There's not much interest in passing new farm legislation in Congress outside of lawmakers who are members of the U.S. House or Senate Agriculture committees. That's the view of Senator Chuck Grassley, an Iowa Republican and one of only two farmers currently serving in the U.S. Senate.
Grassley, a member of the Senate Ag Committee, says a big factor limiting the discussion on the new Farm Bill was high corn and soybean prices the past few years that helped generate record income for U.S. farmers. However, as supplies of corn and soybeans have increased this past year, prices have dropped significantly, and these commodities are now trading at or near what it costs a farmer to produce them.
"If prices keep slipping lower and we don't have a farm bill, people will begin getting nervous about the situation and more farmers will be contacting members of Congress that aren't on the ag committees and you'll hear more talk about the need to pass a new farm bill," Grassley observes. Congress has been working on a new 5-year farm bill, but efforts to pass a new law have been slowed down by arguments over how much the nation's food stamp program should be reduced. Lawmakers in the House and Senate are expected to draft a final farm bill proposal in January, and are expected to vote on it soon after.
Key tax provisions for agriculture may be extended in 2014 by Congressional action
Several important federal tax provisions pertaining to farming and agriculture are expiring at the end of this year, but they may get new life in early 2014, Grassley said last week. The expiring credits include Section 179 expensing and bonus depreciation, which are often used by farmers to offset income with new equipment purchases.
Efforts in Congress to completely overhaul the tax code put extension of more than 50 provisions on hold, he says. However, Grassley also says Senate Finance Committee chairman Max Baucus has talked about bringing up a tax-extension bill early in 2014. Baucus wasn't specific on when it would happen, but Baucus said there will be extensions made in the new year, says Grassley.~~~PAGE_BREAK_HERE~~~
Under the Section 179 small business expensing provision, the maximum amount that a small business can immediately deduct as an expense when purchasing business assets is scheduled to drop from $500,000 to $25,000—which would be a slam to farmers whose incomes vary widely from year to year, says Pat Wolff, a tax specialist with American Farm Bureau Federation. "If the maximum is allowed to drop to $25,000 farmers and ranchers will lose a valuable income averaging tool that could result in them paying higher taxes," adds Wolff.
The House Ways and Means Committee has recommended a $250,000 expensing limit, while the Senate Finance Committee has proposed a one-year extension of the current law followed by a $1 million limit. Both the House and Senate levels would be permanent and would be indexed for inflation.
Renewable fuels, and wind energy tax credits, also set to expire at end of 2014
Several other tax provisions are set to expire at the end of 2013, related to farmer-supported renewable fuel production, such as cellulosic ethanol and biodiesel tax credits. The incentives include the $1 per gallon renewable biodiesel tax credit, the $1.01 per gallon credit for cellulosic biofuels and wind energy production tax credits. These tax credits are designed to boost renewable energy technologies and to support development of the necessary market infrastructure.
There are about 50 things that are candidates to be extended in the federal tax code, says Grassley. They tend to be lumped together in a package. "This tax extension topic hasn't been discussed up until now because when lawmakers start talking about extensions, whether it's for wind, or the Research and Development tax credits or the other 48, then people start talking about extensions that aren't very serious regarding tax reform," says Grassley.
Farmers and other businesses find it difficult to plan when tax provisions are left hanging in limbo
Other federal tax provisions set to expire at end of 2013 are food donation and farmland preservation incentives, as well as deductions for state and local sales taxes and tuition and fees for higher education.
While representatives and senators in the past have usually reinstated these tax extensions retroactively, not knowing if and when this will happen makes it difficult for farmers and others to make important business decisions. For example, not knowing the maximum allowable Section 179 small business deduction could make farmers feel like they should delay making an equipment purchase or not make the purchase.