The House Agriculture Committee held a hearing April 5 to examine how the tax code impacts agricultural producers. Members of the House Committee on Ways and Means, the committee charged with crafting the nation's tax code, testified. Also testifying:
- Patricia Wolff, senior director, congressional affairs, American Farm Bureau Federation, Washington, DC;
- Doug Claussen, CPA, Principal, KCoe Isom, LLP, Cambridge, Nebraska;
- Chris Hesse, CPA, Principal, CliftonLarsonAllen, LLP, Minneapolis, Minnesota;
- Guido van der Hoeven, Extension specialist/senior lecturer, Department of Agricultural and Resource Economics, Raleigh, North Carolina;
- Dr. James M. Williamson, economist, USDA, Economic Research Service, Washington, DC.
"Both the ranking member and I are CPAs, and many of our colleagues in Congress are small business owners in their own right,” said Agriculture Committee Chairman K. Michael Conaway. “Few business sectors in America are subject to as many unknowns as farming and ranching. With the upcoming potential for tax reform, it is important to highlight the unique challenges of the agricultural industry and explore opportunities within the tax code to better support a vibrant farm sector.
"As with tax reform changes from years past, the devil is in the details. Providing for a simpler, fairer tax code means that many parts of the tax code may have to change, but these individual proposals cannot be evaluated in a vacuum. I look forward to working with Chairman Brady and his colleagues on the Ways and Means Committee as they craft a tax reform package, and I urge all of my colleagues to reserve judgment until they've had an opportunity to evaluate a complete package.”
What they said
Hesse reviewed agricultural tax provisions and Claussen talked about the importance of cash accounting for farmers, interest expense deductibility, and loss carryback provisions.
Claussen said the lower tax rates on individual, pass-through and corporate earnings in House leadership's "Better Way for Tax Reform," would benefit farmers and ranchers, but he said the elimination of the estate tax would benefit very few farm operations.
More important, Claussen said, is the preservation of provisions that allow the heirs of an estate to receive a step-up in the basis of the property they inherit.
Tax reform can facilitate farm transfers before the death of the farm owner, van der Hoeven said.
'Federal tax policy has the potential to affect many facets of the farm business operation and the well-being of the farm household," Williamson said. "By altering the cost of capital, tax policy may affect investment decisions, while other provisions provide benefits linked to the volatility of farm income, but the extent to which this is the case depends on the farm’s size and other factors.
Wolff addressed agriculture’s need for sweeping tax reform.
“Farmers and ranchers need a tax code that recognizes the unique financial challenges that impact them," she said.
Wolff urged Congress to create and retain tax policies that support high-risk, capital-intensive businesses like farms and ranches. Farm Bureau supports many of the provisions in the House’s proposed blueprint for tax reform, including reduced income tax rates, reduced capital gains taxes, immediate business expensing, and estate tax repeal. But, Wolff explained, the plan can be improved by reinstating benefits like the deduction for business interest expense and guaranteeing the continuation of stepped-up basis, cash accounting and like-kind exchanges.
“Farming and ranching is a cyclical business where a period of prosperity can be followed by one or more years of low prices, poor yields or even weather disaster,” Wolff said. Farmers, she added, depend on flexibility and benefits in the tax code that allow them to recover capital investments and put their money back to work on their farms quickly.
Source: House Agriculture Committee, American Farm Bureau Federation