WASHINGTON — K·Coe Isom, the nation’s leading agricultural accounting and business advisory firm, has discussed the House and Senate tax bills and outlined how the bills differ in key respects on some critical issues for agriculture.
“Overall, both bills contain many provisions that are positive for agriculture,” said Jeff Wald, CEO of K·Coe Isom. “They both move in the right direction on the estate tax, eliminate the Alternative Minimum Tax and allow for immediate expensing of capital purchases for the next five to six years. These elements of the bills would be beneficial to farmers and ranchers.”
Earlier versions of the House bill would have required farmers to pay self-employment taxes on rental income. After K·Coe Isom and others met with House Agriculture Committee Chairman Michael Conaway to express concerns that this would negatively impact farmers, this provision was removed from the House legislation. The Senate bill would not require payment of self-employment taxes on rental income.
While the two bills share provisions that would benefit agriculture, the bills do differ on some critical issues.
On business interest deductions, Wald worries that the Senate bill could constrain certain ag businesses that are heavily reliant on credit financing.
“The House bill would limit interest deductions for businesses with more than $25 million in gross receipts,” said Wald, “which could impact larger agricultural businesses. The Senate bill would use a $15 million gross receipts test. It would sweep in many medium-sized operations and limit their ability to deduct interest expenses. We are optimistic that we can work with House and Senate ag leadership to maintain vital flexibility on this point.”
Both bills would eliminate the section 199 Domestic Production Activities Deduction used by many farmers and farm coops and would eliminate like-kind exchanges for personal property like agriculture equipment. Unlike the House bill, the Senate bill would eliminate the IC-DISC provisions of the tax code that provide incentives for export of agricultural products.
“We encourage the House and the Senate to work together to ensure that any final tax reform legislation does not negatively impact agriculture. Given the tight margins in agriculture and high volatility of ag markets, Congress needs to continue to focus on preserving financial flexibility for ag businesses,” added Wald.
About K·Coe Isom
K·Coe Isom leads, nationally, as consultants and CPAs in the food and agriculture industry—services constituting more than two-thirds of the firm’s business. The firm is embedded throughout the US food-supply chain—from policy to plate—working with producers, input suppliers, processors, packagers, distributors, biofuel manufacturers, equipment dealerships, landowners, lenders and many agencies and policy organizations that support the industry. The firm also has regional strengths in community banking, construction and real estate development, education, manufacturing and technology. K·Coe Isom serves domestic and international clientele from 21 coast-to-coast offices. Visit kcoe.com.
— K·Coe Isom
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