Farm groups and Western lawmakers are giving mixed reviews to tax relief legislation now making its way through Congress.
The National Cattlemen’s Beef Association and other groups hail a provision in the bill approved Nov. 16 in the House of Representatives that doubles the current estate tax exemption limits of $5 million for individuals and $10 million for couples. The bill calls for the so-called “death tax” to be repealed entirely after six years.
Among other benefits to farms, the bill also allows businesses to write off the cost of new investments all at once rather than over time and increases certain small-business expensing limits, industry insiders say.
But the bill also limits the ability of some businesses to deduct interest expenses — a provision that the National Council of Farmer Cooperatives asserts would drain $2 billion a year from rural America at a time when farmers and communities are struggling through a fourth year of stagnant commodity prices.
“This could be a big problem for some members of the cattle production business,” agreed NCBA president Craig Uden, a Nebraska rancher. “We’ve worked closely with members of Congress to address this issue, and we’ll continue to work tirelessly to fix this problematic provision as this legislation moves forward in the Senate and toward a House-Senate conference committee.”
The nearly $1.5 trillion tax package passed the House by a 227-205 margin. A similar bill advanced out of the Senate Finance Committee late Nov. 16 and heads to the Senate floor, where debate could begin after the Thanksgiving break.
The House bill won praise from U.S. Agriculture Secretary Sonny Perdue, who said in a statement that it would create jobs and boost the economy.
“The people of agriculture dedicate their lives to putting food on the table for their fellow citizens,” Perdue said, “and they deserve to keep more of what they earn from their labors.”
A key provision for growers is the eventual elimination of the estate tax, which has long been a target of agriculture advocates who have argued it complicates farm succession plans. The tax has been a major focus of the NCBA-backed Cattlemen For Tax Reform’s two-month media campaign, which has included videos of producers that have been viewed more than 1 million times on Facebook, according to the organization.
The bill also preserves a step-up in the value of inherited assets for tax purposes in addition to 100 percent expensing of farm property other than land. Under current law, businesses can only depreciate the costs of such investments as buildings and equipment over time — as long as 39 years, the California Cattlemen’s Association explained in a legislative newsletter.
The House bill also temporarily allows farms to expense up to $5 million for the cost of both new and used equipment, buildings, breeding livestock and dairy cows, with the allowance phased out when the purchases exceed $20 million, the CCA notes. Current law covers only new equipment, allows for a write-off of $500,000 and phases out when the purchases exceed $2 million, according to the organization.
The bill also expands cash accounting by increasing the eligibility threshold from $5 million to $25 million, including for farm corporations and partnerships, the newsletter explains.
However, farms and other operations would not be allowed to deduct net business interest expense beyond 30 percent of the business’ adjusted taxable income, which would be computed without regard to such things as net operating losses, the CCA notes. Businesses with gross receipts under $25 million would be exempt from the limits.
“It is unfortunate that the House of Representatives ... approved a tax reform bill that will raise taxes on farmers and their co-ops across the country,” NCFC president Chuck Conner said in a statement.
The House version generated considerable debate even among Western Republicans. Rep. David Valadao, R-Calif., contends the bill would create 975,000 jobs throughout the U.S., including 111,108 in California, while making the tax code fairer and less complex. Rep. Greg Walden, R-Ore., argues the package would lead to the creation of 12,358 jobs in Oregon while raising after-tax income for middle class families by $2,602.
But California’s Rep. Tom McClintock was one of 13 Republicans who voted against the measure. He said while the business side of the bill would “produce dramatic growth for the national economy,” the personal income provisions would do harm that was “entirely avoidable.”
He said the bill would restrict or eliminate “major deductions” for such expenses as mortgage interest, state and local income taxes, medical and casualty expenses and student loan interest.