The past few years have been a challenging time for the American agriculture industry.
Environmental disasters, geopolitical unrest, and ongoing tariff wars and regulatory changes are straining the already razor-thin margins our farmers and ranchers have been operating on. Often, these unforeseen risks appear overnight. Whether it be tornadoes in the Midwest, an avian flu outbreak, or a global conflict that disrupts the supply chain, our agricultural workforce is often left with little time to react and prepare for these crises. This leaves many of them stuck with severe economic impacts and expensive mitigation costs.
Stating the known, we’re living in a global economy in constant flux. In order to survive and thrive, businesses need to move strategically and swiftly so as not to be swept away by political decisions that can reshape entire industries.
The agricultural sector requires a unique challenge as long planning cycles and limited price flexibility make it even more challenging than most business sectors to remain nimble. With few other effective options available, many farmers are finding solutions through an under-utilized area of the tax code: Section 831(b).
Under Section 831(b), American farmers have the opportunity to establish micro-captive insurance plans, a form of self-insurance which allows protection from novel and specific business risks typically not covered by traditional insurers.
As a now-global industry, agriculture relies heavily on importation for equipment, fertilizer, and technology as well as on exportation for the sale of its harvest. This global market increases the exposure of their assets and leaves them vulnerable to greater risks. It is easy for them to insure against physical damage and liability, but political risks and regulatory shocks in the supply chain are uninsurable by traditional insurance providers. It is solely up to farmers and ranchers to foot the bill for these losses.
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Unfortunately, micro-captive insurance plans have not been simple for our farmers to access. The lack of guidance over the course of decades with respect to Section 831(b) has caused confusion among micro-captive managers as they work to remain in legal compliance with shifting IRS guidance and court rulings.
These issues were compounded by the regulatory changes rolled out in January 2025 that implemented arbitrary rules that do not reflect accurate actuarial science and real-world risk. IRS oversight of micro-captive plans and expanded reporting obligations for captive managers did little to solve the purported issues of tax abuse alleged by the IRS.
While this may sound anti-regulatory on its face, I have long advocated for increased clarity to Section 831(b) and increased clear guidance and simplicity in the regulatory framework put forth by the IRS so more small businesses and farmers may utilize this vital risk management tool.
Lowering the barriers of entry for good actors in small business and farming must always be the goal, as set forth by Congress. The new regulations have increased the barriers of entry for small businesses and farmers to mitigate risk, leading to the need for additional education on the topic to take place amongst congressional leaders as well as administrative officials.
This is precisely why I participated in a workshop at the University of Nebraska-Lincoln last month, educating farmers and ranchers on what 831(b) micro-captive insurance plans are, how farm operations can benefit from self-insurance, and how farmers and ranchers can begin utilizing these benefits.
As we look ahead into what 2026 has in store, it’s unlikely that economic trends and political tensions will reach a level of predictability that can adequately support the agriculture industry. Global economic and political uncertainty is rising, and hopefully, Congress will revisit the 2025 regulatory changes to help add stability to risk management.
In my opinion, it is more important than ever to equip our farmers with proactive planning tools so they can navigate whatever the new year has in store.
This year must be the year of agricultural resilience, and a well-structured 831(b) plan helps ensure this is the case. All that is certain in today’s world is uncertainty. Whether we see new tariffs emerge, an uptick in avian flu outbreaks, or unexpected droughts, it is guaranteed there will be some new issue disrupting farmers’ livelihood.
Proactive planning is essential to survive and thrive, and by crafting custom insurance plans aligned with each farmer’s actual exposure, they will be able to access the funds they need when they need them. Long-term viability and access to risk mitigation tools are necessary as we look at the geo-political risks of our country and the livelihood of our farmers.
The agricultural sector of our nation and economy must get it right, right now.
Peter Dawson is a micro-captive insurance consultant and an adviser to the 831(b) Institute.