar amounts and percentages are provided as suggestions only.

(1) Federal income tax deductions, including:

(A) A $5,000 credit per year against the total Federal income tax owed by an individual, partnership or corporation for enrollment in a Farmland Stewardship Agreement. This credit shall continue for as long as the Farmland Stewardship Agreement is in force.

(B) An additional $5 per acre per year Federal income tax credit for each acre enrolled in a Farmland Stewardship Agreement. Again, this credit shall continue for as long as the Farmland Stewardship Agreement is in force.

(C) A $10,000 credit per year against the total Federal income tax owed by an individual, partnership or corporation when property is subject to a permanent conservation easement. This credit shall continue for as long as the easement is in force.

(D) An additional $10 per acre per year credit for each acre subject to a permanent conservation easement. This credit shall continue for a minimum of 20 years, after which it may be renewed by an Act of Congress.

(E) Tax credits may be accumulated in years when an individual, partnership or corporation has no income subject to the Federal income tax, or in years when the credit cannot be fully utilized. Tax credits may be carried forward for up to five (5) years.

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(2) Deductions from Federal income taxes for state and local property taxes, as follows:

(A) An additional 25% deduction from Federal income taxes for state and local property taxes for properties enrolled in Farmland Stewardship Agreements.

(B) An additional 40% deduction for properties subject to permanent conservation agreements.

(C) An additional deduction equal to the difference between the property tax rate charged and the lowest property tax rate available to ensure every acre containing natural habitats, wetlands, aquifer recharge areas, and/or other ecological features receives the lowest effective tax rate possible.

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(3) Immediate exclusion from estate for real property that remains in agricultural or forestry production, is enrolled in a Farmland Stewardship Agreement or is subject to a permanent conservation easement, as follows:

(A) An immediate exclusion from the value of the gross estate in an amount equal to 100% of the full market value of the property, as determined at the time of death, for all properties that remain in agricultural or forestry production or retain their principle ecological values for at least 10 years after the death.

(B) An immediate exclusion from the value of the gross estate in an amount equal to 100% of the full market value of the property, as determined at the time of death, for each acre enrolled in a Farmland Stewardship Agreement, providing the agreement remains in effect for at least 10 years after the death.

(C) An immediate exclusion from the value of the gross estate in an amount equal to 100% of the full market value of the property, as determined at the time of death, for each acre subject to a perpetual conservation agreement.

(D) Allow post-mortem decisions by estate to participate.

(E) Eliminate limitations in Section 2032A if the property remains in agricultural or forestry production for at least 10 years after the death.

(F) Provide exemption from recapture of special use tax, if property is subject to a "Farmland Stewardship Agreement" or perpetual conservation easement, and estate sells some or all the land covered by the agreement prior to the expiration of the 10 year post-death period under Section 2032A.

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(4) Exclusion of gain on sales of land that remains in agriculture or forestry production, is subject to a Farmland Stewardship Agreement, or is subject to a permanent conservation easement, as follows:

(A) A 50% reduction in the amount of capital gains tax owing, if land remains in agriculture or forestry production for at least 10 years following sale,

(B) An additional reduction of 10% (for a total reduction of 60%) in the amount of capital gains tax owing, if land is subject to a Farmland Stewardship Agreement, plus an additional 1% reduction per year for each year remaining in the term of the agreement at the time of the sale (i.e., another 10% reduction for 10 years, another 15% reduction for 15 years, etc.)

(C) a 100% reduction in the amount of capital gains tax owing, if land is subject to a perpetual conservation easement.

(D) a 100% reduction in the amount of capital gains tax owing, if land is sold to a government agency or qualified organization for conservation purposes.

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OPTION 2: PAYMENT FOR SERVICES ON A PER ACRE FEE BASIS

This would be a cost-share program, with a portion of the funds coming from the federal government through the USDA and the balance of the funds coming from other federal agencies, state or local government entities or private land trusts. Where possible, existing conservation programs would be utilized (or modified so they could be utilized) to provide these cost-share funds. The authorities that exist and funds that are available from all levels of government to enter into contracts for specific services also could be utilized to provide funding for the agreements.

Payments would be based on an acreage rate that accurately reflects the value of each service provided, as determined by comparison to the "Property Analysis Record" maintained by the Center for Natural Lands Management in Fallbrook, CA, a database developed through grants from the U.S. Environmental Protection Agency and the David and Lucile Packard Foundation to accurately determine management costs over time so land trusts that accept conservation easements can obtain sufficient funds to ensure proper management of the properties through the endowments that many land trusts require as part of easement donation. (Click here to see separate description of the "Property Analysis Record")

All owners who enroll properties also will receive a base payment of $5,000 per year, regardless of their property size. This payment is designed to make the program worthwhile -- and attractive -- for owners/operators whose properties contain important habitats and/or ecological resources, but whose holdings comprise 160 acres (a quarter section of land) or less.

Base payments and service fees could be paid through annual contracts (as is done through the USDA's Conservation Reserve Program, for example) or paid in a lump sum at the onset of the agreement, with proceeds invested in a securitized bond through which annual payments can be made to the owner/operator or his or her designee. (The securitized bond payment option has been successfully used for over 15 years in the Howard County, Maryland Farmland Protection Program.)

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OPTION 3: OTHER INCENTIVES

Other incentives that can be offered to owners/operators to encourage them to enter into Farmland Stewardship Agreements include:

(A) guarantees to receive, use and discharge water at specified volumes for the duration of the agreement,

(B) the ability to consolidate all permits and regulatory requirements into the farm operation document so that the document can act as a comprehensive operating plan that will satisfy all permits, regulations and requirements from all governmental entities, or all participating entities, for the entire term of the agreement, and

(C) the ability to use the Farmland Stewardship Agreement as an "umbrella" agreement to consolidate all conservation plans, cost-share programs, best management practices and conservation programs into a single agreement.

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Penalties & Reclaim Provisions
(for ecological services)

Damage or Destruction by Owner/Operator; Option to Repair or Compensate

The owner/operator shall be liable in the event that the Conservation Premises or any part of them are damaged or destroyed by any cause whatsoever on the part of the owner/operator. The owner/operator shall not be liable for any damage or destruction that is caused as a result of factors beyond the owner's/operator's control, including acts of God and impacts from properties and/or water bodies that are not owned by or under the control of the owner/operator. In addition, the owner/operator shall not be liable for any damage or destruction that is caused if the owner/operator is following a recommended or required practice or procedure, or fulfilling the requirements of or complying with any rule, regulation, permit or other legal dictate promulgated by any governmental entity. The burden and cost of proving damage by the owner/operator shall be borne by the agency with responsibility for enforcing this agreement. The owner/operator shall have the right to dispute said agency’s findings and to pay for independent investigators, consultants and counsel to gather evidence and act on the owner's/operator's behalf. Such disputes between the owner/operator and the agency shall be settled by binding arbitration.

If the owner/operator is found to be liable for causing damage or destruction to the Conservation Premises, or any part thereof, the agency with responsibility for enforcing this agreement may elect either of the following options:

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(a) Within __ days after receipt of written demand by the agency with responsibility for enforcing this agreement, the owner/operator shall commence and diligently pursue completion of the repair, restoration, or replacement of the damaged or destroyed habitat, natural area and/or natural resource on the Conservation Premises, and this agreement shall remain in full force and effect, with no abatement in compensation. owner/operator shall pay all costs necessary to restore the habitats, natural areas and/or other natural resources covered by this agreement to the condition that existed on the Conservation Premises on the commencement date of this agreement.

(b) If the agency with responsibility for enforcing this agreement determines that it is not possible to repair, restore, or replace the damaged or destroyed habitats, natural areas and/or other natural resources covered by this agreement, the agency shall terminate this agreement on that portion of the Conservation Premises that has been damaged or destroyed on _____ days written notice to owner/operator and any lender under Article ____ of this agreement. In addition, as just compensation for said damage or destruction, owner/operator shall be required to locate, negotiate for and pay to establish permanent protection of a similar habitat, natural area and/or natural resource on another property in the state through a fee simple purchase or a perpetual conservation easement that shall be donated by the owner/operator to the agency with responsibility for enforcing this agreement, or another designee of the agency’s choosing, and shall be of the same quality and contain the same area, acreage or amount of habitat, natural area and/or other natural resource that was damaged on the Conservation Premises.

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Acts of God

Nothing in this agreement shall require the owner/operator or the agency with responsibility for enforcing this agreement to take any action to restore the condition of the Conservation Premises after any Act of God or other event over which they had no control.

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Reclaim Provisions

In the event that the remedies described above cannot be satisfactorily carried out, it is possible that reclaim provisions could be considered as a part of any federal legislation that would be enacted to authorize the tax incentives described previously. S. 1181, for example, included fairly stringent reclaim provisions to discourage premature termination of its "endangered species conservation agreements," exact penalties for violation of the agreements when habitats are destroyed or damaged, and ensure that habitats are not converted to other uses the moment the agreements expire. Reclaim provisions for the Farmland Stewardship Agreements might work as follows:

(A) A requirement that a percentage of the actual value of tax credits received during the time the agreement was in effect be recaptured if the agreement is terminated early. Cash payments for services rendered would not be affected, so long as the services for which the owner/operator is under contract have been satisfactorily rendered. Recapture provisions for tax credits would work as follows:

(1) A recapture of 100% of the actual value of tax credits received if the agreement is terminated prior to its first anniversary.

(2) A recapture of 80% of the actual value of tax credits received if the agreement is terminated in years 1-4

(3) a recapture of 60% of the actual value of the tax credits received if the agreement is terminated in years 5-9

(4) a recapture of 40% of the actual value of the tax credits received if the agreement is terminated in years 10-14

(5) a recapture of 20% of the actual value of the tax credits received if the agreement is terminated in years 15-19

If the property is sold, the new owner shall have full liability for compliance. The original owner shall have no responsibility for compliance after the date of the sale and shall not be subject to any liability for reclaim provisions as a result of any actions of or neglect by the new owner.

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(B) A requirement that a percentage of the actual value of tax credits received during the term of the agreement be recaptured if the habitats and/or other natural resources covered by the agreement are converted to other uses or significantly altered so as to disrupt their natural ecological functions within 10 years after the conclusion of the agreement. The percentage of tax credits recaptured would be equal to the percentage of habitat or other natural resource that is converted to another use. For example, if 25% of the "Conservation Premises" is converted to another use or significantly altered within 10 years after the conclusion of the agreement, then 25% of the value of the tax credits received during the term of the agreement would be reclaimed. Again, if property is sold, new owner shall have full liability for compliance.

One advantage to these reclaim provisions is that they would add up and give productive ag lands and natural resources higher values so they could compete more effectively in the market economy and thus make it less desirable (and less economically attractive) to convert them to more intense land uses. At the same time a owners’/operators' equity -- and the value of the land for loans -- also would be enhanced.

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Impact of This Proposal on Efforts to Repeal Federal Estate Taxes

This proposal would NOT interfere with any effort underway to repeal or phase out estate taxes -- so that groups supporting estate tax repeal also could support (or at least not oppose) this effort. The intent here is to offer enhanced estate tax credits as part of a larger package of tax credits. One advantage of the Farmland Stewardship Agreement to landowners over recent legislation to phase out of estate taxes over a 10-year period is that a larger percentage of estate taxes would be immediately repealed under a Farmland Stewardship Agreement. However, ultimate repeal of the estate tax still would offer a larger benefit to owners/operators, so owners/operators who receive tax credits as part of the Farmland Stewardship Agreement would not want to oppose any effort to completely repeal estate taxes, since they would come out better on estate taxes -- and still continue to receive income tax deductions, credits for state and local property taxes and capital gains exclusions.

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