The tax bill written by the Republican-controlled Congress would deliver “near-term benefits to many ag producers, but rate reductions and estate tax changes beneficial to ag are temporary” and bring the risk of higher taxes in the future, says the accounting firm K-Coe Isom. The National Cattlemen’s Beef Association said “all of the positive changes … are set to expire after 2025,” including a doubling of the exemption from estate taxes.
Lawmakers could begin voting on the tax bill as early as Tuesday. Republican leaders intend to send the bill to President Trump before the end of this week.
The tax bill doubles the standard deduction for taxpayers, allows the immediate tax write-off of the cost of new equipment, and keeps a deduction for interest on loans. The NCBA said the bill has provisions “that will benefit family ranchers and farmers, including expansion of key provisions livestock producers rely on, like cash accounting, bonus depreciation, and Section 179,” which allows speedy depreciation of purchases of new or used equipment and off-the-shelf software.
K-Coe Isom said the bill would limit the ability of larger farmers to deduct interest on business expenses and would repeal the Section 199 deduction used by farmers and cooperatives. North Dakota Sen. John Hoeven said the loss of Section 199 would be offset by a new provision that would prevent higher taxes for cooperatives and their farmer members.
“One key concern among agriculture is that the benefits of this bill — lower rates, bonus depreciation for immediate expensing, increased limits for estate taxes — these are all temporary,” said Doug Claussen of K-Coe Isom. “The loss and limitations on deductions currently used by farmers, however, are permanent. Farmers could see their taxes increase in the future if rate reductions or enhanced expensing provisions are allowed to expire.”
“While it is disappointing that Congress ultimately passed up this once-in-a-generation chance to fully and permanently repeal the unfair and onerous death tax, the final bill does take a sizable bite out of the death tax by doubling the exemption rates, and we are grateful for the lawmakers who fought so tirelessly on agriculture’s behalf,” said NCBA president Craig Uden.
The Hoeven language, cosponsored by South Dakota Sen. John Thune, create a new deduction allowing cooperative members to claim a 20 percent deduction on payments received from a farmer cooperative. The deduction has the same value as the Section 199 deduction. The National Council of Farmer Cooperatives, which made Section 199 a key issue in farm circles, said the new deduction “will, we believe, keep money in the pockets of family farmers across the country,” reported DTN/Progressive Farmer.
For a two-page summary of the tax bill, click here.