The Nine Month Farm Bill – And Other Changes To Tax Law

We are now into the second week of the what some are referring to as the McConnell-Biden Farm Bill and it has taken about that long for most to figure out exactly what was buried in legislation designed to delay coming to grips with out of control spending and the great desire to raise taxes.

Those in the ag industry who were holding out hope for major shifts in U.S. farm policy via a five year farm bill, will have to regroup and hope for better results in the new Congressional session.

Senate Ag Chair Debbie Stabenow (D-MI) found herself pushed aside in favor of legislative language generated by the office of Minority Leader Mitch McConnell (R-KY). McConnell’s role in the tax talks gave him immense leverage, while Stabenow was hurt by committee infighting over her efforts to write a more comprehensive farm bill extension that included changes in the dairy program.

Winners: Southern agricultural interests with the greatest stake in direct cash payments. The extension offers a temporary business as usual approach to planning 2013 crops. Some see this helping cotton and peanut growers compete better for acreage with grain crops.

Farmers, manufacturers and equipment dealers scored significant tax victories, among them are provisions renewing write-offs for equipment purchases and permanent exemptions that spare moderate-sized farm estates from federal tax.

Family businesses should be pleased that lifetime exemption for estates and gifts remain at current levels ($5.12 million when indexed for inflation in 2012). Rates on any excess will be taxed at 40%, up from the current 35% rate, but not as steep as President Obama had proposed.

American Soybean Association is please with the biodiesel tax incentive, the extension of the dollar-per-gallon credit retroactive to 2012 and through 2013 is also a significant win for the burgeoning biodiesel industry, an important market for soybean growers.

Warnings: Ranking Member of the House Ag Committee Rep. Collin Peterson, warned the White House that it must tread carefully on farm bills issues or risk a backlash. Peterson didn’t hide his anger with the administration for helping to roll Stabenow and the agriculture committees. “Upset is an understatement,” Peterson told POLITICO. “I’m not going to talk with those guys. I’m done with them for the next four years. They are on their own. They don’t give a sh-it about me, anyway.”

South Dakota Farmers Union president Doug Sombke of Conde, described the extension as “a great disappointment.” He said Congress “had every opportunity to pass a new five-year Farm Bill by the end of the year but chose instead to ignore its rural constituents… The only thing I can say with any confidence is Congress threw both House and Senate committees under the bus,” he said.

National Corn Growers Association had this to say: “Once again Congress’ failure to act pushes agriculture aside hampering farmers’ ability to make sound business decisions for the next five years. The National Corn Growers Association is tired of the endless excuses and lack of accountability. The system is clearly broken.”

The anger among dairy farmers was evident in a statement released by Jerry Kosak, president of the Milk Producers Federation who called the nine-month extension of current farm policy, “a devastating blow to the nation’s dairy farmers.” Kosak added, “After months of inaction, the plan that passed overnight as part of the fiscal cliff package amounts to shoving farmers over the dairy cliff without providing any safety net below.”

Ag Secretary Tom Vilsack issued the following warning, “…rural America with a shrinking population is becoming less and less relevant to the politics of this country, and we had better recognize that and we better begin to reverse it.”