U.S. Treasury

The U.S. Department of Treasury, Washington, D.C.

More than 40 national and regional agricultural groups in the Tax Aggie Coalition sent a letter to House and Senate leadership on Tuesday expressing concerns about tax-code proposals they say would jeopardize the future of family-owned farms and ranches.

The concerns are tied to President Biden’s plan to target several provisions in the tax code to fund infrastructure and human resources.

“We urge you not to alter or eliminate the long-standing tax code provisions that are fundamental to the financial health of production agriculture and the businesses that supply its inputs, transports its products and markets its commodities,” the letter said.

“With more than 370 million acres expected to change hands in the next two decades, the policies Congress enacts now will determine agricultural producers’ ability to secure affordable land to start or expand their operations,” the coalition said.

“Regardless of whether a business has already been passed down through multiple generations or is just starting out, the key to their longevity is a continued ability to transition when a family member or business partner dies. For this reason, we believe the current estate tax exclusion limits must be maintained,” the coalition said.

The letter also highlighted three other tax provisions the group says are important for farm and ranch families.

One is the stepped-up basis provision on the value of land, buildings and livestock on the date of the owner’s death. The basis is the original purchase price plus adjustments such as depreciation and the value of improvements. Current tax law allows an heir to increase their basis in the bequeathed assets to fair market value without paying capital gains tax.

The second provision is like-kind exchanges, which allows businesses to buy and sell like assets without tax consequences.

The third provision is the Section 199A business income deduction, which allows pass-through businesses — such as farms and ranches — that pay taxes under individual income tax rates as opposed to corporate rates to deduct 20% from their income taxes.

“The agriculture industry is the backbone of many economies in rural America … it is essential that Congress preserve sound tax policies for our nation’s farmers, ranchers, and family-owned agribusinesses,” Colin Woodall, CEO of National Cattlemen’s Beef Association, said in a press release.

“Ultimately federal tax policy should help facilitate agricultural land transfer, not be a hindrance to that process. It's critically important that the policies Congress enacts now continue to allow the next generation — including beginning, veteran, and minority farmers and ranchers — to be successful,” he said.

Zippy Duvall, president of American Farm Bureau Federation, said farmers and ranchers already face uncertainties with unpredictable weather and fluctuating markets.

“A sound tax policy should help them navigate those challenges, not add to the confusion,” he said.

“Generations of farmers have relied on important tax provisions like stepped-up basis and like-kind exchanges to grow their family-owned businesses and eventually pass them on to the next generation,” he said.

Congress should refrain from creating tax rules that will make it harder for farms and ranches to stay viable now and in the future, he said.

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