By MICHELE F. MIHALJEVICH
WASHINGTON, D.C. — When legislators returned to work last week after the summer recess, tax reform was one of several priorities on their agenda.
During his presidential campaign, Donald Trump promised to reform the tx code if elected. Most Republican legislators appear fairly unified regarding tax reform, said Danielle Beck, director of government affairs for the National Cattlemen’s Beef Assoc. (NCBA). “For Congress and the administration, the message remains optimistic,” she said. “They intend to move full speed ahead on tax reform. But we’ve been talking about comprehensive tax reform for 30 years now. They’re also working on passing a budget and on how to avoid hitting the debt ceiling.
“They’re trying to juggle a lot of bills and some are more time-sensitive than others.” There are questions over whether tax reform should be revenue-neutral, Beck noted. House Speaker Paul Ryan (R-Wis.) has called tax reform a top priority. Last week, he said tax writers were working on details of a reform package. “It’s about growth, it’s about fairness and it’s about finally giving American families a tax break,” he said. “We want Americans to begin the new year with a new tax system. It’s high time. We haven’t done this since 1986 and the rest of the world has passed our country on. It’s time we get back in the game of being competitive, and we will get faster economic growth when we do this.”
Bob White, director of national government relations for the Indiana Farm Bureau, isn’t overly optimistic Congress will get tax reform done this fall. “The leadership says it’s going to pivot (away from health care) and move on to tax reform and get it done by the end of the year,” he explained. “I’m glass half-empty on that because of their track record. There are different ideas (in Congress) on tax reform.
“It’s generally agreed upon with everyone you talk to, they need to do something. Something has to be done; they’re just not sure what. It will be momentous if they get anything passed.” The NCBA would like to see a permanent repeal of the estate tax, Beck said, adding, “It’s critically important to maintain stepped-up basis. We’ve been beating the drum on a ‘death tax’ repeal for decades. It would be throwing the baby out with the bath water if they repeal the death tax without stepped-up basis.”
The current exemptions for federal estate taxes are $5.49 million per person and $10.98 million per couple. Any amount over the exemption level is taxed at a graduated rate. The exemption rose from $1 million in 2003 to $5 million in 2011. It has been indexed regularly for inflation since then.
“Indiana Farm Bureau has been pushing to end the estate tax for a long time,” White noted. “For succession planning, you’ve got to have more tools. Any wealth you gain you can’t retain.”
Another issue Congress may consider is switching from the cash method of accounting to the accrual method. The difference between the two has to do with the timing of when revenue and expenses are recognized.
With the cash method, income is recognized when it’s received and expenses are recorded when they’re paid. Under the accrual method, income is recognized when it’s earned and expenses, when they occur.
NCBA is pushing to keep the cash method of accounting, Beck said. “Livestock producers utilize cash accounting flexibility in managing their tax burden,” she explained. “If cash accounting is lost, ranchers would pay taxes on income before they receive it.” Another area of concern for agriculture is Section 1031 like-kind exchanges, which allow producers to postpone paying taxes when they sell assets such as land, buildings and livestock or purchase replacement property.
“Without like-kind exchanges, some farmers and ranchers would need to incur debt in order to continue their farm or ranch business or, worse yet, delay mandatory improvements to maintain the financial viability of their farm or ranch business,” NCBA and other agriculture-related organizations stated in a June 2017 letter to members of the House Committee on Ways & Means.
Even though Section 179 expensing was made permanent in 2015, it’s also on the table as a part of tax reform negotiations, White said. Section 179 of the federal tax code refers
to the deduction of business expenses for investments such as property and small equipment.
Legislation passed in December 2015 set the deduction limit for small businesses at $500,000, up from $25,000. “I feel pretty confident it’s going to stay there,” White stated.
“Farmers are small business owners, and small business owners are driving the U.S. economy.” During an August 30 speech in Springfield, Mo., Trump said it’s time for all members of Congress to support pro-American tax reform.
“I’m calling on Congress to provide a level playing field for our workers and our companies, to attract new companies and businesses to our shores and to put more money into the pockets of everyday hard-working people and also into the pockets of companies so they can continue to grow and expand,” he said.
The costs and time required to comply with the tax code are impediments to farmers growing and producing food, USDA Secretary Sonny Perdue said last week.
“It’s an old, no-so-funny joke that farmers live poor and die rich, because of the value of the land they own,” he noted. “It isn’t right that a family’s hard work will be punished by the death tax, through which many farms have to be broken up or sold off just to pay the tax.”
NCBA has created a website – www.cattlemenfortaxreform.com – that features stories from cattle and beef producers detailing how they’ve been impacted by federal tax provisions. NCBA officials hope the campaign builds support in Washington for comprehensive tax reform, the organization said. NCBA is requesting producers share their stories by emailing them firstname.lastname@example.org