'TWO YEARS EARLY, HOUSE AG COMMITTEE BEGINS LOOKING AT FARM BILL'

(AgWeb.com) -- AgWeb.com reports that even though the reauthorization of the current farm bill isn't needed until 2012, House Ag Committee Chairman Collin Peterson (D-Minn.) last week invited experts to testify on how Congress might "shake things up" in the next farm bill rewrite. Some of those testifying "handed out harsh criticism of the current program, including Iowa State University's Bruce Babcock," who called some of the current crop subsidies coupled with subsidized crop insurance "as basically a waste of taxpayer dollars." Scott Brown of the Food and Agricultural Policy Research Institute (FAPRI) "focused most of his attention on the livestock sector and stepped lawmakers through the factors affecting the sector that are truly beyond their control, such as the downturn in the U.S. economy, noting that the first-quarter 2009 GDP shrunk to a level not seen since the early 1980s." Harvard's Robert Paarlberg noted that while farm interests "want an expensive business-as-usual farm bill," the U.S. deficit and debt will make it "more difficult to hide the high costs of a business-as-usual 2012 farm bill." http://www.agweb.com/get_article.aspx?src=gennews&pageid=157422

FARM ACT TAX PROVISIONS

I think we all know that the Farm Act has now been signed into law. What you may not know is there are some tax provisions associated with the Farm Act. Here are a few of the items I thought you might be interested in:

CONSERVATION RESERVE PROGRAM PAYMENTS

There has been controversy over the last several years of whether or not a farmer needed to pay social security tax on CRP payments. This is bouncing around between the IRS and the courts, and before the act, the IRS had ruled successfully that you had to pay Social Security tax on CRP payments, even if you were not a farmer or were retired. Now, this is all changed. The act provides that CRP payments received by retired or disabled individuals, who are getting Social Security, retirement, or disability payments are not subject to the self-employment tax income for self-employment tax purposes. This is effective for payments after 2007.

FARM LOSS CARRYBACKS

The new law tightens up farm losses if you are receiving large amounts of program payments. The law states that for any year a taxpayer other than a C corporation receives subsidies through CCC loans, countercyclical payments, or payments in lieu of that, the losses are limited to the greater of $300,000 or the total income from the farm for the prior five years. Any additional loss is carried forward to the next year.

SELF EMPLOYMENT TAX

One really good change to the law is that it modified the optional methods so that electing taxpayers will be eligible to secure four credits of social security benefit coverage for each tax year by increasing the indexing of the dollar thresholds. In the past, a farmer was only able to receive one quarter of coverage. Therefore, farmers with losses would eventually not be eligible for disability.

There are other tax provisions to the act. I will list them, and if you are interested in them please let me know, and I would be glad to get you more information. I do not include the detail in the blog due to fact that this would only affect a minority of farmers.

• Qualified conservation donations


• Endangered species recovery expense deduction


• Depreciation of race horses
  
• Exchange of mutual ditch, reservoir, or irrigation company stock


• Timber investments in REIP'S
  
• CCC loan transaction reporting


• Corporate estimate tax of farmers with over $1 billion in assets


• Kansas Disaster Area Relief


• Credit for production of cellulose biofuel


• Alcohol credit

Again, if you have any questions on these, please feel free to contact me.

Larry Kopsa CPA

FARM BILL HIGHLIGHTS

(CQ Today) -- The farm bill is a multibillion-dollar reauthorization of federal farm, nutrition assistance, rural development and agricultural trade programs. The heart of the farm bill is income and commodity price support policy, but the measure also deals with agricultural trade and foreign food aid, conservation and the environment, forestry, domestic food assistance, agricultural research and more. Some bill highlights:

• Direct payments, subsidies that farmers always get regardless of crop prices, would be cut overall by $313 million by reducing the percentage of acres for which a farmer can collect those payments from 85% to 83.3%.

• The bill would allow fruits and vegetables to be planted on 75,000 acres of land typically used to grow government-subsidized crops such as corn and soybeans, so long as that produce was used for processed and canned foods. That would change the current planting restrictions that prevent farmers from growing fruits and vegetables on land subsidized by the government.

• The Conservation Reserve Program, a program that pays farmers to preserve land instead of farm it, would be reduced from 39.2 million acres to 32 million acres.

• The government would subsidize the purchase of excess sugar in the American market to make sugar-based ethanol.

• The definition of “rural” would be changed to make sure that USDA dollars go to rural areas with the greatest need.

• The ethanol tax credit would be extended for two years, but would be reduced 6 cents to 45 cents per gallon. The ethanol tariff would be extended for two years as well.

• The legislation would create the Biomass Crop Assistance Program, which would provide incentives for producers to establish and grow cellulosic energy crops.

NEW FARM DEAL DRAWS VETO THREAT

(CQ Today) -- Despite some House Republican opposition to the new farm bill, lawmakers on both sides of the aisle say they’re confident Congress would be able to override a veto of the bill. On Thursday, Agriculture Secretary Ed Schafer reiterated the administration’s veto threat, saying farm subsidies in the bill are still far too generous. The Congressional Budget Office has not estimated the final cost of the agreement, but lawmakers and their aides said it could reach upward of $600 billion over 10 years. The wide-ranging bill (HR 2419) includes new limits on who can get crop supports, extra funding for nutrition, rural development programs and expanded conservation initiatives, among other things. Conferees are expected to sign off on the agreement by early next week, allowing the House and Senate to vote on the conference report May 14, lawmakers said.

FARM BILL NEGOTIATORS SAY THEY HAVE TENTATIVE AGREEMENT AS BUSH CONTINUES TO OBJECT

(AP) -- Negotiators on a five-year, $300 billion farm bill say they have reached a tentative agreement on the legislation and it will be considered by the House and Senate next week. But the Bush administration has objected to the bill, and the White House says it seems unlikely that Congress will pass farm legislation the president can sign. President Bush has said the bill is bloated with farmer subsidies in a time of record crop prices and is too expensive. Senate Agriculture Committee Chairman Tom Harkin, a Democrat, said after meetings Wednesday that the negotiating is finished, but he acknowledged that some minor issues remain unresolved. The agreement would eliminate some government payments to individuals who make more than $750,000 in farm income annually, which would be closer to the White House's proposal on limiting subsidies. Those who make more than $500,000 in non-farm income would also be ineligible for subsidies. The Bush administration originally proposed a cap for those who make more than $200,000 in annual gross income. Two-thirds of the legislation is nutrition programs, including food stamps. Lawmakers agreed last month to provide more than $10 billion extra over 10 years for those programs. The bill would also expand subsidies for several crops and create new grants for vegetable and fruit growers. The legislation would also increase loan rates for sugar producers, extend dairy programs and provide more dollars for renewable energy and conservation programs to protect environmentally sensitive farm land.