Taxing concerns

The American Farm Bureau Federation, along with 46 state Farm Bureaus and 280 organizations representing family-owned agribusinesses, sent a letter in September to congressional leaders urging them to leave important tax policies in place as they draft legislation implementing President Biden’s “Build Back Better” agenda. The letter addresses four key tax provisions that make it possible for farmers and ranchers to survive and pass their businesses on to the next generation: estate taxes, stepped-up basis, 199A small business deduction and like-kind exchanges.

“The policies Congress enacts now will determine agricultural producers’ ability to secure affordable land to start or expand their operations,” the letter states. “Regardless of whether a business has already been passed down through multiple generations or is just starting out, the key to their longevity is a continued ability to transition when a family member or business partner dies. For this reason, we firmly believe the current federal estate tax code provisions must be maintained.”

These tools are as crucial as ever as the number of farmers and ranchers 65 and older outnumber those 35 and under by a four-to-one margin. More than 370 million acres are expected to change hands in the next two decades.

“As the economic backbone of nearly every county and rural community across the U.S., the importance of American agriculture and related industries cannot be overlooked,” the letter continues. “Farmers, ranchers, and family-owned agribusiness operators are responsible for producing the safe, affordable, and abundant food, fiber, and fuel supplies Americans enjoy every day. As the stewards of nearly 900 million acres of crop and rangeland, farmers and ranchers play an important role in terms of natural resource and land conservation. For agricultural producers, carrying on the legacy of our predecessors and setting the next generation up for success is critically important.”

Later in September the House Ways and Means Committee released its draft bill, which included tax provisions that would pay for portions of the proposed $3.5 trillion budget reconciliation legislative package. While the bill would preserve stepped-up basis, there are several provisions that would impact family farms, including lowering the current estate tax exemption. Stepped-up basis and the estate tax in the current tax code help protect family farms that are passed down from generation to generation. 

“We are very pleased to see that the House Committee did not include the elimination of stepped-up basis within its initial text. However, we are concerned with the provisions on the estate tax in the Committee draft that could impact family farms. NCGA will continue to work to preserve stepped-up basis and the current estate tax exemption as this process moves forward,” said John Linder, National Corn Growers Association president. “Family farms produce crops that feed Americans and provide consumers with affordable and environmentally friendly fuel. We are grateful to the House Agriculture Committee for including funding for biofuels infrastructure in its bill and thank Representatives Cindy Axne, Angie Craig and Cheri Bustos, along with Chairman Scott, for their leadership. Greater market access for higher blends of ethanol deploys more low-carbon fuels while supporting rural economies. As the country works to meet the President’s ambitious climate goals, ethanol is the solution we need now.”