The House is expected to take up a major tax reform bill in a few days. As passed last week by the House Ways and Means Committee, the Tax Cuts and Jobs Act (H.R. 1) will preserve many critical tax provisions that farmers and ranchers need to manage tight margins and unpredictable income, according to the American Farm Bureau Federation.
“America’s farmers and ranchers are ready for a tax system that recognizes their hard work and the unique challenges they face while reducing the tax burden that threatens their livelihoods. Thanks to the leadership of the House Ways and Means Committee, we are closer to that goal,” AFBF President Zippy Duvall said in a statement.
Among the most important tax tools addressed in the bill are Sec. 179 small business expensing, immediate expensing, cash accounting and like-kind exchanges.
The measure would expand and increase expensing limits for Sec. 179 small business expensing and allow for immediate expensing (bonus depreciation), but it would not make these provisions permanent, as farmers had hoped. The bill also would let farmers and ranchers continue to immediately deduct customary business expenses including, but not limited to, feed, seed and other inputs.
In addition, the measure would continue cash accounting and the like-kind exchange deduction for buildings and land. Like-kind exchanges would end for equipment and livestock.
The Tax Cuts and Jobs Act’s self-employment-related provisions would exclude from self-employment taxes the 30 percent of farming and ranching income that is considered a return on investment. Farm rental income and Conservation Reserve Program payments would continue to be excluded from self-employment taxes.
The measure would double the estate tax exemption of $5.49 million to $11 million indexed for inflation starting in 2018 and would permanently repeal estate taxes in 2024. Stepped-up basis is continued as is the transfer of any unused exemption amount to a surviving spouse. Farmers and ranchers have long been calling for repeal of the estate tax.
The bill would keep capital gain tax rates and thresholds at approximately the same rates and thresholds as exist under present law.
The House Rules Committee meets Wednesday, Nov. 15, to establish a rule governing House floor debate. Because the rule could contain additional changes to the legislation and will also determine which, if any, amendments will be allowed, Farm Bureau will wait until its release to take a position on amendments and on passage of the legislation.
Of the Ways and Means Committee-approved measure, Duvall noted, “Farm Bureau looks forward to working with lawmakers on both sides of the aisle to improve the bill and ensure reforms reduce the overall tax burden for farmers and ranchers.”