The massive budget legislation Republicans are trying to push through the House offers tax and commodity program benefits likely to help a broad range of farmers and others in agribusiness.

The tax proposals approved by the Ways and Means Committee on Wednesday include an increase in the Section 199A deduction for pass-through business income, increases in business expensing provisions, and changes in rules for commodity program payments to go with higher reference prices for commodities.


In addition to making the 2017 tax cuts permanent, the Section 199A business income deduction would also increase from 20% to 23%. That would effectively lower the top tax rate for individuals with farm or small business income to 28.5% from the current 29.6%; says Paul Neiffer, an agricultural tax specialist.

"Making Section 199A permanent gives farmers and co-ops the confidence to plan for the future, invest in their operations, and continue feeding a growing world. Now more than ever, producers need smart, forward-looking tax policy as they adapt to a rapidly changing marketplace,” Chuck Conner, president and CEO of the National Council of Farmer Cooperatives, said in a statement.

There also are some complicated changes to how wage income is treated when it exceeds a threshold of $100,000 for a couple and $50,000 for a single taxpayer. The combined effect of the changes would be to increase the value of the deduction compared with current law. 

“Everything that they did, as far as changes, is beneficial for farmers and other taxpayers, not detrimental,” Neiffer said.

The deduction was created in the 2017 Tax Cuts and Jobs Act to keep small business tax rates in line with the corporate tax rate, which was lower in that law. The deduction will expire at the end of this year unless Congress renews it.

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According to the Joint Committee on Taxation, the extension and modifications to the Section 199A deduction would reduce federal revenue by nearly $705 billion over 10 years. Extending the lower personal income tax rates established in the 2017 TCJA would cut revenue by another $2.2 trillion over 100 years.  

The changes to Section 199A and other tax provisions are designed to be married up with spending measures developed by other committees, including Agriculture, and merged into a single budget reconciliation bill to send to the GOP-controlled Senate. 

Under the legislation, Section 179 allowance would allow businesses to write off up to $2.5 million of the cost of equipment and software, with the limit phased down as spending exceeds $4 million. 

Paul Neiffer.jpegPaul Neiffer (LinkedIn photo)Under the 2017 tax law, bonus depreciation was being phased out over time, dropping from 60% last year to 40% this year.

Additionally, the bill would increase the estate tax exemption to $15 million per person, $30 million for a married couple, and index it to inflation. The TCJA doubled the exemption – it is $13.99 million for this year – but that increase is scheduled to expire at the end of this year. The new exemption would be permanent. 

“The Death Tax is a death warrant for family businesses and the top threat to family-owned cattle operations,” Nebraska cattle producer Buck Wehrbein, president of the National Cattlemen’s Beef Association, said in a statement, referring to the estate tax. 

The House Agriculture Committee’s portion of the reconciliation bill includes provisions that would increase the payment limit for commodity programs from $125,000, where it has been set since the 2014 farm bill, to $155,000 and index the new cap for inflation.

The single payment limit also would be eliminated for Chapter S corporations and LLCs, which would be treated the same as joint ventures and partnerships.

Meanwhile, the agricultural exemption from the means test for disaster and conservation program payments would be liberalized: Income from agritourism, direct-to-consumer marketing of farm products, and the sale of ag equipment would count toward the requirement that 75% of adjusted gross income come from farming.

Price Loss Coverage reference prices would be raised by 10% to 20% and then would be increased 0.5% a year, and the Agriculture Risk Coverage guarantee would be raised to 90%.

The new PLC reference prices would be $6.35 a bushel for wheat, $4.10 a bushel for corn, $4.40 a bushel for sorghum, $5.45 per bushel for barley, $2.65 a bushel for oats, $16.90 a hundredweight for rice, $10 a bushel for soybeans and 42 cents a pound for seed cotton.

The rates would take effect for the 2025 crop year and be increased 0.5% annually.

Marketing loan rates would be increased to $3.72 a bushel for wheat, $2.42 a bushel for corn and sorghum, $2.75 a bushel for barley, $2.20 a bushel for oats, 55 cents a pound for cotton, $7.70 per hundredweight for rice and $6.82 a bushel for soybeans. 

The legislation also would allow producers to enroll as many as 30 million new base acres that would be eligible for PLC or ARC coverage. The new allocation would be based on plantings from 2019 to 2023. 

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