By TIM THORNBERRY
Kentucky Correspondent

WASHINGTON, D.C. — A bill recently introduced into the U.S. Senate could change the tax code and make a five-year depreciation schedule for agriculture equipment a permanent law.

The legislation was introduced by Sens. Amy Klobuchar (D-Minn.) and Jerry Moran (R-Kan.) and is supported by a host of agriculture groups, including the National Assoc. of Wheat Growers (NAWG) and the National Farmers Union (NFU).

According to information from Klobuchar’s office, “the current tax code sets a seven-year depreciation schedule for agricultural equipment, while the depreciation schedule for construction equipment – which is similar in use and life span to farming equipment – is five years.”

The statement went on to note that changing the depreciation schedule “would make the tax code more consistent and aid rural development by aligning depreciation and debt service, increasing farm income by over $850 million a year and helping farmers and ranchers finance new equipment and replace worn-out machinery.”

Klobuchar said putting money back in the pockets of farmers and ranchers enables them to grow the agricultural economy and strengthen rural communities.

“By bringing tax fairness to our farms and ranches, our agricultural producers can purchase the modern equipment that will allow them to produce more while spending less,” she added.

Sen. Debbie Stabenow (D-Mich.), chair of the Senate Agriculture Committee, said the bipartisan effort will strengthen American manufacturing and agriculture and will encourage farmers and agricultural producers to continue investing in their businesses, creating jobs and boosting the economy.

Changing the schedule to a five-year period would bring the depreciation of the equipment and its typical debt time more in line, say proponents.

“Common sense dictates that depreciation schedules should match the typical length of debt service for farm machinery,” Moran said.

Roger Johnson, NFU president, said there are many reasons to change the tax code to accommodate the bill.

“First of all, it has a bit of an economic stimulus impact in that it allows farmers to recoup those machinery costs two years earlier on their tax returns, so that ends up saving them a bit of money and adding a little bit to net farm income,” he said.

Johnson added in the past, the schedule has bounced back and forth between the five- and seven-year period and it would be good to have something of a permanent nature. He also said this would allow farmers to replace equipment earlier than usual, noting that newer equipment is more economical, safer to operate and better for the environment.

“Everybody knows that we are still struggling in this economic environment with lots of concerns.

This would do a little bit to shore that up,” he said. “It would help support manufacturing jobs. We know the agriculture equipment industry in this country either directly or indirectly employs about a quarter of a million workers. If we can help with the unemployment issue by passing this piece of legislation, that would be another advantage.”

Johnson pointed out that at one time, $100,000 would buy a piece of equipment and now it is likely just a down payment.

“It is very common to pay $500,000 for a piece of farm equipment, and that is significant money. What the general public needs to understand is that when farmers buy that, they can’t deduct it from their taxes all in the year they buy it,” he said. While this bill seems to have support from all, Johnson said there are many good bills that have been consumed in the legislative process by other issues – and there are many other issues on the table right now.