Taxes

One Big Beautiful Bill Might Force Farmers to Rethink Farm Business Structures

Tue, 10 Feb 2026 15:02:09 GMT

At a time when farm income is under growing pressure, the One Big Beautiful Bill is reshaping the farm safety net in ways that go well beyond bigger checks or better crop insurance coverage. According to Farm CPA Paul Neiffer, the legislation could quietly push producers toward fundamental changes in how their farm businesses are structured, decisions that could have long-term implications for taxes, payments, and succession planning.

While the bill was signed into law in July of 2025, there’s still guidance that needs to be set before farmers can make vital decisions. And some of the most favorable changes- like to crop insurance coverage- won’t go into effect until late this year.

While much of the early conversation around the bill has focused on higher reference prices and stronger crop insurance subsidies, during the 2026 Top Producer Summit, Neiffer told attendees the real impact may not be fully understood yet, and farmers should be paying close attention.

“This bill changes the rules we’ve all been operating under for the last 20 years,” Neiffer says. “And when the rules change, the structure of the farm suddenly matters a lot more than it used to.”

Financial Stress Is Already Building in Farm Country

The bill arrives against a backdrop of tightening farm finances. USDA’s updated net farm income forecast showed a sharper-than-expected decline for 2025 , with early projections for 2026 offering little comfort, particularly for row-crop producers, a trend doesn’t surprise Neiffer.

“It peaked out in 2022, and it’s definitely been going down ever since,” he explains. “If you’re a row-crop farmer, 2026 is probably going to look a lot like 2025 unless something changes on the price side.”

While government payments will help stabilize income, Neiffer is blunt about what would happen without them.

“Without ARC, PLC, the FSA payments, the SDRP top-ups, without all of that, most row crop farmers would absolutely be struggling right now,” he says.

Payments tied to the One Big Beautiful Bill are expected to start flowing in October, providing a critical backstop during a period when margins remain thin and balance sheets are tightening across large parts of the country.

Crop Insurance: One of the Bill’s Biggest Wins

Neiffer gives the crop insurance provisions in the One Big Beautiful Bill high marks , calling them one of the clearest positives for producers.

“I’d give it a B-plus to A-minus,” says Neiffer.

Why such a high grade? The bill boosts premium subsidies across most revenue protection levels:

Coverage levels from 55% to 75% receive a 5 percentage-point increase in premium subsidies.
80% and 85% coverage levels see a 3 percentage-point increase.
Supplemental Coverage Option (SCO) now extends up to 90% coverage, and farmers can now pair ARC with SCO, something previously prohibited.
SCO subsidies jump from 65% to 80%, making higher coverage far more affordable.

For many producers, especially wheat growers, these changes significantly reduce out-of-pocket costs while expanding protection.

Beginning farmers also receive a major boost. Previously limited to a 10% premium subsidy bump for five years, the bill expands the benefit to 10 years, with even higher subsidies in the early years.

“For young farmers, it can now make financial sense to farm on their own instead of with their parents,” Neiffer said. “From a family standpoint, they’re actually going to make more money.”

Prevent Plant Still a Pain Point

Not everything is a win. One of the main reasons Neiffer doesn’t give the crop insurance changes a straight A is because of changes to prevent plant, something that remains a concern, especially in high-risk regions like Arkansas and the Dakotas.

Under previous rules, farmers could buy up an additional 10% of coverage. That was later reduced to 5%, and Neiffer says USDA’s Risk Management Agency is still discussing cutting or eliminating that option entirely.

“That extra 5% really matters when you’ve got too much water,” he said.

While not enough to outweigh the bill’s positives, the issue drags down what could otherwise be a near-perfect crop insurance package.

Beginning Farmers See Expanded Incentives

The bill also significantly expands benefits for beginning farmers, extending premium subsidy incentives from five years to ten , while also increasing the subsidy percentages in the early years.

“Before, they got a 10% bump, but only for five years,” Neiffer says. “Now it’s 15% in years one and two, 13% in year three, 11% in year four, and 10% all the way through year ten.”

That change, he says, could alter how farm families bring the next generation into the operation.

“For a lot of young farmers, it may actually make more sense financially to farm on their own instead of farming with their parents,” Neiffer says. “If they’re part of the parents’ operation, they may or may not qualify for those premium subsidies. On their own, they do.”

From a purely financial standpoint, Neiffer says some families could generate more income overall by restructuring how younger operators enter the business.

Prevent Plant Remains a Lingering Concern

Despite the positives, not every provision landed well with producers. Prevent plant coverage remains a contentious issue, particularly in regions prone to excess moisture.

“Under the old rules, you could buy up an extra 10% of prevent plant coverage,” Neiffer adds. “That got cut to 5%, and now RMA is still talking about cutting or eliminating that extra 5% altogether.”

For producers in places like Arkansas and the Dakotas, that reduction matters.

“When you’ve got too much water, that extra coverage helps mitigate a really bad situation,” he says. “Losing it would hurt.”

Even so, Neiffer says the overall crop insurance package remains strong.

“That’s really the only thing dragging it down just a little bit,” he said.

ARC and PLC Changes Offer Ongoing Protection

Beyond insurance, Neiffer points to ARC and PLC changes as one of the most important income stabilizers in the bill, especially because they are designed to work over time, not just in a single marketing year.

“The increase in reference prices and effective reference prices isn’t a one-shot deal,” he says. “It happens this year, it happens next year, and it keeps happening as long as prices stay depressed.”

The bill also includes what Neiffer describes as an “automatic put” built into ARC and PLC, designed to cushion farmers during prolonged periods of weak prices.

“That’s going to help smooth out income over multiple years, and right now, that’s exactly what farmers need,” says Neiffer.

The Structural Shift Farmers May Not Be Ready For

The most overlooked part of the One Big Beautiful Bill, and potentially what may be the most consequential part of the legislation, is how it changes payment limits tied to farm business structure.

Under old rules, LLCs and S corporations were often limited to a single payment cap. The new law shifts that framework, allowing multiple payment limits based on the number of equal owners , depending on how the operation is structured.

That opens the door to significant restructuring. According to Neiffer:

General partnerships may move to LLCs for liability protection and expanded payment eligibility.
C corporations, which remain stuck with a single payment limit, may convert to S corporations.
Some farms are already making the switch.

“I’ve talked to several farmers already that either have switched or will be switching,” Neiffer says. “And it’s completely because of the One Big Beautiful Bill.”

Still, he urges caution. USDA guidance on how these new rules will be applied has not yet been released.

“Before I tell anyone to change their structure, we need that guidance,” Neiffer says. “Otherwise, you risk unintended consequences that wipe out the benefit.”

A Note of Caution on Taxes and Spending

Neiffer also warns producers not to let tax provisions drive equipment purchases or expansion decisions.

“There are a lot of good tax provisions in this bill,” he said. “But farmers tend to get hooked on them.”

He points specifically to bonus depreciation as an area of concern.

“They go out and buy something just because they can deduct it,” he says. “If they finance it with debt, they don’t always think about what happens the next year, or the year after that, or the year after that.”

The result, he says, can be financial strain that lasts long after the tax benefit fades.

Guidance Still Needed Before Big Decisions

Despite the potential advantages of restructuring, Neiffer urges farmers to have patience. USDA guidance on how the new payment limit rules will be applied has not yet been released.

“Before I’m telling anybody to change their structure, we really need that guidance,” he says. “I worry about the law of unintended consequences, where we think the rule is going to work one way, and then something else kicks in and negates the benefit.”

Farmers were expecting clarity by the end of 2025. That hasn’t happened yet.

“We’re already almost to March,” Neiffer says. “But we should have it any day now.”

When it arrives, Neiffer believes it could prompt some of the most significant farm business decisions producers have faced in years , driven not just by markets, but by policy.

5 Things Farmers Should Know Now 45Z Is A Real Thing

Mon, 07 Jul 2025 22:09:52 GMT

The One Big Beautiful Bill (OBBB) delivered additional surety for the 45Z biofuel blender tax credit.

After almost three years of talking about what could be spelled out by 45Z, Mitchell Hora says farmers can now get “locked in” to capitalize on the program.

“This 45z deal could be absolutely game changing for my family’s farm, and I think it will be game changing for other family farmers across the country,” Hora says. “It’s going to have a ripple effect that could change global agriculture. So that’s why I’m just so adamant that we have got to get this right, and we’ve got to hit the ground running.”

Hora, an Iowa farmer and founder of Continuum Ag, says there are five things every farmer should know about what the OBBB has laid out. He also says there are unanswered questions.

1. It’s happening.

“They [lawmakers] cut almost all of the other green funding programs within the Inflation Reduction Act. They cut a bunch of that old stuff, but they kept the 45Z program,” Hora says. “It’s alive, it’s locked in, it’s going to happen.”

What sets 45Z apart from previous biofuels tax provisions is how it measures the grain—the program uses a scorecard to assess every bushel (not acre) with a carbon intensity (CI). Any score under 50 points receives a tax credit to the biofuels producer.

“This program shows how you can score a farmer’s carbon footprint, how you can audit it, verify it, track it through the supply chain, and how to monetize it,” Hora says.

2. OBBB gave 45Z an extension

The 45Z program now has additional momentum behind it as the OBBB outlined an extension now into 2029.

“Now biofuels producers have more time to really capitalize on this,” Hora says.

The program is currently active for the 2025 tax year. This means farmers could be selling 2024 grain into the 2025 biofuels production year. And the program is available through 2029.

3. Only North American feedstocks are eligible.

Imported used cooking oil has become a focus for may who have critiqued previous blend credits as feedstocks from other countries were not limited.

Now, only feedstocks from North American sources can be used as part of this program. This includes corn, soybeans, used cooking oil, beef tallow, and canola.

“Without foreign feedstocks being included this drives more demand and more value for U.S. farmers,” Hora says.

4. Current language ignores indirect land use change.

“This single thing lowers everyone’s CI score across the board. It definitely helps corn and corn based ethanol and the soybean side as well,” Hora says.

5. Tax credits are transferrable.

Biofuels producers can take their tax credits and sell them to another buyer if they aren’t going to use them themselves.

Additionally, this makes it easier for farmer-owned co-op ethanol plants to process their taxes.

Additional considerations and unanswered questions.

Farmer data is key to unlock the potential.

“The overall 45Z impact is ag data is extremely valuable. It’s setting a precedent as to the value for data,” Hora says. “Iin order for the ethanol plant to generate 45Z credit using your low carbon farming practices, they have to prove it in an audit, and likely an audit at every point of aggregation, so that farmer data is really the key to unlock value here.”

As for the monetary value of the CI score, Hora says after talking to hundreds of ethanol plants, the range of sharing the value of the credit varies between 30% to 50% of the value.

This 45Z program update does effect sustainable aviation fuel—particularly alcohol to jet.

“Under the current version of 45z the alcohol to jet pathway not going to happen at any type of real pace, not at any type of accelerated rate of innovation. The math just doesn’t work out,” Hora says. “You’d be much better off under the current 45Z rules to just sell it as ethanol.”

The Final IRS Guidance Matters

Forthcoming final rules from the IRS will set which of the two calculators will be used: GREET FD-CIC or USDA FD-CIC

Also, the IRS sets if the credits will be tracked with mass balance or book and claim method.

“Here’s the takeaway for farmers. You can continue to wait. But you’re money ahead to get your data organized,” he says.

The money is flowing—yet.

“There may be small amounts, pennies on the dollar to get things started and get farmers enrolled. This didn’t unlock the flood gates. But it locked it in. It’s here to stay. They are going to get these rules out. We’ve got to get some movement on the work ahead to get the data and the people ready,” Hora says.

You may want to pump the brakes on signing up for a new private carbon program, Hora says. Because all previous guidance has not allowed for signing up an acre for one program and selling a bushel under 45Z from the same land.

There will be ripple effects (and opportunities) for animal agriculture.

Hora says, “If you are in animal ag, talk to people in your supply chain. And talk about how to capitalize on this precedent setting program.”

The One Big Beautiful Bill Will Boost 2025 PLC Payments: Here's a Per-Acre Breakdown

Thu, 03 Jul 2025 20:14:39 GMT

Both the Senate and House GOP worked around the clock to get President Donald Trump’s massive tax bill passed this week. The One Big Beautiful Bill, which was more than 800 pages long, barely passed in both the Senate and the House, but is receiving high praise from many agricultural groups who argue the bill is a win for agriculture.

On Thursday, House GOP leaders overcame objections from even Republican lawmakers on provisions for SNAP, Medicaid and rural hospitals. All but two Republicans, Reps. Thomas Massie, R-Ky., and Brian Fitzpatrick, R-Pa., voted for the bill, which passed 218 to 214.

.@SpeakerJohnson officially signs the One Big Beautiful Bill— sending it to @POTUS' desk to be signed into law.

Tax cuts, border security, energy dominance, and so much more are coming your way. 🇺🇸 pic.twitter.com/elzAg7s4LP
— Rapid Response 47 (@RapidResponse47) July 3, 2025

But for agriculture, tax provisions received high praise, including avoiding a year-end tax hike and eliminating the so-called death tax.

“America’s cattle farmers and ranchers are pleased by the final passage of the One Big Beautiful Bill. This legislation will protect family farmers and ranchers from the devastation of the Death Tax, it will avoid a massive year-end tax hike that could have put cattle operations out of business, it expands and protects many of the small business tax deductions that family producers rely on to save more of the hard-earned money, and it funds critical foreign animal disease prevention measures that protect cattle health,” says Ethan Lane, senior vice president of government affairs, National Cattlemen’s Beef Association (NCBA).

The bill also provides $66 billion in new spending for farm programs. According to Agri-Pulse , that’s the largest infusion of new money into farm programs since 2002.

These are changes and enhancements many ag groups were pushing for in the next farm bill.

According to Farm CPA Paul Neiffer , a provision in the bill will pay the greater of ARC or PLC for the 2025 crop.

“Therefore, any anticipate increase in PLC payments would likely be the minimum amount paid to farmers for 2025 but remember none of these payments will begin until October 2026,” Neiffer explained in this in-depth analysis . “There will be a payment limit of $155,000 on ARC and PLC, but LLCs and S corporations will be treated the same as a general partnership.”

Based on Neiffer’s calculations, here’s how it will impact PLC. On average, it will add:

Corn: $22.52 per acre
Soybeans: $42.46 per acre
Wheat: $32.77 per acre
Sorghum: $9.90 per acre
Cotton: $93.05 per acre

Neiffer says while everyone’s PLC yield is different, he simply used an average yield to calculate these figures.

Potential extra PLC per acre payments. Click to enlarge.

(Paul Neiffer )

“You will note that based on June MYA prices, projected PLC payments are estimated at about $2.6 billion. Now, under the old law, all of the ARC acres elected would be removed from this table, however, remember that the new law pays the farmer of the higher of ARC or PLC so the first projected column shows what the minimum payment essentially would be,” Neiffer explains.

You can read Neiffer’s full and in-depth analysis here .

President and CEO of National Cotton Council (NCC) Gary Adams says this bill provides additional support desperately needed this year.

“The 2025 crop is going to be or shaping up to be the third year in a row that farmers will see both the market prices and the support levels below cost of production,” Adams says. “One of the reasons why this bill is so important is that for the reference price that applies to the PLC and ARC programs, those higher reference prices that are in this legislation apply to this year’s crop, and that is important because it will help if prices stay low, and stay where they are. This will put some additional support, in the grower’s pocket for the crop that they’re going to harvest this fall.”

American Farm Bureau applauded the work by Congress this week, saying, “More than half of farmers are losing money, so an increase in reference prices is desperately needed, and tax tools will help farmers and ranchers plan for the next season and the next generation.”

The bill now heads to Trump’s desk, which he plans to sign Friday at the White House.

Breaking Down the Biggest Differences in the Big Beautiful Bill Proposals and Potential Impact on Agriculture

Fri, 20 Jun 2025 14:14:36 GMT

Senate republicans are racing against the clock to finish their version of President Donald Trump’s Big Beautiful Bill. As the Senate continues to roll out its versions of the reconciliation bill, there are some differences between the House and Senate proposals when it come to agriculture.

The main variations come down to changes in the tax provisions, but it’s key to note proposed changes to the farm safety net are similar in both the House and the Senate.

What’s Next?
The House and Senate will now need to work out their differences in the two versions of the Big Beautiful Bill. President Trump said he wants to sign the legislation on July 4, but many reports cast doubt Congress can meet that approaching deadline. Politico even reported this week the Senate GOP’s version of the bill is “facing major headwinds in the House.”

Read More: Big, Beautiful Bill: What’s in it for Agriculture?

Farm CPA Paul Neiffer believes the July 4 deadline isn’t likely as the debate heats up, but he still remains optimistic the bill is close to the finish line.

“I think July is the date, but not July 4,” Neiffer says. “They’ll get it done before the August recess. I think they’re actually pretty close. The media out there talks about how they’re really far apart on Medicaid and state and local taxes. But I think when push comes to shove, the president has a lot of clout, and they’ll come up a compromise. So, I’m pretty optimistic they’ll get it done.”

Weighing the Differences Between the Senate and the House
Neiffer says he would grade the Senate’s overall budget reconciliation proposal as a “B” for ag, which is slightly below how he rated the House’s proposal. One reason is what the Senate is proposing for Section 199A:

The Senate has a Section 199A deduction of 20%, while the House’s version is 23%.
Both the House and Senate are calling for 100% bonus depreciation, but the Senate’s would be permanent. The House’s version would expire at the end of 2029.

“With the Senate making that permanent, that’s a really good deal for ag,” Neiffer says. “They would now have some certainty all of the assets that a farmer purchases — combines, tractors, buildings and everything but land — they can deduct 100%.”

Neiffer says another difference is on state and local tax deductions.

The Senate is keeping the current $10,000 deduction and reducing the benefit of the pass-through entity tax deduction.
The deduction is at the $40,000 level in the House and retains the pass-through entity deduction in full for farmers.

Beefed Up Farm Safety Net
Under the Senate’s version, Neiffer says farmers would be paid the higher calculated payment rate under Price Loss Coverage (PLC) or Agricultural Risk Coverage (ARC) during the 2025 crop year.

The Senate Ag Committee’s proposal also increases the reference price formula, and instead of having a floor based on 85% of the Olympic moving average marketing year price, the Senate is proposing an increase up to 88%.

“That actually results in a boost on the corn PLC price by about $0.15. And I think on soybeans, it’s about $0.35,” Neiffer says. “So, that’s very beneficial. Now, I was hoping they were going to boost the ceiling. Right now, the ceiling is 115% of the EFR. And they had talked last year about boosting it up to 120%. I think that was too much for the budget, so they kept it at 115%.”

The Differences on 45Z
When it comes to the 45Z Clean Fuels Production Tax Credit, there’s one major difference. The Senate allows foreign feedstocks to be eligible for the credit, just with a 20% “haircut.”

In the House’s version, only feedstocks produced or grown in the United States or Canada qualify for the tax credit. That change would help detour some of the used cooking oil imports from China.

“To me, a 20% haircut means there’s got to be some senators out there maybe pandering to somebody that I don’t know about. Because really, they should eliminate the whole foreign feedstock and just give you a credit based on domestic production,” Neiffer says.

The Bigger Issue with 45Z
Peter Meyer of Muddy Boots Ag says no matter what version of the 45Z tax credit makes the final cut, there’s a bigger issue at hand. The Trump administration needs to provide guidance and rules around 45Z — something the Biden administration failed to do during its time in office.

“We’re just clamoring for clarification, right? All I want is clarification. They can say all they want about extending this to 2030. That’s great. That’s a positive. But tell me what the rules are. We still don’t know the rules,” Meyer says.

Meyer knows there’s been so much talk about 45Z and sustainable aviation fuel, but little action in terms of demand. Meyer says the lack of action in terms of demand is largely because there’s no clarity around the tax credit.

“We need more demand for the ethanol they’re producing,” Meyer says. “Soybean oil can be converted to sustainable aviation fuel. But you just cannot produce sustainable aviation fuel without a credit. You can’t.”

What's Missing in the Big Beautiful Bill When It Comes to Agriculture?

Tue, 10 Jun 2025 17:22:26 GMT

The fate of President Donald Trump’s One Big Beautiful Bill is with the Senate. The 1,000-page bill includes nearly $4.9 trillion in tax breaks and budget cuts, and is also packed with priorities that cover agriculture . That includes one provision that will allow community banks to pass along lower interest rates to ag producers. However, not all of agriculture’s wants are in the bill.

American Farm Bureau Federation (AFBF) recently dug into the details of the massive bill being debated in Washington. According to the nonpartisan Congressional Budget Office (CBO), the House-passed version of the One Big Beautiful Bill Act would increase spending for agriculture-facing programs by $56.6 billion over the next decade. Of that increase, $52.3 billion is for enhancements to the current farm safety net, including higher reference prices for ARC and PLC, and $4.3 billion is for trade promotion, livestock biosecurity, research and rural school funding.

According to AFBF, the One Big Beautiful Bill Act would increase agriculture-facing programs spending by $56.6 billion over the next decade (fiscal years 2025–2034).

(American Farm Bureau Federation (AFBF) )

According to AFBF, here’s what the current version of the bill includes for farm bill provisions (Title 1, Subtitle B-Investment in Rural America):

Updates and funding for many core agriculture titles through 2031.
Enhancements to safety nets including ARC, PLC and Dairy Margin Coverage (DMC) through the 2031 crop year.
Increases to reference prices for major covered commodities between 11% to 21% under the farm bill provisions of the bill.
Addition of a reference price escalator mechanism beginning in the 2031 crop year, which AFBF says would increase reference prices by 0.5% annually on a compounded basis. That increase is capped at 115% of the original statuary value.
Permits for farmers to add up to 30 million new base acres
Updates to ARC by adjusting revenue guarantee and the payment cap beginning in 2025. That would increase the coverage threshold to 90% of benchmark revenue, and increase the payment cap of 10% to 12.5%.
Enhancements to the DMC program and an increase of Tier 1 coverage eligibility from 5 million pounds to 6 million pounds per farm.

Proposed changes to the safety net

(AFBF)

Changes to Conservation Programs
AFBF’s analysis of the reconciliation bill shows long-term funding authority for USDA’s major conservation programs will continue through 2031. That includes the Environmental Quality Incentives Program (EQIP), Conservation Stewardship Program (CSP) and Agricultural Conservation Easement Program (ACEP).

The levels are higher than what was included in the 2018 farm bill, but align with funding under the Inflation Reduction Act (IRA), making these programs permanent baseline versus new program expansions.

AFBF says the bill doesn’t retain all IRA-funded initiatives.

“For example, it rescinds $450 million in unobligated IRA funds that had been allocated for competitive forestry grants to non-federal landowners. According to the Congressional Budget Office, these adjustments collectively result in a net reduction of $1.8 billion in conservation spending over the next decade,” said the AFBF analysis. “The bill also renews smaller initiatives that were not funded in the last farm bill extension. This includes the Grassroots Source Water Protection program, which safeguards well water, and the Voluntary Public Access and Habitat Incentive program, which rewards farmers for opening land to hunting and recreation. In addition, the Feral Swine Eradication and Control Pilot Program, a vital initiative to combat over $1.6 billion in annual damages caused by invasive wild pigs, is extended with new funding through 2031.”

Focus on Trade
Another important element included in the House version of the Big Beautiful Bill includes establishing a new Agricultural Trade Promotion and Facilitation Program, which would be similar to Market Access Program (MAP) and Foreign Market Development (FMD), while also providing $285 million annually in permanent, mandatory funding through a separate account.

“Because the bill does not modify or replace MAP or FMD, which are typically funded at $200 million and $34.5 million per year, respectively, the new program effectively doubles USDA’s total trade promotion capacity,” said AFBF’s analysis.

National Pork Producers Council (NPPC) CEO Bryan Humphreys says the trade portion of the bill, as well as the tax provisions, are a “win” for livestock producers.

“We’re very pleased with what came out of the House version. We included in there were animal health priorities, some additional funding for MAP and FMD to promote our product internationally, and then, of course, the tax package was included in there on things like 179, bonus depreciation and estate taxes,” he says. “We are very pleased those were in there even if some of our other assets we need to be in the farm bill weren’t able to make it in there.”

Humphreys says the House version of the reconciliation bill includes funding for animal health priorities, including $233 million per year on animal disease prevention and response.

What’s Not in the Bill?
According to Humphreys, there’s one major priority that didn’t make it into the Big Beautiful Bill — and that’s provisions for Prop 12.

“We still need a farm bill to address Proposition 12 in California. At the end of the day, this is an issue that, as California continues to regulate outside of their borders, is not just a pork industry issue. It is an American agriculture issue,” he says. “We’ve been asking — along with the American Farm Bureau, Corn, Soy and others — for Congress to address this issue of California regulating farmers outside of their borders. And we still need that to be addressed.”

Humphreys says a farm bill is still needed to address Proposition 12 in California. But if a farm bill doesn’t happen this year, Humphreys says NPPC is exploring other options to do it.

“Even though there are other solutions for Proposition 12 and other potential vehicles out there that we’ll continue to explore with our friends on the Hill, at the end of the day, we still believe as American pork producers that America and the pork industry need a farm bill — a skinny version, a large version or whatever. We need to maintain that coalition not just for now, but for decades to come as well. We’re not ready to give up on that yet,” Humphreys says.

Renewable Energy In The Bill
Energy programs are another area of focus under the reconciliation bill. According to AFBF, USDA’s farm energy and biofuel programs are reauthorized through 2031 to spur renewable energy innovation in rural America. That would include the Biobased Markets Program, which is a program that promotes biobased products through federal procurement. It also addresses the Bioenergy Program for Advanced Biofuels, which provides payments to producers of biodiesel, cellulosic ethanol and other next-generation fuels.

Tax Provisions That Would Benefit Ag

Farm CPA Paul Neiffer calls the tax provisions within the House version of the bill “very favorable for agriculture,” rating them a 8 or 9 out of 10. Here’s why:

As of Jan. 20, farmers will have 100% bonus depreciation for the next four years
The Section 199A deduction that was at the 20% level will now be bumped up to the 23% level.
Cooperative deductions will still be included
Starting next year, Section 179 will increase to $2.5 million, up from $1 million
An increase in the gift tax exemption amounts to $15 million per individual and $30 million per couple, adjusted for inflation annually.

Neiffer say farmers who’ve built net worth through land or other assets, there’s a piece of the legislation that will also benefit them.

“The lifetime exemption starting next year will be $15 million, and it’s made permanent,” Neiffer says.

Lower Interest Rates for Ag Producers?

According to Jeff T. Kanger, president of First State Bank in Lincoln, Nebraska, there’s another provision that will allow community banks to pass along lower interest rates to ag producers and rural housing.

“The community banks have less tax exposure and can therefore pass along some interest savings to customers,” Kanger told AgWeb. “This provision is very important to a lot of our growers.”

It’s called the “Exclusion of interest on loans secured by rural or agricultural real property.” According to the provision text, it “allows for a partial exclusion of interest on certain loans secured by rural or agricultural real estate. Speciﬁcally, it allows for the exclusion of 25 percent of interest received by a qualiﬁed lender on any qualiﬁed real estate loan.”

What’s Next?
The Senate could roll out its version of bill later this week, which is expected to include changes from the House’s version that passed in May by one vote.

House Speaker Mike Johnson also said this week he still believes July 4 is a realistic target for passing President Donald Trump’s “big beautiful bill.”

Big, Beautiful Bill: What's in it for Agriculture?

Fri, 16 May 2025 03:53:48 GMT

House Republicans are holding hearings this week about President Donald Trump’s “big, beautiful bill.” The bill could benefit agriculture, including positive tax provisions for farmers, an extension for 45Z and an increase in farm bill reference prices. However, potential changes to SNAP and putting more of the burden on states are also raising concerns.

Pieces of the overall bill passed both the House Agriculture Committee and the House Ways and Means Committee this week. Committee markup is the first test the provisions had to pass. The provisions from each committee will then be inserted into the overall bill.

The House Ways and Means Committee’s portion includes making 2017 tax cuts permanent, eliminating the estate tax and reducing taxes on interest income for agricultural loans.

Farm CPA Paul Neiffer calls the tax provisions very favorable for agriculture, rating them a 8 or 9 out of 10. Here’s why:

As of Jan. 20, farmers will have 100% bonus depreciation for the next four years
The Section 199A deduction that was at the 20% level will now be bumped up to the 23% level.
Cooperative deductions will still be included
Starting next year, Section 179 will increase to $2.5 million, up from $1 million
An increase in the gift tax exemption amounts to $15 million per individual and $30 million per couple, adjusted for inflation annually.

Neiffer say farmers who’ve built net worth through land or other assets, there’s a piece of the legislation that will also benefit them.

“The lifetime exemption starting next year will be $15 million, and it’s made permanent,” Neiffer says.

The draft legislation also includes an extension of 45z tax credit. Established by the Inflation Reduction Act that was passed in 2022, it provides a tax credit for the production and sale of low-emission transformation fuels.

Increase in Reference Prices

On Wednesday night, the House Agriculture Committee passed its portion of the budget reconciliation package, but not without debate around farmer interests versus food stamps.

According to the House Ag Committee, the provisions increase Price Loss Coverage (PLC) reference prices to levels proposed last year. Those include:

$4.10 per bushel for corn
$10 for soybeans
$6.35 for wheat

“Essentially, they took the proposal from last year and are going to stick it in this bill,” Neiffer says. “We’re going to have about a 10%-to-20% increase. Since it was effective immediately, I thought it might apply to the ’24 crop, but Jim Wiesemeyer reached out to let me know it’s likely going to apply for ’25. The problem I have with that, they were talking about immediate help for farmers, which if they’re applied to ’24, they’d be getting the help in October ’25. Now, if it’s applied to ’25, their help isn’t going to be until October ’26, at the earliest.”

In the proposal, farmers would also see payment limits increase from $125,000 per individual or entity to $155,000, starting with the current 2025 crop year.

Those in favor of the increase in reference prices on the House Ag Committee argue this is a vital lifeline for farmers at a time of great financial need.

“Since 2019, SNAP costs have skyrocketed from $60 billion to $110 billion annually, an 83% increase, while enrollment has grown from 36 million to 42 million,” said House Ag Committee Chairman Glenn “GT” Thompson (R-PA).

“The truth is our current farm safety net hasn’t kept up — it’s outdated and often it doesn’t even get triggered when prices drop,” says Rep. Zach Nunn, R-Iowa. “This is an investment that will provide predictability when prices fall and another provision to keep our crop insurance programs strong and intact.”

The Fight in the House Ag Committee Over SNAP

That includes a projected $290 billion cut to the Supplemental Nutrition Assistance Program (SNAP) over the next decade.

The plan also removes $290 billion from the program, redirecting some of that money to farmers by expanding support for commodities and crop insurance.

But Democrats on the committee spoke out against the cuts to SNAP benefits calling them a non-starter.

“The average SNAP benefit is about $6 per day. Let me say that again, $6 a day. You don’t build a life on SNAP. You build a bridge to the next paycheck,” says Rep. Angie Craig, D-Minn. “The cuts you are proposing to SNAP would be the largest rollback of an anti-hunger program in our nation’s history.”

Both the Committee’s portion of the legislation will also be rolled together into the bigger reconciliation package and must be reconciled with the Senate bill.

While it’s a long road until the complete bill is passed in Congress, Trump has said he wants this passed and plans to sign it on July 4.

Ag Groups React

The majority of ag groups support the tax provisions, saying this will be beneficial to farmers.

National Cattlemen’s Beef Association (NCBA) says the tax package must be approved by the House of Representatives as part of the reconciliation process.

“The Death Tax is a death warrant for family businesses and the top threat to family-owned cattle operations. NCBA has been working with members on and off the Ways and Means Committee for months to educate them about the needs of cattle producers and advocate for the tax provisions that are the most effective for cattle operations,” said NCBA President and Nebraska cattleman Buck Wehrbein. “This work would not have been possible without the broad participation we had in NCBA’s tax survey from producers, who detailed the struggles they have had with paying the Death Tax and what they would like to see in a broader tax package. This is a huge victory for grassroots advocacy and everyone that made their voice heard—from the producers that have not paid the Death Tax yet—to those that have paid it multiple times to avoid losing their livelihoods.”

Associations representing row crop farmers applaud the House Ag Committee’s push to adjust reference prices.

“We appreciate Chairman Thompson’s efforts to include key agricultural investments in must-pass legislation,” said Illinois farmer and National Corn Growers (NCGA) President Kenneth Hartman Jr.

However, the cuts to SNAP are a concern for others. The National Young Farmers Coalition, a group who says its vision is to create a future where farming is “free of racial violence, accessible to communities, oriented towards environmental well-being, and concerned with health over profit,” is against the proposed cuts.

“This budget proposal is a betrayal of the values that sustain our food system. These are not the investments young farmers need,” said Erin Foster West, Policy Campaigns Director of the National Young Farmers Coalition . “Instead of passing a bipartisan Farm Bill that builds resilience for farmers and families alike, this bill fast-tracks harmful cuts to nutrition programs that serve as both a safety net for families and a revenue stream for farmers. It trades long-term food security for short-term austerity.”

The Tax Man Cometh To The Farm

Wed, 19 Feb 2025 15:52:13 GMT

Everyone can benefit from a practical reminder from time-to-time. In this case, Paul Neiffer wants to remind farmers that the 2017 Tax Cuts and Jobs Act is set to expire at the end of 2025.

“We’ve had these tax cuts for eight years now, but farmers may not be thinking about this and what it could mean for them,” said Neiffer, principal of FarmCPAReport.com and a Top Producer columnist.

Neiffer addressed the topic of what farmers need to know now and address from a tax standpoint during the 2025 Top Producer Summit in Kansas City.

“Certainly, farmers are aware of the lifetime estate tax exemption dropping in half after this year. But I think a lot of these other provisions that would hit them, they’re probably not quite as aware of them,” he said.

Neiffer highlighted three provisions he believes U.S. farmers are likely most interested in seeing extended or made permanent. They include:

1. The 100% Bonus Depreciation. Neiffer said he believes the 100% provision will be made permanent, though it’s currently only 40%.

“We think that will come back to farmers,” he said. “The practical benefit is when they purchase equipment or farm buildings they’ll be able to deduct 100% of that item in the year of purchase. Also, there is a chance that trade-in of farm equipment will be similar to the old rules and non-taxable in most situations.”

2. The increase in the lifetime exemption for estates. If the current law is left unchanged, as of Jan 1, 2026, the present lifetime estate and gift tax exemption will be cut approximately in half. It currently is almost $14 million.

Neiffer is optimistic about the exemption. “I think the likelihood on the estate exemption is very good. I think that’ll stay at least at the current level,” he said.

3. The Section 199A Cap. This provision allows individuals, trusts and estates with pass-through business income to deduct up to 20% of qualified business income (QBI) from taxable ordinary income. Schedule F farmers are also granted the 20% deduction.

While Neiffer said there is some bipartisan support in Congress for extending the Section 199A deduction beyond 2025, he is ambivalent about that happening. “With that 20%, it would be a lot more costly to enact,” he noted.

Practical Next Steps Farmers Can Take
Looking ahead, Neiffer said he believes the likelihood of having a major tax bill before the end of 2025 is slim. At best, the bill would be ready by November or December.

For that reason, Neiffer’s recommendation to farmers is for them to plan on pushing income into 2026 but to have the flexibility to bring that income back into 2025.

“The reason is if the tax cuts don’t get extended that means 2026 tax brackets are going to be a lot higher,” Neiffer explained. “So, we would want to bring income into 2025. Now, farmers have the ability to do that using deferred payment contracts and some other elections that they can make – but only if they plan ahead accordingly. They definitely want to make sure they do that,” he added.

Your next read: It’s Tax Time: Your Guide To Calculate Farm Income

‘Biggest Bill in American History’ Has May Deadline Among GOP Leaders; Tariffs Could Help Pay For It

Mon, 06 Jan 2025 19:06:40 GMT

Speaker Mike Johnson (R-La.), in an interview on Fox News’ Sunday Morning Futures, announced plans to pass a sweeping bill addressing President-elect Donald Trump’s priorities, including border security, tax cuts, and deregulation, by May. Johnson said he wants this bill done by the House the first week in April, with the goal of getting it to Trump’s desk by the end of the month, though Johnson acknowledged yesterday that the bill could slip into May.

Channeling Trumpian lingo, Johnson has called it “one big, beautiful bill.” Using the Senate’s reconciliation process, Republicans aim to bypass Democratic opposition, but internal GOP divisions over the bill’s scope and timeline may pose challenges.

Key Elements of the Bill and Funding

Key elements of the bill include funding for mass deportations, extending 2017 tax cuts, addressing the debt ceiling, and dismantling federal regulations. Other reports note it will include unprecedented spending to tighten borders and remove people here illegally, energy deregulation. The bill reportedly will include Trump’s popular “no tax on tips” campaign promise.

There will be unprecedented spending cuts to help pay for it all. Republicans are searching for ways to pay for parts of the plan via spending cuts plus energy revenue. (See next item for some potential details of cuts.)

Some GOP Opposition

Sen. Lindsey Graham (R-S.C.) called for prioritizing border security separately, criticizing the “cram-it-all” approach. Sen. Ron Johnson (R-Wis.) suggested a two-step process to manage legislative complexity.

Urgent Timeline

Johnson emphasized the importance of swift action, targeting Trump’s signature by May, ahead of the 2026 midterms.

Of Note:

Trump publicly voiced support for this approach in a social media post Sunday. Trump said Republicans must “Secure our Border, Unleash American Energy, and Renew the Trump Tax Cuts.” The president-elect also called for his “no tax on tips” pitch to be in the bill. Trump said the cost of these policies will “all be made up with tariffs.” Republicans face internal debates on whether consolidating or segmenting Trump’s priorities is the most viable path forward. Trump’s 2017 tax cuts are set to expire at the end of this year without legislative action.

Other Proposals to Reduce Spending

Republicans are considering several programs and areas to cut funding or reduce spending to help pay for tax cuts in 2025. Here are some possibilities being mentioned:

Welfare Programs

Medicaid: Republicans are considering implementing caps and deep cuts to federal Medicaid funding through block grants and/or per capita caps. This could result in significant reductions in Medicaid spending.
SNAP (Food Stamps): There are proposals to roll back funding for the Supplemental Nutrition Assistance Program by limiting what items recipients can purchase and potentially adding work requirements.

Environmental Regulations

Republicans are likely to repeal environmental regulations implemented by the Biden administration, which could free up federal funds. This includes:

Repealing the Inflation Reduction Act
Lowering energy costs and increasing oil and gas production

Green Energy Subsidies

Observers indicate that Republicans are likely to look at cutting green energy subsidies from the 2022 Inflation Reduction (Climate) Act to help balance out the cost of their new tax proposals. But biofuel program stakeholders in the energy and ag sectors, and farm-state lawmakers, do not want to alter tax incentives programs like 45Z.

Federal Spending Cuts

The incoming administration is expected to cut federal spending to programs they don’t prioritize, such as:

Environmental regulations
Prescription drug coverage in federal health care programs
Adding requirements to welfare programs

Tariffs

Trump has proposed adding tariffs to imports to supplement lowering taxes for Americans, although many economists have opposed this idea.

Trump’s aides are exploring a tariff plan targeting critical imports from all countries, according to the Washington Post. The proposal represents a shift from the broader 10%-20% universal tariffs suggested during Trump’s campaign. Economists warn such measures could inflate consumer prices and disrupt global trade patterns. However, the WaPo story “incorrectly states that my tariff policy will be pared back,” Trump said on Truth Social. “That is wrong.” Trump added that the sources in that story don’t exist.

Other Potential Areas

Reducing funding for the Internal Revenue Service
Cutting clean energy programs that benefit conservative districts
Implementing a financial transaction tax on stock, debt, and derivatives transactions
University endowment tax hike — Some Republicans have floated boosting the 1.4% tax on endowments to as high as 35% for certain universities

While these are areas Republicans are considering, the specific cuts and their extent may change as negotiations progress and the political landscape evolves.

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Tax Turbulence: How Sunsetting Provisions Could Change Your Bottom Line

Thu, 19 Dec 2024 14:31:59 GMT

With 30 tax provisions set to expire at the end of 2025, the tax liabilities for family farms could increase at a time America’s farm families can ill afford any additional hits to the budget. Uncertainty surrounds the 2017 Tax Cuts and Jobs Act (TCJA) and American Rescue Plan Act (ARPA)–especially as a new administration is in route to the White House.

“The cost of the TCJA is significantly higher than was originally estimated in 2017. The newest estimate we’ve seen is that a full extension of the TCJA is going to cost $7.75 trillion through 2035,” says Pinion’s Beth Swanson. “With the budget reconciliation process and the expected cost, we’re worried that Congress is going to have to pick and choose which provisions of the TCJA are going to get extended next.”

According to research from USDA ERS, the impact of these expiring federal income tax provisions would increase tax liabilities for farm households by almost 9 billion. That’s a $2,200, or 12%, average increase per farm.

Increase in tax liabilities resulting from expiring Tax Cuts and Jobs Act (TCJA) provisions that would increase tax rates, decrease deductions, and restore personal exemptions.

(USDA, Economic Research Service and USDA, National Agricultural Statistics Service, 2018–2021 Agricultural Resource Management Survey)

Broken down by farm size, that looks like:

Low sales farms: Tax increase of about $700
Moderate sales farms: Tax increase of about $2,300
Very large farms: Tax increase of nearly $28,000

“Interestingly, in percentage terms, moderate sales farms are expected to have the greatest increase in tax liabilities at about 16%,” says Tia McDonald, USDA ERS. “They’re in an in-between area where they’re not quite getting some of the exemptions that higher income folks can take advantage of like bonus depreciation and even 179.

Farm CPA and Top Producer columnist Paul Neiffer adds, “Another part of it is the percentage increase of going from a 12% tax bracket to a 15% tax bracket. A lot of those moderate-income farmers also have 2, 3 or 4 kids that, under the current rules, qualify for the $2,000 tax credit, which is going to drop down to a $1,000 tax credit.”

As far as which provisions are the most important for farmers and ranchers, McDonald says the biggest impact will come from be provisions providing reduced individual income tax rates, an increased standard deduction, a cap on state and local tax deductions, and the elimination of the personal exemption, which would create an increase in total tax liability of $4.5 billion for all farm households.

“The reason for that is that it touches almost every farm household. So, the reach is quite broad,” she explains.

The Qualified Business Income Deduction
The second most important provision set to expire that McDonald lists is the qualified business income deduction, which provides farm households with positive business income a deduction equal to 20% of their qualified business income.

“Approximately 40% of low sales farms to almost 80% of very large farms receive that qualified business income deduction,” McDonald says.

Estimated Impact of Expiring QBI Deduction

(USDA, Economic Research Service and USDA, National Agricultural Statistics Service, 2018–2021 Agricultural Resource Management Survey)

Referring to the results of a recent survey, Kent Bacus of National Cattlemen’s Beef Association (NCBA) says even though this deduction hasn’t been around long, it’s been valuable to producers.

“As far as the 199A qualified business income deduction, with that being relatively new, we still had over half of the [1,200] respondents who have used it, and they’ve considered a very important tool,” Bacus says. “I think that’s something that we want to see continue in the next package.”

Child Tax Credit and Bonus Depreciation
McDonald says additional provisions, such as the child tax credit, the estate tax exemption, alternative minimum tax provisions and bonus depreciation, will likely have less of an impact on tax liabilities overall.

“Those are really targeted toward higher income farm households, so they don’t have quite the reach,” she explains.

Swanson, however, says the loss of bonus depreciation would still be notable for many.

“For bonus depreciation, sunsetting is a concern – especially because Section 179 isn’t really a one-for-one trade. With commodities that are heavier on equipment, producers tend to use bonus depreciation year after year,” Swanson says. “It’s more than just a timing difference. The loss of bonus depreciation will be a significant annual effect to many of the farmers that we work with [at Pinion].”

This is echoed by the results of NCBA’s survey as well.

“When you look at Section 179 and bonus depreciation, one of the key things we ask is, ‘If these tools weren’t available, how would that impact you?’,” Bacus says. “What we found is without access to these tools, about 25% to 30% of the respondents would have had to pay an additional $20,000 in taxes.”

The Timeline
Once the new administration is in place, Bacus believes we can expect Congress to act quickly.

“We have new leadership in the Senate and new leadership in the administration. They’re going to try to prioritize a couple of key things that will be important to the new administration, and a couple of those are going to be border security and taxes.” Bacus explains. “We’re looking for a lot of movement in those first 100 days.”

But Swanson says it’s possible that movement may not be focused on extending these provisions in the beginning.

“We are worried about President-elect Trump’s varied tax commitments and the distraction those might provide to getting the TCJA extended,” Swanson says. “I think the best thing we can do is wait and see. We will hope that the legislative process goes fairly quickly and Congress is able to avoid all of those distractions that may prevent us from getting TCJA expansion done.

Once these provisions are in focus, Bacus believes there are a few avenues it could take.

“With those tight margins in the House and the Senate, you are going to have to have some kind of bipartisan package that comes together. The big question is, are they going to update the tax code? Are they just going to extend it? Or will we potentially see a default if all these efforts fail,” Bacus says. “I think it’s unlikely that the efforts have failed, but the aggressive timeline that’s been proposed is always subject to the minutia and the swamp nature of Washington. That tends to slow things down.”

Neiffer expects an extension with a few key changes.

“I don’t think we’re going to see a permanent TCJA,” Neiffer says. “We’re going to see another three to five or five to seven years. Some of the provisions may become permanent and some will disappear. And you’re going to see some new ones come into effect.”

Your Next Read: Will the Tax Cuts and Jobs Act Get a Second Life?

Could 100% Bonus Depreciation Make a Return Under a Trump 2.0 Administration?

Fri, 08 Nov 2024 20:58:10 GMT

President-elect Donald Trump is preparing for his second term as president. While it’s not two consecutive terms, his history during the first term could serve as a possible playbook on how the next four years could impact agriculture.

“You have to remember, Trump is a populist,” says Jim Wiesemeyer, Farm Journal Washington correspondent. “He learned a lot from his first four years. So, he’s better prepared now. He won’t choose a lot of cabinet people who will eventually write books negative about him. He learned that lesson.”

The parlor game of whom will be named to key cabinet positions, including the U.S. Secretary of Agriculture , will continue during the next few months. One of the biggest anticipated changes that could impact farms across the U.S. is the possible change to the tax policy.

“You can up the odds that you’re going to have many, if not most, of the expiring Trump 2017 tax cuts that expire at the end of 2025 renewed. That’s good for the U.S. sector because of the estate tax exemptions will probably remain as they currently are,” says Wiesemeyer.

While anticipated changes continued to be weighed by political analysts, one agricultural tax expert thinks farmers can count on one major thing.

“I think we’re definitely going to see no tax increases. That’s for sure,” says Paul Neiffer, Farm CPA and contributor to AgWeb.

Neiffer says even though Trump campaigned on no tax on tips and no taxes on social security, Neiffer doesn’t see those proposals passing, as it would leave too big of a hole in the federal budget deficit.

“But certainly, the lifetime exemption that next year will be almost $14 million, I think that’s going to be made permanent. And that’s great news for our farmers that possibly are facing some estate taxes,” Neiffer says.

Neiffer also thinks the Section 2032A deduction, which permits an alternative method for valuing certain real property used either as a farm for a farming purpose or in a trade or business other than farming, is something that could get bumped up to $14 million per taxpayer. He believes it would be a “good deal” for farmers.

The other benefit, according to Neiffer, is the extension of the Section 199A Deduction and additional changes he expects to occur with the corporate tax rate.

“The lower rates for 199A capital will likely to be extended,” Neiffer says. “We could even see a reduction in the corporate tax rate down to maybe 15% for farmers. And if that happens, you could see a lot of farmers switching from being an individual farmer to being a corporate farmer.”

According to Neiffer, 100% bonus depreciation could also make a comeback under Trump.

“We think, perhaps, 100% bonus depreciation might be coming back for farmers,” says Neiffer. “When they buy equipment or buildings, farm buildings, etc., they’ll be able to deduct 100% of that in the year of purchase.”

Neiffer points out farmers need to be careful and make sure they optimize their depreciation related to their debt, but the idea of 100% bonus depreciation would be a welcome change for farmers.

Wiesemeyer also says the relief for farmers is there will be no major changes to capital gains taxes, which is something the democratic nominee Kamala Harris had proposed during her campaign.

Your Next Read: Washington Insiders Weigh in on What the Election Means for Agriculture

Washington Insider Weighs In on What the Election Means for Agriculture

Thu, 07 Nov 2024 16:57:50 GMT

Donald Trump secured a second term in the White House after wins in key battleground states over Democratic challenger vice president Kamala Harris.

President-elect Trump garnered even stronger support in rural America this time around than in 2016.

Farm Journal Washington analyst Jim Wiesemeyer says the support from the heartland was likely backlash against the ag policy moves of the Biden-Harris Administration.

The election results are a bit of a double-edged sword for agriculture.

The good news is a Trump presidency and Republican-controlled Senate might result in fewer regulations and lower taxes, as well as at least partial support for biofuels policy.

The bad news is the U.S. could be headed for a possible trade war with China and other countries.

The future of trade is top of mind post election.

Washington insiders such as Mary Kay Thatcher say President Trump’s trade agenda won’t include renegotiation of a trade deal with China because they didn’t comply with Phase One.

Instead, he’ll immediately increase tariffs on China and other trading partners, which could mean a trade war and the demise of U.S. export markets.

Thatcher, who is senior manager of federal government and industry relations for Syngenta, says: “You have to believe that because President-elect Trump was so strong on doing tariffs before that it’s very likely he’ll follow through now. He’s talked about, at a minimum, 20% tariffs on everybody. He’s talked about 60% on China, who’s still our No. 1 ag export customer, likely to fall to two or three, but still a very important market. He’s also talked about Mexico if Mexico doesn’t stop as many people coming across the border.”

On taxes, it’s possible most of the expiring 2017 tax cuts will be renewed. Yet it might depend on if the House is controlled by Republicans or Democrats since she doesn’t believe Congress will want to increase the deficit.

“Just extending the things that will expire at the end of 2025, such as estate taxes, 199A taxes on co-ops and individual income tax rates — that’s $4 .6 trillion on top of an already really sad budget deficit.”

On energy policy, Thatcher sees at least partial support for biofuels because of rural America’s support for Trump in the election. That includes programs, such as 45Z, tied to climate and conservation and supported in Congress.

However, she says energy policy might be trimmed.

“I don’t look for him to go in and overturn the whole thing, especially if you think about some of those initiatives that have to do with agriculture. There are numerous farmers out there who have benefited from those programs and are going to speak up in support,” Thatcher explains.

There will be fewer regulations under this President and Congress. In fact, Thatcher expects a large share to go by the wayside even before Trump takes office and more to follow.

“Again, if there’s a Republican House, they’ll be using what they call the Congressional Review Act, which means they can look back at regulations written within the last 60 legislative days and they can try to overturn those,” she explains.

Another big election outcome for agriculture, is there are 50 to 60 new members of Congress that need to be educated about the importance of farming and ranching to the country.

A State To Eliminate Property Taxes? Ballot Initiative in North Dakota

Mon, 28 Oct 2024 20:28:22 GMT

North Dakota voters are facing a significant decision this fall regarding property taxes and state funding.

A constitutional initiative on North Dakota’s November 2024 ballot proposes to eliminate property taxes based on assessed value, the Associated Press and others report.

If passed, this measure would:
• Prohibit political subdivisions from levying taxes on the assessed value of real or personal property, except for paying bonded indebtedness incurred through a certain date.
• Require the state government to replace property tax revenue to local governments, equal to the amount of tax revenue collected in 2024.

The potential financial impact of this measure is substantial. A top legislative panel estimated the cost of replacing lost property tax revenue at $3.15 billion every two years. This is a significant amount considering North Dakota’s 2023 two-year general fund budget was $6.1 billion.

A similar measure was on the ballot in 2012 but was defeated, with 76.54% of voters opposing it. However, some expect this year’s vote to be closer due to increased frustration and political changes in North Dakota since then.

Supporters argue:

Property tax is viewed by some as an immoral tax that infringes on private property rights.
North Dakota’s strong financial position, including oil and sales tax revenues, could potentially cover the lost revenue.

Opponents contend:

The measure could lead to drastic cuts in various state services.
It may result in a loss of local control over spending decisions.
There are concerns about potential chaos in the legislative and appropriations process.

If the measure passes, several areas could be affected:

Government Services: Funding for Medicaid expansion, hospitals, nursing homes, and education programs might face cuts.
Infrastructure: Money for infrastructure projects could be at risk.
Local Governance: Cities and counties may lose a significant portion of their budgets. For example, property taxes make up about one-third of Fargo’s budget.
Tax Structure: The state might need to increase other taxes or create new fees to compensate for the lost revenue.

North Dakota has recently implemented tax reforms. In 2023, the legislature passed a package of income tax cuts and property tax credits estimated at $515 million. The 2024-2025 budget includes $358 million in income tax relief and $157 million in property tax relief.

It's Go Time: Prepare Your Data Now For Biofuels Tax Credits

Wed, 02 Oct 2024 19:42:45 GMT

With 40Z–the clean fuel production tax credit for transportation biofuels–set to begin on Jan. 1, Mitchell Hora, CEO of Continuum Ag, says now is the time to get your ducks in a row.

“The corn we’re harvesting now is what’s going to be utilized for this 2025 production,” he says. “We really need to have our data in order and be ready for when these tax credits do come through.”

Hora notes there are still a lot of unknowns with how the credits will work, but believes it has the potential to be a major opportunity farmers won’t want to miss out on.

“There is a significant opportunity for farmers to be compensated for their CI scores in 2024,” he says. “Now, it’s going to be messy. The data is going to be messy. The payments are likely going to be quite conservative because of that. But I still see a lot of indications as to there being some money that can be had here.”

While Hora is optimistic about the opportunities coming, Paul Neiffer, Farm CPA and host of the Top Producer podcast, is a bit more skeptical.

“The concern I have is there’s no guidance,” Neiffer says. “We have the 2024 crop, but if they come out and say the ethanol plant or the biofuel plant had to have a contract in place with the farmer, well, there’s no farmer out there that has a contract.”

Neiffer also believes the program’s success will largely come down to what the requirements end up being.

“If you have to sign up for all these regimented programs, farmers might say forget it,” Neiffer says. “If it’s four bucks a bushel, yeah, I’ll do everything for that, but if I have to do X, Y and Z for 30 or 40 cents, it’s not going to fly.”

If farmers do end up wanting to take advantage of those opportunities, however, data will be critical. According to Hora, Continuum Ag has calculated carbon intensity (CI) scores for over 325 million bushels of grain and found the average score to be 11.1 - which is 18 points lower than the default of 29.1.

“If you’re going to get paid anything, you have to have data. That’s what it boils down to,” Hora says. “If you don’t have data, that load of corn has a default load score of 29.1 until you can prove otherwise.”

He recommends taking the necessary steps now to calculate your CI score now and then implementing practices such as reduced tillage, manure application, etc. to lower it.

“Nobody knows exactly what their score is, because we don’t know exactly what the calculator is going to be. But we have a general idea of what goes into it, so we can start moving the needle,” Hora says.

While in the combine this fall and planning what practices you’ll use for next year, Hora says it’s a good time to consider how your current actions will impact your carbon intensity for next year.

“All we can do is start getting our data organized, start figuring out what the scenarios are going to be, be in position to make some educated decisions when the time is right, and capitalize however the rules do come out,” he says. “In my mind, this is just by far the biggest opportunity in ag.”

Catch up on episodes of the Top Producer podcast here.

Your Next Read: The ABCs of 45Z: Take Time Now to Prepare for Low-Carbon Market Opportunities

Carbon Intensity Is Going To Be A Team Sport

Fri, 27 Sep 2024 02:09:21 GMT

A new game is about to start and it’s time to figure out what position you want to play.

The Inflation Reduction Act has opened a three-year window for farmers to be compensated for their agronomic practices in a new way.

The Section 45Z tax credit provides biofuel producers (ethanol, biodiesel and sustainable aviation fuel) with an incentive to produce low-emission fuels. This is setting up a new business model: farmers sell grain with the grain’s carbon data associated directly to its value. This is unlike carbon offset programs, which compensate farmers for carbon as an asset itself.

Grain will be assessed with a carbon intensity (CI) score, determined by the Department of Energy’s set of parameters.

Your Field Position

“This is based on what farmers are actually doing. If a farmer has done good practices, they are getting rewarded for it,” says Paul Neiffer, a farm CPA.

Currently, the standard CI score for corn is 29.1. The Inflation Reduction Act sets a weighted average below 25. Neiffer estimates the potential at 5.4¢ per CI point below 29.1. Corn with a CI score of zero is worth an extra $1.57 per bushel in value in tax credits. (5.4 x 29 = $1.57)

“Farmers and biofuel producers need to get aligned and start talking,” says Mitchell Hora, an Iowa farmer and founder of Continuum Ag. “This is an immense opportunity. For the first time, 45Z provides farmers and biofuel manufacturers a scoreboard with a transparent points system and a business model that rewards scoring points.”

To get their CI score, farmers are required to provide at least seven data points:

Yield
Fuel usage/energy usage
Fertilizer
Herbicide and insecticide
Tillage
Cover crop (yes/no)
Manure

While, the current parameters don’t ask for planting date or planted populations, Hora says farmers should have it any way.

This Is Pregame Warm-Up

Hora spotlights how right now is the time to engage because the postharvest practices in 2023 will set the stage for the data needed for the 2024 harvest, which could be sold into 2025 and qualify for the financial incentives. Currently, Section 45Z is good for three years: Jan. 1, 2025, to Dec. 31, 2027. He is encouraging farmers and biofuels companies to be ready so they can maximize the financial opportunity.

The Internal Revenue Service has yet to announce their official regulation, which would help set the value-share structure.

“There’s a chance we don’t get the final word from the IRS until really late in the game,” Hora says. “But right now, farmers can get their baseline CI scores and take a bit of a leap of faith. I see a lot of opportunity for farmers and biofuels companies together.”

ADM and Poet have responded to requests for interviews saying the companies are evaluating opportunities for their business.

Here Are The Notable Changes In The House Farm Bill

Tue, 04 Jun 2024 19:04:11 GMT

The House Ag Committee recently released and approved their initial version of the long-awaited 2024 Farm Bill, which included changes to several areas important to production agriculture – such as reference prices, base acres and federal programs. During an episode of the Top Producer podcast, Farm CPA Paul Neiffer explained how farmers could expect those changes to affect them.

Reference Prices
According to Neiffer, the proposed farm bill would increase reference prices across the board, with the smallest increases in barley, oats and corn and the largest in rice. The changes for other crops include:

• Legumes: ~19%
• Peanuts: 17.8%
• Cotton: 14.4%
• Wheat: 15.5%
• Soybeans: 18.5%

It’s important to note, however, these likely won’t be the final numbers in the farm bill.

“I think this is going to increase the cost of the farm bill by – over a 10-year period – maybe $15 billion to $20 billion,” Neiffer says. “If they need to cut some, they can cut it out of here.”

Base Acres
Another update includes base acres. In the new House-approved language, if you have planted more acres than you have base acres, the excess acres will now qualify to be increased to reflect what your plantings were over the average of 2019 to 2023 crop years.

“This is a pretty good deal. It’s a one-time opportunity – not a reallocation of your current base,” Neiffer says. “Let’s say you have corn and soybeans, but the last five years you only planted corn. This base acre update will be based on what you planted. So, if you only planted corn, you’ll get an increase in corn base acres.”

In addition, non-covered commodities, such as potatoes or onions, can now be used on up to 15% of total farm acres.

The House proposal does not restrict who qualifies for the program.

Agriculture Risk Coverage Program
Like reference prices, the Agriculture Risk Coverage program (ARC) also sees an increase in this proposal.

The guarantee of benchmark revenue jumps from 86% to 90% and the maximum payment also rises from 10% of benchmark revenue to 12.5%.

Marketing Loans
Neiffer says that while some may go up slightly more than others, almost all marketing loans increase by about 10%.

“There are a couple of situations where that helps. If you want to get a loan, you can get more of a loan,” he says. “But it could also hurt you in a way.”

He goes on to explain price loss coverage (PLC) payments are calculated as the difference between the effective reference price and market year average (MYA) price and the MYA price cannot drop below the loan rate. So, with the increase in the market loan rate, PLC payments could be smaller.

Livestock Programs
On the animal side, changes have been made to the dairy margin program and livestock indemnity payments.
“The big one [for the dairy margin program] is the tier one coverage gets more of a subsidy from 5 million lb. up to 6 million lb. That’s a 20% increase,” Neiffer says.

The payment rate for livestock indemnity payments is also increased to up to 100%. Neiffer says that increase is for animals that have been killed by a federally protected species, such as wolves.

He adds if a pregnant animal is killed in this situation, the owner could be paid up to 85% of the unborn animal’s lowest weight class.

Partnership Tax Payments
Another payment change to watch involves how operations are classified. In the past, Neiffer says, operations taxed as partnerships – such as an LLC or S corporation – were limited to one payment. The new proposal does not have a payment limit for qualified pass-through entities, which could be any LLC not electing to be a C corporation, any S corporation or any general partnership or joint venture. The one-payment limit would still apply to C corporations.

“I don’t know if this will happen,” Neiffer says. “The 2018 Farm Bill had certain provisions similar to this in the House bill but didn’t happen.”

Farm Income Definition
The House proposal also broadens the definition of what counts as farm income.

“Under the current definition of farming, gains from trading in farm equipment typically is not considered to be farm income. This farm bill specifically states that is farming, as well as agritourism and direct-to-consumer marketing,” Neiffer says. “That’s good news.”

Conservation Reserve Program
The maximum Conservation Reserve Program (CRP) payment more than doubles in this draft – jumping from $50,000 to $125,000.

“For farmers who maybe have acres that really shouldn’t be farmed, this is allowing more of those acres to get enrolled,” Neiffer says.

Crop Insurance
The final area Neiffer highlights with notable changes is supplemental crop insurance.

He shares the 85% cap on revenue protection policies is increased to 90% for individual yield or revenue coverage, but it’s aggregated across multiple commodities. The supplemental coverage option (SCO) is also increased from 86% to 90%.

“This is really welcome news for farmers in North Dakota, Texas, Oklahoma or southern Missouri where the cost of crop insurance is so high,” Neiffer says. “By increasing the subsidy, this is probably going to allow a lot of those farmers to buy revenue protection at 60% or 65% and then use SCO to go up to 90%.”

There’s also a 10-percentage point subsidy increase for those who qualify as beginning or veteran farmers. This has been expanded from five years to 10 years as well.

How Many Interest Rate Cuts Will We See in 2024?

Thu, 25 Apr 2024 21:53:48 GMT

Ask Dr. Vince Malanga of LaSalle Economics how many interest rate cuts we’ll see the Federal Reserve announce in 2024, and he says one or two at the minimum.

This is one of his insights recently shared on AgriTalk Radio as he gave his thoughts on the U.S. economy and the Federal Reserve’s maneuvers.

On interest rates, his opinion is we should have already seen a cut.

“They should have taken a victory lap. We got a sharp decline in inflation. They should have seized on that,” Malanga says. “They would have assuaged the bond market and made it a little bit easier to sell this debt. We know the government has a prolific amount of debt they have to sell. They would have stabilized the commercial real estate sector without any change in the overall economy.”

Malanga reflects on the current short-term perspective of interest rates being restricted.

“They’re running somewhere between two and three percentage points over the inflation rate and so they’re moderately restricted,” he adds.

As such, there’s still economic improvements that demand attention. He points to the residential and commercial real estate markets as being pointedly troubled right now.

“The housing market is a mess. Housing is unaffordable, not only because of mortgage rates but also because of the cost of utilities and the cost of insurance–the cost of all that overhead,” he says. “The commercial real estate sector is a mess. There’s about a trillion dollars of commercial real estate debt that has to be rolled over and the values of commercial real estate have gone down.”

The weight of government debt on the economy is another focus for Malanga.

“There is not a day that goes by that the government doesn’t have to issue more debt. The government is the strongest sector of the economy, but the government is growing at the expense of the private sector,” he says. “Government spending, which has historically been running between 18% and 20% of GDP, is now running between 23% and 25% of GDP.”

He adds, “when you’re shoveling that much money into the economy, it’s like throwing a bunch of spaghetti at the wall. Some of it will stick.”
In addition to the economic concerns, Malanga says there’s possibility to have three wars simultaneously occurring.
“There’s no room for catastrophe,” he says.

As for what’s next, Malanga hopes the first steps are reducing government spending, and not increasing taxes, while being paired with economic stimulation.

“Government spending has to be brought under control. The most direct route by which the deficit has gotten to gain some control over is by stimulating the economy, stimulating the private sector of the economy. Deregulate the economy rather than over regulate the economy,” he says.

Malanga also shares insights on the Chinese economy, which you can hear in this full clip from AgriTalk.

How To Increase Your Potential SAF Tax Credits Now

Tue, 05 Mar 2024 22:54:02 GMT

With sustainable aviation fuel (SAF) tax credits beginning in 2025, the practices farmers use during the 2024 growing season will have a direct impact on their ability to take advantage of these incentives.

Mitchell Hora of Continuum Ag recently joined the Top Producer podcast to share the best ways to begin preparing now.

“If you’re selling to a biofuel plant, the company will be asking you for management information, and they might be just directly asking you for your carbon intensity score,” Hora says.

A grower’s carbon intensity (CI) score is calculated based on a tool from the U.S. Department of Energy called the Greenhouse Gases, Regulated Emissions and Energy Use in Transportation (GREET) model. The score can vary from field to field and year to year.

According to Hora, the GREET model tells growers what their crop’s carbon footprint is. And for the corn and soybeans that will be planted this spring, the footprint is already being made.

“To maximize this opportunity in the calendar year 2025, we need to optimize the carbon intensity of the corn that we’re going to grow, and the soybeans we’re going to grow in 2024,” he says. “The practices that we did this fall, like tillage, manure, fertilizer and cover crops directly impact the carbon intensity of this 2024 crop.”

The upcoming tax credits are dependent on the crop’s CI score, and the maximum credit would be $1 per gallon for ethanol and biodiesel and $1.75 per gallon for SAF. However, Hora doesn’t advise expecting to receive that value.

“I think it’s going to be tough to get there,” he says. “If my corn has a CI score of zero, it doesn’t necessarily mean the ethanol has a score of zero because there are a lot of other factors that go into it.”

He shares on average, U.S. ethanol has a CI score of 55.5 while U.S. corn has a CI score of 29 – though he has seen scores range from 44 to -13.

How to Find and Improve Your Score
As far as how to figure a CI score, producers can download the GREET model and input their data, but Hora warns it can get complicated. He shares Continuum Ag has developed a program that simplifies the model, though there is a fee to access it.

“It plugs in your typical fertilizer, typical yield, what you do for tillage, if you use cover crops, fuel usage, etc.,” he says. “Then we run the actual GREET model and as they create updates, we’re ready for it and just plug in the new model. All of our farmers will get their updated CI score.”

Once growers receive their CI scores, they may be curious how certain practices change it. Hora lists a few of the ways producers can lower their scores, such as:
• Using a cover crop ahead of corn
• Supplementing or replacing synthetic fertilizer with manure
• Reducing tillage by implementing strip till or no till practices
• Decreasing diesel fuel usage and energy inputs
• Improving yield to spread carbon input across more bushels

He also encourages consulting with your agronomist to find the steps you need to take next.

“We cannot just sit back and wait,” Hora says. “There 6 billion bushels of corn that goes into ethanol every year in this country, and right now all 6 billion bushels have a default CI score. We need to keep having the conversation of getting more farmers aware and getting more farmers to get their CI score.”

To hear more about SAF tax credits, listen to this episode of the Top Producer podcast.

Related Stories:

Carbon’s Next Chapter On The Farm

Carbon Intensity Is Going To Be A Team Sport

Stepped-Up Basis Leaning in Favor of Rural America on House Ways and Means Panel

Thu, 02 Feb 2023 23:21:15 GMT

Tax policy geared toward farmers and others that transfer land and other assets to heirs will get a renewed focus at the Ways and Means Committee this year, a marker of the panel’s more rural tilt while still promoting measures that favor business.

Chairman Jason Smith (R-Mo.) has cast himself as a champion for working families, small businesses, and farmers, “not the people on K Street.”

With the retirement of former Rep. Kevin Brady (R-Texas), whose district included Houston suburbs, and the exit of former Rep. Tom Rice (R-S.C.), whose district included Myrtle Beach, and the addition of members like Reps. Randy Feenstra (R-Iowa) and Claudia Tenney (R-N.Y.), the panel now has greater rural representation.

Stepped-Up Basis Breakdown

The step-up in basis tax rule reduces the capital gains tax on inherited property. The Joint Committee on Taxation has noted that the failure to collect these taxes costs $40 billion per year, citing a 2021 Congressional Research Service report.

Read more: Use Portability to Avoid a Potential Multi-Million Dollar Estate Mistake

In Democratic proposals to eliminate the provision, lawmakers have included exemptions of up to $1 million and for farmers.

Rep. Bill Pascrell (D-N.J.), who has introduced legislation on the issue, told Bloomberg Tax that “people are getting away with murder” on the issue. There’s room for compromise, though, Pascrell said.

“We’ve made some considerations for farmers, small farmers, but there’s no question in my mind that inheritance has never been taxed many times,” Pascrell said. “Anybody who believes that your inheritance should not be taxed, I’ll listen to, but that, to me, is probably in the top five of what needs to be reformed.”

Favor in the House

With Republicans now in control of the House, Feenstra said he wants to introduce legislation shielding the stepped-up basis and like-kind exchanges.

Read more: Top 10 Stories of 2022: Tax Court Rules Farmer Can Use Old Tractors

The upcoming farm bill will be the first opportunity to add in those types of policies, as well as extending or renewing tax measures from the 2017 tax law that expired at the end of 2022, Feenstra said.

“There’s great opportunity for that Ways and Means can work with the Agriculture Committee,” Feenstra said, “and make sure whether it be in conservation, an energy title, or even a research and development title.”

Tenney said she hopes to make other tax measures benefiting farmers permanent, pointing to the 2017 tax law’s 20% pass-through deduction for certain businesses, which she said benefits farms in her district.

Feenstra also wants to see full bonus depreciation, which allowed companies to immediately expense capital expenditures, and which starts to phase out this year, make a return.

A research and development tax deduction that expired last year could also be included in the farm bill, Feenstra said.

$1B to Biofuels in Build Back Better

Mon, 27 Dec 2021 18:52:54 GMT

USDA Secretary Tom Vilsack and Rep. Cindy Axne joined AgriTalk with host Chip Flory and Pro Farmer policy analyst Jim Wiesemeyer recently to comb through President Biden’s reframe of the Build Back Better (BBB) plan.

The proposal is now $1.75-trillion dollars and is almost 25-hundred pages long. It includes the following for biofuels:

$1 billion in funding for the biofuels industry
A four-year extension of the $1dollar biodiesel tax credit
Plans to develop “sustainable aviation fuels
$320 billion in clean energy tax credits
$110 billion for investments in clean energy technology
$105 billion to address extreme weather

Ethanol

“There is a specific appropriation of $1 billion for the industry,” says Vilsack. “Secondly, there are a series of tax credits the industry could potentially take advantage of as it formulates low carbon fuel, and the combination of those two is a very positive aspect.”

Projections for sustainable aviation fuel (SAF) have been top-of-mind for Vilsack. He says the industry can expect a 35-billion-gallon demand.

Opportunities for production facilities to “be able to store carbon, to sequester carbon and there is a potential tax credit that they can benefit in the bill for that kind of storage capacity,” says Vilsack.

Representative Cindy Axne (D-IA) shared ADM’s intentions to produce SAFs at multiple locations, saying, “they expect to get to 500 million gallons a year and then scale up.”

Conservation

The decreased BBB budget reduces conservation funding from $28 billion to $27 billion for programs like Environmental Quality Incentives Program (EQIP) and Conservation Stewardship Program (CSP), as well as the conservation easement efforts.

“When was the last time we invested $27 billion over a couple years in conservation programs? Never… There’s $27 billion in additional assistance for forests to help avoid these catastrophic forest fires,” Vilsack says.

Rural Economy

“There’s a significant amount for rural housing, rural economic development, and billions of dollars for the Rural Energy for America Program (REAP),” says Vilsack.

USDA renewable energy grants will also be made available through BBB in the range of $3 billion. Vilsack says universal preschool, college expense assistance and lower healthcare and housing costs are also included “to strengthen American families.”

Axne elaborated on these efforts saying the childcare provision will provide relief for those looking to reenter the workforce as it is “the number one thing that’s holding people back from getting into the workforce.” She says this legislation will help roughly 20 million children.

In conjunction with the BBB, Vilsack emphasized the bipartisan infrastructure (BIF) package will improve broadband access in rural America, along with improved roads, bridges, ports, and inland waterways. He also shared he recently rode a barge down the Mississippi River that resulted in over an hour and a half wait for a barge to move through a single lock and dam. “You’re going to cut that time in half” with the BIF improvements, he notes.

Vilsack also noted opportunities to increase debt-relief for farmers “who are in a distressed circumstance that have loans from USDA” can be found in the reframed BBB.

Climate Change

Commodity Credit Corporation’s (CCC) authority for carbon goes untouched in the new BBB, according to Vilsack.

“We are confident that the program we announced last month, which will utilize the Commodity Credit Corporation, is a legitimate use of those resources as it is helping to create a climate-smart commodity and the standards for climate-smart commodities so that there will be some clarity and some direction in the future as to folks who want to go to consumers and say, ‘Buy our stuff because it is produced sustainably,’” says Vilsack.

The climate-smart commodity efforts development, according to Vilsack, will open the door for documentation of how commodities are produced. “For that, farmers should be compensated, and they should also be able to legitimately participate in carbon markets that are privately operated,” he says.

Stepped-Up Basis

In the BBB reframe, Vilsack claims there isn’t any literature outlining the end of the stepped-up basis. Additionally, there is “nothing” suggesting the current estate tax will be altered.

“The people that are paying for this are corporations that made more than $1 billion and didn’t pay any tax, and individuals that make more than $10 million per year or $25 million--they might pay a little extra tax,” Vilsack says. “I think they can afford to do that. And tens of millions of American families are going to see their taxes reduced because the child credit continues and because the Earned Income Tax Credit is extended and increased.”

House Agriculture’s Glenn Thompson (R-Pa.) shared he’s fearful the tax policies “shrouded in secrecy”, will wreak havoc on farm families, saying, “a recent study has shown these policies could add $1.4 million to the average tax liability for a farm family.”

Biofuel Aid

Vilsack provided an update timeline on the COVID-19 aid package for biofuel producers, saying “It’s ready to go, we just need to get the clearance from OMB and the White House, and I’m sure we will get that very soon.”

“It may physically still be here [at USDA], but because we have been working with OMB, once it goes over there it’s not going to take very long for them to sign off on that,” Vilsack says.

According to Vilsack, the USDA will detail how the funds will be split up to help the industry. He says the combined tax credits and support through the BBB demonstrate industry support and interest in aviation biofuel.

The reframed BBB legislation will continue the $1-a-gallon tax credit for biodiesel that was previously noted in the original, $3.5 trillion plan. However, under the new, $1.75 trillion plan, that credit will now only through 2026 and would then be replaced by a clean fuel credit that could extend to other products, including sustainable aviation fuel and lower carbon versions of ethanol.

Newest Tax Proposal in Washington Won’t Impact Most Farmers Today, But Tax Expert Warns it Could Be a Trojan Horse for Higher Taxes

Tue, 26 Oct 2021 18:08:47 GMT

Senate Democrats are pushing for a new tax proposal this week in order to help fund two impending spending bills in Washington D.C. What’s being proposed is called The Billionaires Income Tax, and it will do just that: impose a tax on billionaires. One farm tax expert thinks the proposed tax changes tied to the plans could turn into a trojan horse for farmers.

As Democratic leaders in the House work to secure a vote on the $1 trillion bipartisan infrastructure plan yet this week, legislators are also hoping to reach an agreement on Biden’s Build Back Better Act. In total, the spending package comes with a price tag of $2 trillion and includes everything from climate initiatives to social safety nets the Biden administration is trying to pass.

“In a package that’s supposed to be about giving everybody a shot to get ahead, it would be a big mistake, from both a policy and political perspective, not to ask billionaires to pay a fair share,” said Senate Finance Committee Chairman Ron Wyden, D-Ore.

Newest Tax Proposal Wouldn’t Impact Most Farmers

Since spring, the issue with the massive spending plan is how to pay for it. The new proposal would impose a tax on unrealized capital gains and also hit the step up in basis.

“I wouldn’t call that a wealth tax, but it would help get at capital gains, which are an extraordinarily large part of the incomes of the wealthiest individuals, and right now escape taxation until they’re realized, and often they’re unrealized in the death benefit from so-called step Up of basis. So, it’s not a wealth tax but a tax on unrealized capital gains of exceptionally wealthy individuals,” says Treasury Secretary Janet Yellen

Eliminating the step up in basis is an idea many farmers have worried about since the Biden administration started floating around possible tax changes.

Farm CPA Paul Neiffer says as the tax proposal sits today, the majority of farmers won’t be hit with the tax change since they have to bring in at least $100 million dollars of net farm income, for at least three consecutive years.

“I’m not saying I think there’s lots of things that will probably be in there would affect farmers, but strictly based on this proposal that Janet Yellen outlined, this proposal won’t impact the majority of farmers,” says Neiffer.

The Farm CPA says at this point, only farmers who are already billionaires would be included in the newest tax proposal.

“There might be a couple billionaires out there that are doing a lot of farming,” says Neiffer with CLA. “We know that there are some billionaires that have farm operations. So yes, it would impact those farmers. But for the rank and file farmers, as it’s currently proposed, it would really not affect them, because they have to have at least $100 million in net income for at least three consecutive years, or they have to be worth at least a billion dollars.”

A Trojan Horse for Higher Taxes?

Neiffer says even though the proposal would impose capital gains tax on liquid assets, it’s only triggered when they sell those assets. However, he thinks it’s a proposal that opens the door for changes down the road that could end up impacting farm families.

“The issue is if they get this in place, it starts at $1 billion, and then suddenly, it’s going to drop to $500 million. Then it’s going to drop to $100 million, then it’s going to drop to $50 million, and eventually, it’s going to drop to $10 million. And then that’s when it’s really going to affect our farmers, especially if the income is going to drop down to $1 million or less. So, this is just sort of like the Trojan Horse. Let’s get that Trojan horse into the gates, so to speak, and then we’ll let the lower amounts drop, not in the next year or two, but within 10 years, and that’s when it will definitely affect farmers.”

AgDay reported Tuesday that The Wall Street Journal’s estimates show the proposal would likely only affect less than 1,000 of the nation’s wealthiest citizens. Democrats are also eyeing a 15 percent corporate minimum tax. If progress is made this week, it puts the plan on track to be passed before surface transportation funding runs out on Oct. 31.

The Biden administration’s tax changes originally proposed earlier this year showed those tax changes could be costly for family farms. The report from Texas A&M University’s Agricultural & Food Policy Center (AFPC) showed the original proposal from the White House would have produced a significant tax liability across all the U.S. farms. In fact, the only farms that wouldn’t have seen impacts would have been ones that rent 100% of their ground.

DC Signal to Noise: A Conversation with The Farm CPA, Paul Neiffer

Mon, 27 Sep 2021 20:41:46 GMT

Chip Flory of AgriTalk and Pro Farmer policy analyst Jim Wiesemeyer have a conversation with Paul Neiffer of CliftonLarsonAllen about potential future tax liabilities for farmers and ranchers.

Neiffer sets the record straight on these topics:

> Tax proposals in the reconciliation plan

> Step-Up in Basis

> And more

Watch the video above or listen to the podcast below:

AgriTalk: Three Ag Leaders Reflect on Reconciliation Bill

Fri, 24 Sep 2021 20:31:27 GMT

The reconciliation bill has been a hot-button topic for agricultural America this week, and South Dakota Senator John Thune, Arkansas Senator John Boozman and American Farm Bureau Federation (AFBF) President Zippy Duvall dropped in on AgriTalk to share their views with Host Chip Flory.

Thune says the effects of the bill as it currently stands will be felt across more than large corporations.

“These taxes are going to be passed on. They’ll argue we’re just taxing the rich, we’re just taxing businesses and we’re just taxing big corporations. I think the people who will get hurt by this are consumers, workers, families and business because we’re talking about $3.5 trillion, which is a huge amount of tax increase, and nobody is going to be spared,” says Thune.

Agricultural America, as Thune puts it, will experience a great deal of these negative effects.

“We’ve been fighting hard against some of the ideas that are out there that would really adversely impact agriculture. But this is just bad news and there is no good way to raise $3.5 trillion without hurting a lot of people,” says Thune.

Senator Boozman says that agriculture is not about Republicans and Democrats, rather the regions of the country and the commodities they grow. He says in the past, members from each party would generally seek input from commodity groups when working on a bill of this nature, but that was not the case this time around.

“When you look back over the last 40 years, we’ve had several reconciliation packages, several entities like this. This is the first time there has been no input from one of the parties. There has been no input at all from republicans and no input from stakeholders; no amendments to this bill,” says Boozman. “I’m very upset about it and your listeners are upset because this is strictly coming from the Biden Administration.”

As a country, he says, we expect our governmental parties to work together to agree on legislature that is for the betterment of all. Agriculture falls short in the reconciliation bill as a result of divided parties.

“My concern is the senate. We’re seeing one side of the administration can unilaterally, without any input from anyone, come back and rewrite the farm bill, which they’re doing again. Now, all that’s being thrown out the window,” says Boozman.

AFBF President Duvall seconds Senator Boozman’s notion that the House Ag Committee is working in a partisan manner.

“Normally, on the House Ag Committee or the Senate Ag Committee, you see more bipartisan working relationships and efforts going on. Unfortunately, in this day and time, everything is partisan, and we do have a serious problem with the process,” says Duvall. “The process should be dealt with on both sides of the aisle; our country depends on us to be able to sit down and come up with solutions from both sides of the isle.”

For more on the reconciliation bill, click here .

The Scoop Podcast: The Opportunities Agriculture Can’t Miss In Renewable Fuels

Mon, 09 Sep 2024 13:58:20 GMT

Tim Urban of Bracewell Technologies has advocated for clients on business tax issues, extension of temporary tax provisions, and federal tax policies within the energy sector. He says agriculture has potential game changers in the evolving energy policies, in fact, in many ways ag is in the middle of this evolution.

“I don’t think there’s ever been a time in my memory where the ag sector can pick up the phone and it gets answered at the highest level,” Urban says.

Urban will present a general session with an outlook and insights on biofuels, sustainable aviation fuels, and renewable diesel as it relates to the ag industry at the 2024 ARA Conference and Expo . And he shares more on The Scoop podcast:

“Whether it’s electricity or whether it’s fuel for your car, miraculously, ag and ag products play a huge starring role in all of it,” he says.

While liquid fuels are a “no-brainer,” Bracewell sees corn, soybeans, and other ag stocks being rich with opportunities.

As for the future of renewable energy policy, Bracewell says the November election will set the stage for what policies are pursued, but overall, he thinks the future is bright for ag’s role in renewables.

“The ag community is uniquely well positioned,” he says.

Learn more at the 2024 ARA Conference and Expo, Dec. 3 to 5 in Houston, TX.

Omnibus Bill Includes 199A “Grain Glitch” Change

Thu, 19 Nov 2020 03:01:36 GMT

The omnibus spending bill before Congress this week does include a change to Section 199A of the President’s Tax Cuts and Jobs Act.

The hotly debated 199A provision gives farmers a financial incentive to sell to cooperatives instead of private companies.

According to Pro Farmer’s Washington Policy Analyst Jim Weisemeyer, the 199A language change would repeal the 20% deduction of gross sales to co-ops.

“This currently gives co-ops an edge over other types of businesses because farmers who sell their commodities to grain firms can deduct only 20% of their net business income,” he says. “Some farmers could write off their income entirely using the gross sales deduction.”

Under the omnibus revision, farmers selling to co-ops would be able to claim a 20% deduction on net business income, with limits set on those with high incomes or capital gains, Wiesemeyer says.

“The deduction would be reduced by the lesser of the following amounts: 9% of the farmer’s income from sales to the cooperative, or 50% of wages attributed to those sales,” he says. “Besides this tax break, a farmer would be able to claim the pass-through deduction from the co-op, if any. Farms structured as C corporations would not be eligible for the farmer-level deductions. And co-ops would be able to determine their deduction based on rules similar to the old tax law under the Domestic Production Activities Deduction.”

The National Farmers Union is not happy with the changes saying bipartisan compromises were “disregarded in favor of corporate interests.”

“Farmers Union is deeply disappointed that Congress included harmful modifications to Section 199A in this must pass legislation,” says NFU President Roger Johnson. “Reverting back to Section 199, in light of double-digit corporate tax relief, leaves farmers and their cooperatives worse off than prior to the passage of the Tax Reform and Jobs Act.”

Paul Neiffer: What You Need to Know About CARES

Wed, 11 Nov 2020 06:23:58 GMT

The ink from President Trump’s pen in signing the Coronavirus Aid, Relief, and Economic Security (CARES) Act is less than 24 hours old. One of my favorite sayings about any new tax law is “We have the law, now we need the rules.”

We know what the law says now. So, what we’re waiting on is the governmental authorities to set up the rules so we can use the tax advantages of the law. I’ll outline some of the considerations farmers should plan for over the next few months as we start to get some rules.

First, the farmer will need to determine if they should apply for a Paycheck Protection Program (PPP) loan from the Small Business Administration or whether they will take advantage of the payroll tax credit available to them for their share of FICA tax (their share of the wages paid to employees based on 6.2% of cash wages paid). You are not entitled to participate in both of these provisions.

Weigh Your Options

It appears farmers with very little payroll will likely get minimal benefit from either program. PPP’s maximum loan is based upon the average of one month’s payroll costs for a farmer times 2.5. However, if a farmer only incurs $50,000 of payroll costs in a year, the maximum loan available to them is about $10,000. As long as the farmer incurs at least $10,000 of payroll and other related costs by June 30, the loan is forgiven, and it is not taxable income.

However, if a farmer is starting with spring planting on 5,000 acres of corns and soybeans, do you want to take the time and effort to get a $10,000 loan?

Instead, the farmer may consider taking the credit against its share of FICA tax which may generate tax savings of $3,000 on the same $50,000 payroll. This is much easier to process and does not involve any extra time during spring planting.

Farmers with large payrolls such as dairy and specialty crops will certainly want to take advantage of the PPP loans since they provide immediate cash and their benefit is likely much greater than the payroll tax credit.

One of the beneficial tax provisions is the ability for farmers to carry back farm operating loss back five years instead of two years. This is retroactive to 2018. Also, instead of limiting the loss to 80% of taxable income it is now limited to 100%. These new provisions apply for 2018-2020.

Farmers should actively review this provision with their tax professional to see if immediate funds can be obtained from the IRS to help with liquidity.

Listen in as Paul Neiffer and Chris Barron discuss the CARES Act on Barron’s AgView Pitch Podcast :

Tax Relief For American Families and Workers Act Passes Out of House Ways & Means Committee

Tue, 23 Jan 2024 22:12:31 GMT

The Tax Relief for American Families and Workers Act was passed by the House Ways and Means Committee on a 40-3 vote. Only three Democrats voted against it since, in their opinion, it did not increase the child tax credit enough.

Democrats continue to harp on the Republicans for not increasing the child tax credit even though it is the Republicans who originally increased it from $1,000 to $2,000 back in 2017 (effective 2018) and allowed up to $1,400 of it to be refundable.

If the act passes, the major item that applies to farmers is that 100% bonus depreciation is allowed on 2023 returns. Therefore, farmers might not want to file their return until they see if this act is passed sometime in February. This is another key reason to make a Jan. 15 farmer’s tax estimate and not try to file by March 1. These late tax acts seem to happen more and more often.

Otherwise, the act is essentially the same as we reported last week, but we wanted to highlight a few changes or address items brought up by readers:
• The increase in the 1099-MISC and 1099-NEC from $600 to $1,000 only applies to payments made after Dec. 31, 2023. Therefore, it will not affect any current 1099 filing requirements. There is no retroactive provision.

• There were some tweaks on the ERC promoter penalties. First, if a farmer received an ERC credit that was prepared by a firm deemed to be a “material adviser,” then this will be treated as a listed transaction, which leads to additional reporting and, in our opinion, an automatic audit. To be considered a material adviser, the promoter simply charged a fee based on the amount of refund or credit. This means a small CPA firm that charges a fee for ERC services based on a percentage of the credit will be considered a material adviser and thus subject the farmer to possible disclosure to the IRS. Also, any firm that simply charges an amount based on so much per employee might fall under the same definition since that dollar amount will be a percent of the credit. If this act passes, the IRS will issue regulations, but they might be very broad in their interpretation.

• If a CPA firm is determined to not meet the due diligence requirements, then a $1,000 penalty per failure can be assessed.

Do we think this will pass? We believe there is a good chance this will pass and it might happen in the first couple weeks of February. We would hesitate to file any income tax returns with items that might be affected by this act (which primarily 100% bonus depreciation for most farmers).

Trump Uses Farm Equipment Store Manager as Tax Reform Example

Wed, 11 Nov 2020 06:07:41 GMT

Today President Trump addressed an audience of supporters at the White House urging Congress to put a tax reform bill on his desk before Christmas.

To help drive home his message of tax savings for every day Americans, the Administration showcased several families who will pay less in income taxes under the new bill.

One of those families was the Glicks. Bryant Glick works as a manager at Lancaster Parts and Equipment, a parts store and John Deere dealership in Lancaster County Pennsylvania. Under the GOP tax plan, the Glicks will move from the 15% tax bracket to the 12% tax bracket and will pay roughly $600 less in income taxes, according to President Trump.

“Many of your predecessors promised this reform was coming,” Glick said. “But you were the one to get it done. With the tax savings we are going to see, we are going to put that money into home renovations.”