By Matt Reese
With harvest in full swing, the attention of America’s farmers is not on policy debates in Washington, D.C., but there are some significant potential agricultural implications.
“Get your muck boots on if you’re going to try to wade into this. There is a lack of clarity. There is the bipartisan infrastructure package that has broad support right now and a lot of key priorities for Ohio agriculture included in it — like rural broadband and funding for inland waterway structures. That is kind of being stymied right now by all of the other things that are happening with the Build Back Better Act, a $3.5 trillion proposal,” said Luke Crumley, with Ohio Corn & Wheat. “On top of that we have this fiscal cliff looming with the debt limit that is quickly approaching here in the middle of the month. Our growers are trying to sift through all that in the middle of harvest. We are trying to push information out to our growers about this, but it is a confusing time.”
Senate infrastructure package
After months of across-the-aisle negotiations, the Senate voted to pass the bipartisan infrastructure package (H.R. 3684) in August. Both Ohio senators Rob Portman (R) and Sherrod Brown (D) were supportive of the measure. It has broad support from Ohio agriculture as well.
In a recent visit from Ohio Farm Bureau members to D.C., Sen. Portman said he was pleased with the removal of tax changes from the infrastructure bill. Sen. Brown was pleased with the funding being provided to Ohio projects.
“Our country has made big promises that we’re going to invest in infrastructure. There are some 3,000 Ohio bridges that are in need of repair and we have simply neglected investing. There will be at least $10 billion in this bill for Ohio alone. The state will make determinations of where this money goes. It also includes broadband. The pandemic was the great revealer. It showed the importance of broadband in rural Ohio, but also inner city Ohio. It will address these long neglected problems,” Brown said. “I expect it will get to the President’s desk by October.
One of the provisions I’m proudest of — Senator Portman and I worked on this — is the Buy America provision. We insist that steel and pipe and concrete that go into these infrastructure projects be made by American workers and American companies. Think of the number of jobs for building trades people to do the actual construction and through the supply chain. I think our state could benefit as much or more as any other state because we make so many of those things.”
As the infrastructure package is being considered by the U.S. House, Speaker Nancy Pelosi has connected these measures with the passage of the separate, and very broad, “Build Back Better Act.”
Build Back Better Act
While Sen. Portman was clearly pleased about the removal of tax provisions from the Senate infrastructure bill, he is concerned about the potential for them to be added back in by the House.
“The other [Build Back Better Act], which is $3.5 trillion, has a lot of bad tax increases in it, including increases in the estate tax. Unfortunately, they take that 2017 [estate tax] exemption and cut in half, so you are now going to see some farms caught up in the estate tax again. Also they raised the capital gains tax, which is a bad thing, so we have got to be sure we are not going back to the bad old days,” Portman said to Ohio Farm Bureau members. “Stepped-up basis is still something a lot of Democrats would like to get rid of and that would be a huge problem. That would mean all of the years of inflation that raises the price of land, buildings or equipment, you’d have to pay capital gains on that when you try to pass it along. That would require a lot of farmers to have to sell their property altogether, so we can’t go back to that.”
For months, concerns with these provisions have been communicated by agricultural groups.
Crumley said the potential elimination of the stepped-up basis has huge implications for agriculture.
“We heard about some really concerning proposals early on with this. Overnight, farmers faced the real prospect of losing their farms. Consistently in the early days of this we were concerned about how many folks were interested in eliminating stepped-up basis. It was very scary early on, but gradually the picture has improved and we have seen the conversation shift. Today I am much more confident we will be able to protect provisions like stepped-up basis. We have moved the needle,” Crumley said. “We couldn’t have gotten here without grower involvement. It was our Ohio growers talking directly to their representatives and responding to calls of action over the last several months that have really moved the needle.”
As a sign of that progress, earlier this month Democrat Congressman Tim Ryan (OH-13) released a statement in support of protecting stepped-up basis in the current draft of the Build Back Better Act.
“Ohio family farmers are a cornerstone of our economy and a pillar of our communities. It is critical that Ohio’s family farms can continue to thrive from generation to generation without the fear of being hit with an unaffordable tax burden,” Rep. Ryan said. “That is why I applaud efforts to protect stepped-up basis within the Build Back Better Act, and I will continue to be a strong advocate to ensure this important measure for our family farmers is protected as Congress continues to debate this package.”
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 Build Back Better legislation. 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.”