House Republicans proposed a tax package Friday that would impose a new excise tax of up to 60% on purchases of U.S. farmland by China and other “countries of concern” and also provide tax incentives for investing in low-income rural areas.
The House Ways and Means Committee on Tuesday will debate the three-bill package, collectively called the American Families and Jobs Act.
The tax on foreign farmland purchases would apply to a citizen of China, Russia, Iran, North Korea, Cuba or Venezuela, and to private business entities owned by a citizen or company in one of those nations. The tax could be prorated depending on a company's ownership.
There would be separate rules for companies that are publicly traded in the United States.
“U.S. adversaries are attempting to secure access to agricultural products by quietly acquiring U.S. farmland,” according to a summary of the legislation provided by the GOP-controlled committee. “China's reported holdings of farmland are said to be 384,000 acres and that acreage has grown by more than 50 percent since 2019. What’s more, questions remain about whether China’s ownership has been fully reported.”
Chinese holdings currently account for less than 1% of foreign-owned U.S. farmland, but the issue has received considerable attention in conservative media, and concerns have been growing in Congress. A provision included in the government’s fiscal 2023 spending bill required USDA to set up an interactive public database for foreign ownership disclosures.
The new provisions for “rural opportunity zones” are modeled after provisions in the 2017 tax bill that were aimed at urban areas.
The legislation would provide temporary deferral of capital gains income for investments in a rural opportunity fund and a permanent tax exemption for capital gains from the sale or exchange of fund investments.
Rural opportunity funds would be the investment vehicles for qualified opportunity zones, which would be limited to areas with “persistent poverty.”
The GOP package also includes some business expensing and depreciation provisions, rolls back tax incentives for electric vehicles, and increases by $4,000 the standard deduction for personal income taxes. The bill leaves intact the biofuel tax incentives that were included in the Inflation Reduction Act of 2022.
The legislation “builds on successful tax policies enacted by Republicans that spurred higher economic growth – far more than projected – and sparked the fastest growth in real wages in 20 years,” said Ways and Means Chairman Jason Smith, R-Mo. “These policies will provide relief for working families, strengthen small businesses, grow jobs, and protect American innovation and competitiveness.”
The top Democrat on the committee criticized the legislation as a giveaway to the corporations and wealthy Americans.
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“Make no mistake about it, they are laying the groundwork for even bigger cuts in 2025, and the only way they will ever achieve a balanced budget is by sticking seniors and working families with the bill,” Rep. Richard Neal, D-Mass., said in a statement.
“And while Americans are sheltering inside to avoid the fallout of climate-spurred wildfires, Republicans think now is a good time to repeal the largest climate investment in our history to pay for their corporate handouts.”
But Senate Finance Chairman Ron Wyden, D-Ore., didn't rule out considering elements of the package, including extended expensing for research and development.
“As I’ve told Republicans repeatedly, Democrats are on board with fixing business tax incentives like R&D expensing as long as Congress also passes support for the most vulnerable children and families on the same scale," he said in a statement.
"The tax uncertainty a lot of businesses are dealing with right now, particularly around R&D expensing, is a direct result of the timing and budget gimmicks Republicans used to inflate their 2017 corporate tax handouts."
He was referring to the fact that provisions of the 2017 bill were sunset at different dates to save on their cost.
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