Uncategorized

Just before Christmas, President Donald Trump signed the Tax Cuts and Jobs Act into law. This is the first major tax overhaul since 1986 when President Ronald Reagan was in office. Many agriculture groups say the new law is a “net benefit” for farmers and ranchers. “In addition to lowering the tax rate, almost all of the important deductions and accounting methods farmers use stayed in the bill,” says Pat Wolff, senior director of congressional relations at American Farm Bureau Federation. Keep in mind, the tax savings won’t go into effect until next year when farmers file their 2018 taxes. “In the short-term, it is clear most farmers will pay less,” says Brian Kuehl, federal affairs director for K Coe Isom. However, some tax provisions are set to expire beginning in 2022, which could cause farmers to pay more in taxes down the road. “In the long term, we could see a tax increase,” Kuehl says. “A lot of the good provisions for farmers, [for example] the pass-through rates, are set to expire. Some of the bad provisions for farmers, like some of the deductions they are used to taking, are gone for good.” Here are the top nine ways the bill might impact your farm operation: 1. Individual Tax Rates. Other than the 10% and 35% tax brackets, all of the other individual tax brackets have been lowered. “The reduction ranges from 15% to 25% on income between $20,000 and $400,000 for married couples,” says Paul Neiffer, CPA and principal at CliftonLarsenAllen. “The only range where we see rates go up or stay the same is a narrow window between $400,000 and $480,050. Once a married couple reaches this threshold, the old top rate of 39.6% is reduced to 37% thereafter.” However, these rates go back to the 2017 tax brackets in 2026, adds Jim Wiesemeyer Pro Farmer’s Washington policy analyst. 2. Child Tax Credit. The child tax credit is double what it was in 2017 at $2,000 per child, with $1,400 of this refundable for families who have no income tax liability. This credit phases out starting at $400,000 for married couples, Wiesemeyer says, and reverts back to $1,000 in 2026. 3. Standard Deduction and Personal Exemptions. In an attempt to reduce the number of taxpayers who itemize their tax returns, the new bill increases the standard deduction but eliminates exemptions. For the average farm couple with four children, the loss of personal exemptions eliminates about $25,000 of deductions, Neiffer says. Under the new code, it’s $12,000 for individuals and $24,000 for married couples. This too goes back to the 2017 rates of $6,350 for individuals and $12,700 for married couples in 2026. 4. Estate Tax. The new tax code doubles the estate tax exemption, which Wolff says is a big win. The new exemption level of $11.2 million for individuals and $22 million for couples will mean few farmers pay the tax, she says. It’s key to note stepped-up basis stays intact and the exemption level will continue to be adjusted for inflation. The estate tax exemption reverts back to $5.49 million per individual beginning in 2026. “As long as there is a threat that lower exemption levels will come back, farmers and ranchers will continue to have to spend money on estate planning,” Wolff says. 5. Section 199A Deduction. Under the previous law, farmers were entitled to a deduction of up to 9% of net farm income known as the domestic production activities deduction. The overall limit was 50% of wages paid and a final limit of taxable income. It could not create a net operating loss. The new law eliminated this deduction. However, it did create a new Section 199A deduction designed to level the playing field between corporations, which are now taxed at 21% while pass-through farmers would be taxed at 37%. On sales to a non-cooperative, a farmer is allowed a 20% deduction based on net farm income and net taxable income less net capital gains and cooperative distributions, Neiffer explains. “Once that deduction is calculated, the farmer is allowed to add 20% of gross cooperative payments received as a patron. The only limit is taxable income less net capital gains,” he says. Corporations are not allowed to take this deduction, and it will expire at the end of 2025. 6. Immediate Expensing and Bonus Depreciation. Under the new tax code, farmers can write off all farm assets other than land in the first year. That’s a big win for farmers, Kuehl says. In addition, the new law increases the limits on Section 179 and makes bonus depreciation 100% again. The downside is bonus depreciation will start phasing out in 2022. “So in the short term we have a good provision that will really help farmers,” Kuehl says. 7. Commodity Gifts to Kids. Under the old law, if the “kiddie tax” did not apply and a child was in a lower bracket, he or she could also save the difference in the tax rates and save on self-employment taxes, Neiffer says. In other words, the kiddie tax would prevent income tax savings but allow for self-employment tax savings. According to Neiffer, the new law subjects children to much higher taxes. “They are subject to the trusts and estates tax rates, which are 37% once income reaches $12,500,” he says. “Therefore, if the child is subject to the kiddie tax, commodity gifts have become more expensive.” Neiffer says Schedule F farmers can achieve similar savings paying appropriate wages to children under the age of 18. 8. Property Taxes and Mortgage Interest. If you’re in a state with an income tax, the new bill caps the aggregate of personal state and local income taxes, property taxes, etc., to $10,000, Neiffer says. “The property taxes paid on your farm operations and rented farmland continue to be fully deductible,” he says, adding homes purchased after Dec. 15, 2017, are only subject to a mortgage interest deduction up to $750,000. 9. Business Interest Deduction. Under the old law, farmers were always able to deduct business interest related to their farm operation, including the purchase of farmland, Neiffer says. Under the new law, if a farm operation has gross receipts greater than $25 million, including certain related parties, then interest deduction will be limited to 30% of adjusted net income. “From now until 2022, farmers can add back interest, income taxes, depreciation and amortization [EBITDA] to arrive at adjusted net income,” he explains. “After that date, farmers will not be able to add back depreciation and amortization.” However, a farmer can elect to fully deduct interest. “The trade-off is farmers must use the Alternative Depreciation System, which has a longer life, on all farm assets with a recovery period of 10 years or longer, and they can’t take bonus depreciation on those assets,” Neiffer says. Visit with your accountant now about how this new law will impact your business in the future.

The Food and Drug Administration will not enforce select food safety regulations during what it calls an "enforcement discretion period" drawing the ire of consumer groups who charge the move is undermining food safety measures. The FDA, which plans to keep the discretion period in place until it resolves issues with specific Food Safety Modernization Act provisions, says the move is to ensure the rules are clear for a long-term solution. "The provisions the agency does not intend to enforce relate to aspects of the farm definition, requirements related to written assurances from a manufacturer's customers, requirements for importers of food contact substances, and requirements related to certain human food by-products for use as animal food," FDA Commissioner Scott Gottlieb said in a statement. "This action will help reduce the burdens on both industry and government and provide the agency the ability to consider the most effective and efficient way forward." Gottlieb said the steps are part of the agency's effort to make sure "we take the time to get this new framework right." One of the key regulations that the FDA is delaying enforcement on is for facilities that would be considered farms, except for certain factors and activities. In the food safety regulations, some packinghouses fall under the preventive controls rule while others would be covered by the produce safety rule. Industry food safety experts have argued consistency in the regulations. The enforcement discretion also covers: Written assurances provisions in all four rules related to the control of identified hazards or microorganisms that are a potential risk to public health; and Foreign Supplier Verification Program requirements for importers of "food contact substances," defined as materials used in manufacturing, packing, packaging, transporting, or holding food. Reaction: Consumer group Science in the Public Interest said the FDA's action is "a rotten anniversary present" noting that the FSMA was signed into law Jan. 4, 2011. "The Trump administration is today undermining that landmark legislation by indefinitely delaying enforcement of the rules that would put it into effect," CSPI president Peter Lurie said in a statement. The FDA's decision has broad industry support. "Enforcement discretion is appreciated since FDA has not yet resolved the farm/facility issue to clarify which rule operations fall under," Jennifer McEntire, vice president of food safety and technology for the United Fresh Produce Association, said in an e-mail. "The industry wants to comply and the sooner FDA can move through the process the better. We don't want to stay in this gray space for too long." The Washington, D.C.-based National Sustainable Agriculture Coalition also applauded the move and praised FDA's acknowledgment of the ongoing confusion that businesses have experienced in determining where they fall within food safety regulations. The group said the FDA has recognized the impracticality of having businesses conducting the same activity (i.e., packing and holding produce) follow different rules just because their ownership structures are different. The coalition said the FDA will need to undertake new rule making to resolve the issue. "It is our hope that in so doing they reach a solution wherein any operation solely conducting farm-related activities on raw, unprocessed produce will be subject to the produce safety rule requirements, not the preventive controls requirements," the group said in a blog post. Gottlieb said the process "will take time." "Our aim is to work constructively with farmers and other producers to achieve our shared goals around food safety," he said in the statement. "These steps are part of our ongoing effort to make sure we take the time to get this new framework right, so it can successfully serve the needs of consumers for the long run."

South Korea has rescinded a 2012 ban on table-stock potatoes from Idaho, Oregon and Washington. The U.S. Department of Agriculture's Animal and Plant Health Inspection Service announced the reversal on Dec. 18. The ban stemmed from "technical concerns," according to the USDA, and the South Korean government has put in place new guidelines for U.S. exporters to the country. Those guidelines will be released to the U.S. potato industry in January, according to a news release. A quota system will cap U.S. exports to South Korea in 2018 to 3,583 metric tons, but that will increase in the future. "We have received numerous requests for U.S. table-stock potatoes from importers in Korea and are excited to finally be able to ship to this market," Potatoes USA chief marketing officer John Toaspern said in the release. Chipping potatoes to South Korea have been allowed, but guidelines for those shipments " an $8-million market in recent years "have also been changed with the new table-stock agreement, according to the release. Although only the three states are allowed with the new agreement, the potato industry is working to allow access for other states, according to the USA Potatoes release. "The National Potato Council thanks USDA APHIS and their Korean counterparts for their dedication to resolving this issue," NPC CEO John Keeling said in the release.

It’s been a miserable few years for Florida’s orange crop. And now to add insult to injury, California is gearing up to steal the sunshine’s state crown as the king of U.S. citrus production. After a decade of the citrus-greening disease devastating Florida oranges, Hurricane Irma smashed into groves this year, inflicting yet another blow to the crop. Farmers in the state are set to collect 46 million boxes of the fruit this season, the U.S. Department of Agriculture said Tuesday. That would be the smallest since 1945 and would match California’s harvest. A box weighs 90 pounds (41 kilograms) for Florida, and California changed its weight since 2009-10 to 80 pounds. Michael Sparks, chief executive officer for Florida Citrus Mutual, the state’s largest grower group, expects the situation for the crop “to get worse before it gets better.” If that’s the case, and California ends up with the bigger crop, it would be the first time in 73 years the state would best Florida. “We think the actual size of the 2017-2018 crop will not be known until the season is over and all the fruit is picked” in the early summer, Sparks said. In October, the group said the crop could be as low as 31 million (90 pound) boxes, or about 2.79 billion pounds, while the current estimate for California points to a crop of 3.68 billion pounds. Most of the oranges grown in California are used for the fresh fruit market, while Florida’s fruit is generally used to make fresh juice.

According to the USDA, nearly all of the cotton crop has been picked, and now the gins are hard at work. In Red Springs, North Carolina, the Hoke Robeson gin reached its 50,000 bale mark for the season earlier in December. Workers are saying they anticipated ginning up to 7,000 more bales before 2017 is over. “It’s been a great harvest season, a great ginning season and everybody’s yields have been spectacular,” said Edgar Edens, a worker from Hoke Robeson. He said a lot of cotton farmers in that area, roughly 25 miles south east of Fayetteville, have quit due to financial reasons. When Hurricane Matthew made landfall in September 2016, the storm dumped several inches of rain that destroyed the crop, and many farmers feared they would go out of business. Thankfully, the 2017 yields are some of the best Edens can remember.

States can enjoy greater local control of how Supplemental Nutrition Assistance Program (food stamp) benefits are administered, the U.S. Department of Agriculture says. While the USDA did not spell out the implications of its new policy, Politico reported it could result in states putting in place new requirements for drug testing of participants and perhaps other oversight measures. In fact, Wisconsin Gov. Scott Walker recently said he would put in place drug testing for food stamp applicants. That was a move that the Obama administration had blocked before. The USDA said it would provide more details about the new state flexibilities in coming weeks. "SNAP was created to provide people with the help they need to feed themselves and their families, but it was not intended to be a permanent lifestyle," Agriculture Secretary Sonny Perdue said in a news release. "We want to provide the nutrition people need, but we also want to help them transition from government programs, back to work, and into lives of independence."