1. Short title This Act may be cited as the Water and Agriculture Tax Reform Act of 2017 . 2. Facilitate water leasing and water transfers to promote conservation and efficiency (a) In general Paragraph (12) of section 501(c) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph: (I) Treatment of mutual ditch irrigation companies (i) In general In the case of a mutual ditch or irrigation company or of a like organization to a mutual ditch or irrigation company, subparagraph (A) shall be applied without taking into account any income received or accrued— (I) from the sale, lease, or exchange of fee or other interests in real and personal property, including interests in water, (II) from the sale or exchange of stock in a mutual ditch or irrigation company (or in a like organization to a mutual ditch or irrigation company) or contract rights for the delivery or use of water, or (III) from the investment of proceeds from sales, leases, or exchanges under subclauses (I) and (II), except that any income received under subclause (I), (II), or (III) which is distributed or expended for expenses (other than for operations, maintenance, and capital improvements) of the mutual ditch or irrigation company or of the like organization to a mutual ditch or irrigation company (as the case may be) shall be treated as nonmember income in the year in which it is distributed or expended. For purposes of the preceding sentence, expenses (other than for operations, maintenance, and capital improvements) include expenses for the construction of conveyances designed to deliver water outside of the system of the mutual ditch or irrigation company or of the like organization. (ii) Treatment of organizational governance In the case of a mutual ditch or irrigation company or of a like organization to a mutual ditch or irrigation company, where State law provides that such a company or organization may be organized in a manner that permits voting on a basis which is pro rata to share ownership